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20211113 – We Want Workers

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 MAIN IDEA:

Here is how the author defines it:” One underlying theme of this book is that viewing immigrants as purely a collection of labor inputs leads to a very misleading appraisal of what immigration is about, and gives an incomplete picture of the economic impact of immigration. Because immigrants are not just workers, but people as well, calculating the actual impact of immigration requires that we take into account that immigrants act in particular ways because some actions are more beneficial than others. Those choices, in turn, have repercussions and unintended consequences that can magnify or shrink the beneficial impact of immigration that comes from the contribution to widget production.”

DETAILS:

Chapter 1 • Introduction
In the introduction, the author describes the main points of this book, which could be summarized this way:

  • Immigration is not just an economic process but rather a societal change of the receiving country’s culture and mores because immigrants, legal or illegal, bring their culture and beliefs with them.
  • There are always winners and losers among the native population, both economically and politically
  • The official social science is not science anymore because its prominent leaders openly proclaim that it has ideological objectives to support immigration and fight xenophobes and right-wing opponents of unlimited immigration.

The author also briefly retells his own story as a child immigrant from Cuba growing in the immigrant community and succeeding in American society.

Chapter 2 • Lennon’s Utopia
This chapter is quite interesting because the author used Lennon’s “Imagine” – a beautiful song of the economically illiterate poet about global socialism and open borders to apply the logic of economic science. Here is the table demonstrating results:

After reviewing the economic consequences of open borders with the mass migration of low-skill South workers to the North, the author looks at the other flow – high-skill immigrants to the North advertised as highly beneficial due to productivity spillovers. This analysis produces another table:

The final point that the author makes in this chapter:” The fact that immigrants affect the receiving country in many other ways—changing social customs, the norms that guide everyday interactions, the cultural milieu, and the political environment—will remain hidden in the background, even though these consequences themselves have an economic impact.”  The author stresses that it is not possible to know full impact of mass immigration, but one thing is clear from the work of Putnam: “Immigration and ethnic diversity tend to reduce social solidarity and social capital. New evidence from the US suggests that in ethnically diverse neighborhoods residents of all races tend to “hunker down.” Trust (even of one’s own race) is lower, altruism and community cooperation rarer, friends fewer.”

Chapter 3 • How We Got Here
In this chapter, the author looks at the history of immigration to the USA. Here is the graphic:

The author also discusses illegal immigration and provides an interesting note on their counting methodology:” …the Census Bureau periodically conducts surveys of the population and asks the respondents where they were born. The answers give us an estimate of how many foreign-born people are actually living in the country. In rough terms, the difference between the number of foreign-born persons actually living in the country and the number of legal immigrants who should be living in the country is the DHS estimate of the number of undocumented persons

It is evident that nobody really knows. There is also a table demonstrating where immigrants came from, and it is no surprise that the vast majority is from Latin America. Finally, the last interesting table in this chapter show immigrants’ characteristics:

Chapter 4 • The Self-Selection of Immigrants
In this chapter, the author presents two opposite opinions. One is that they are the “best and brightest” who do well in America, and another is that they are misfits who bring crime and all kinds of calamities. The author stresses that, in reality, immigrants are different. There are many of both types, but one thing is unquestionable: they are all self-selected. Finally, he discusses various economic parameters of immigrants from different places and provides a graph demonstrating the differences:

Chapter 5 • Economic Assimilation
This chapter looks at the immigrants’ economic status over time and its link to assimilation or lack thereof. The author provides several graphs demonstrating that level of assimilation decreasing with mass immigration when the new immigrants create isolated conclaves where they can maintain their culture, language and make a living without joining an American culture. Finally, the author makes these points:

“First, rapid economic improvement during an immigrant’s lifetime is not a universal aspect of the immigrant experience, even in a country like the United States, which is typically thought of as being very socially and economically mobile.

Second, immigrants assimilate when the incentives to do so are particularly strong, and they do not when there is less need for assimilation (as when there are large ethnic enclaves).

Third, it is tempting to conjecture that the presence of mass migration before 1920 and after 1980 hindered the economic progress of those immigrant waves. Notably, the interval between those two migrations happens to be the period when restrictive immigration policies, combined with the economic debacle of the Great Depression and the political upheaval of World War II, greatly limited the number of immigrants.”

Here is one of such graphs:

Chapter 6 • The Melting Pot

In this chapter, the author discusses the workings of the Melting Pot and whether it is still working or not. Then, he looks at the conditions of immigrants’ children and finds that the usual perception of their rapid progress is somewhat overoptimistic. Here are the actual data:

At the end of the chapter, the author discusses cultural changes in America that prevent the melting pot from working correctly:

  • Assimilation is a choice. It used to be very beneficial economically, and the disappearance of manufacturing jobs that used to demand and reward assimilation significantly decreased these benefits.
  • The political class of America used to encourage assimilation, but now it is actively resisting it
  • The welfare state automatically improves the economic conditions of immigrants from developing countries, consequently changing the composition and motivations of the immigrant population.

In the end, the author concludes:”…the historical experience probably has little to teach us about the next few decades, and it should not be relied on to predict either a rosy future or a looming debacle. Instead, the lesson to keep in mind is that the melting pot will operate most efficiently when that outcome is in the immigrants’ self-interest.”

Chapter 7 • The Labor Market Impact

The author begins this chapter with the story of a meatpacking factory that, after the immigration enforcement raid, which removed the illegal immigrant workforce, hired black Americans at higher wages. The author concludes:” So what is the lesson that eludes the Cato Institute and the Center for American Progress but that Crider quickly grasped when it had to? It is not that immigrants do jobs that natives don’t want to do. It is instead that immigrants do jobs that natives don’t want to do at the going wage.”

The author provides a numerical estimate of the impact across the board:” The most credible evidence—based solely on the data—suggests that a 10 percent increase in the size of a skill group probably reduces the wage of that group by at least 3 percent.”

After that, the author reviews a natural experiment of moving a large group of immigrants from Cuba to Miami. Here is a comparison graph:

The author also retells the story of the Bush administration’s attempts to rely on the politically motivated study promoting immigration as a boon for all Americans while refusing to explain how they produced such a fantastic result. In short, here is the author’s position:” In my view, the most credible evidence on the labor market impact of immigration comes from studies that do not rely on models of hypothetical economies. Despite the many data problems that real-world studies often encounter, at least that evidence is not tainted by assumptions that offer tempting opportunities to manipulate the data and weave a narrative. The historical relation between the wages of specific skill groups and immigration into those groups summarizes what we know for sure: the earnings of the groups most affected by immigration grow at a slower rate.”

Chapter 8 • The Economic Benefits
The author first presents his modeling of economic benefits from immigration. Here is how he describes the result:” This estimate depends on the many assumptions built into the hypothetical economy. Nevertheless, the exercise says something both useful and surprising: it is mathematically impossible for this widely used framework to spit out a huge number for the immigration surplus. A $50 billion surplus in the context of an $18 trillion economy is not that big a deal; it is less than three-tenths of 1 percent of GDP. The calculation also reveals that this small surplus conceals a large redistribution of wealth. Native workers lose $516 billion, while native-owned firms gain $566 billion. If one wishes to believe that natives, on the whole, benefit from immigration and that the surplus is about $50 billion, it follows from the same calculation that native workers are sending a half-trillion-dollar check to their employers.

The author then presents a fascinating discussion on the impact of very high skill immigration using two examples: Jewish mathematicians expelled from Nazi Germany in the 1930s and mass migration of Soviet mathematicians after the fall of the USSR. In the first case, the overall productivity of American universities improved due to the immigration of Einstein, von Neumann, and others. Still, it did not impact the productivity of the Arian professors remaining in Germany. Here is the overall picture of the productivity of their students:

A somewhat different picture appeared in the 1990s mainly because Soviet and American mathematicians worked in different fields during the Cold War. The arrival of the Soviet mathematicians crowded out Americans from the Soviet areas because the overall size of the market for mathematicians did not change:

The final part of the chapter discusses H-1B visas. Again, it provides pretty convincing evidence that the driver is not too few educated American professionals, but rather lower price of Indian professionals.

Chapter 9 • The Fiscal Impact
The author begins this chapter with a reminder that the immigrants are also human beings, in addition to being workers, which obviously has a severe fiscal impact. The author then demonstrates how statistics could be manipulating the same data to obtain different results. He does it by presenting data for the immigrant on welfare either by household (curtain #1) or by an individual (curtain #2). The trick is that children born to immigrants in the USA are not immigrants, so their welfare recipients are counted as natives. Here is the result:

The author then looks at different long-term fiscal impact calculations and finds that they are definitely negative in the short run and probably negative in the long run.  Here is the author’s overall conclusion:” This conclusion contradicts the narrative that immigration is good for everyone. It also contradicts the claim that immigration is harming the average American. Instead, the reality is much more nuanced. Although the mythical average person may be unaffected, immigration creates many winners and losers. This redistribution of wealth—in an economy where the size of the native economic pie remains relatively fixed—is the key insight I have gleaned from decades of research on the economics of immigration. After all is said and done, immigration turns out to be just another government redistribution program. And this lesson sheds a lot of light on which groups are on which side of the immigration wars.”

Chapter 10 • Who Are You Rooting For?

In this chapter, the author provides a concise and very clear summary of the results of his research and insights obtained from it:

•​Not everyone wants to move to the United States, and those who choose to move are fundamentally different from those who choose to stay behind. The nature of the selection, however, can vary dramatically from place to place. The United States will attract high-skill workers when we offer a higher payoff for their abilities, but the high-skill workers will stay behind if they can get a better deal at home. The fact that different kinds of people will want to move out of different countries (and that the skills they bring are not always transferable to the American setting) creates considerable inequality in economic outcomes across immigrant groups at the time of their arrival.

•​Assimilation is not inevitable. The speed of economic assimilation—the narrowing of the gap in economic outcomes between immigrants and natives—depends crucially on conditions on the ground. Sometimes those conditions speed up the process, and sometimes they slow it down. In fact, economic assimilation today is far slower than it was two or three decades ago. This trend, however, masks crucial differences in the assimilation of different immigrant groups. Some groups assimilate very rapidly and some do not. Typically, groups that are more skilled and that do not have access to large and vibrant ethnic enclaves assimilate faster.

•​The experience of the descendants of the Ellis Island–era immigrants shows that the melting pot did indeed melt away the differences in economic outcomes across those ethnic groups, but it took nearly a century for the melting pot to do its job. The same process may be starting to take place with the current mass migration, as the children of today’s immigrants earn higher wages and exhibit less ethnic inequality than their parents did. But we truly do not know how things will pan out in the next few decades, because the economic and social conditions that kept the melting pot busy throughout the 1900s may not be reproducible in the next century.

•​Immigrants affect the job opportunities of natives. The laws of supply and demand apply to the price of labor just as much as to the price of gas. The data suggest that a 10 percent increase in the number of workers in a particular skill group probably lowers the wage of that group by at least 3 percent. The temptation to play with assumptions and manipulate the data, however, is particularly strong when examining this very contentious issue, so the reported effects often depend on such assumptions and manipulations. Our look inside the black box of how research is done suggests one lesson: the more one aggregates skill groups, the more likely one hides away the specific group of affected workers—making it harder to document whether immigration made anyone worse off. The more laser-focused the group of native workers examined, the easier it is to detect that immigration affected the targeted group.

•​Immigrant participation in the workforce redistributes wealth from those who compete with immigrants to those who use immigrants. But because the gains accruing to the winners exceed the losses suffered by the losers, immigrants create an “immigration surplus,” a net increase in the aggregate wealth of the native population. However, the surplus is small, about $50 billion annually. That calculation also suggests a half-trillion-dollar redistribution of wealth from workers to firms. The surplus could be much larger, if there are many exceptional immigrants and if some of the unique abilities brought by those immigrants rub off on the native workforce.

•​The welfare state introduces the possibility that the gains measured by the immigration surplus might disappear if immigrants are net users of social assistance programs rather than net contributors. There is little doubt that immigrants receive assistance at higher rates than natives, creating a fiscal burden in the short run. In the long run, immigration may be fiscally beneficial because the unfunded liabilities in Social Security and Medicare are unsustainable and will require either a substantial increase in taxes or a substantial cut in benefits. Immigrants expand the taxpayer base, perhaps helping to spread out the burden. It is extremely difficult to accurately measure the fiscal benefit in the long run, however, because much depends on the assumptions made about the future path of taxes and government spending.

•​It is probably not too far-fetched to conclude that, at least in the short run, the economic gains captured by the immigration surplus are offset by the fiscal burden of providing public services to immigrants. Given the scale and the skill mix of the immigrants who entered our country in the past few decades, the economic impact of immigration, on average, is at best a wash. This near-zero effect conceals a substantial redistribution of wealth from workers to firms.

•​The argument that open borders would exponentially increase the economic gains from immigration depends crucially on the perspective of immigrants as workers rather than immigrants as people. The multi-trillion-dollar gains promised by the proponents of open borders could quickly disappear (and even become an economic debacle) if immigrants adversely influence the social, political, and economic fabric of receiving countries. In the end, the impact of open borders will depend not only on whether the movers bring along their raw labor and productive skills, but also on whether they bring the institutional, cultural, and political baggage that may have hampered development in the poor countries.

MY TAKE ON IT:

This book pretty much confirms my understanding of the immigration problem with the wealth of data and excellent analysis of this data. I think that immigration, as just about everything else, is not “good” or “bad”, but rather “it depends” proposition. It depends on the types and quality of immigrants and the types and quality of their supporters. There are three different types of immigrants:

  1. the ones who come to obtain a better life at somebody else’s expense, correctly believing that the American welfare state would provide this opportunity
  2. the ones who come to earn better life by using opportunities that America offers, but generally reject assimilation because they consider their own culture superior to the American culture
  3. the ones who want to become Americans and ready and able to put in the effort necessary to do it, not only because they want to get better returns on their effort, but also because they value the opportunity to be free as only Americans could be.

I think that the best solution would be to establish such processes that would filter out the individuals of the 1st type, provide temporary status for the individuals of the 2nd type, and provide all necessary help to individuals of the 3rd type.

However, I think that this is only partially relevant to the problem. The immigrants do not have control over borders – politicians do. And politicians do all they can to open these borders, and they do it for one and only reason – transfer wealth away from the American middle class to themselves. The immigrants, especially illegal, are just a conduit for such transfer. Any other reasons the politicians come up with: humanitarian consideration, empathy, and other staff is just a cloud of smoke to conceal real motives. The motive of enrichment is common for both republicans and democrats, but the latter have another, maybe even more powerful, motive – political power.

The Democratic party is inherently racist and conducts its calculations based on race with the hope of achieving a permanent majority by using a coalition of non-whites against whites. Their dream is to actually recreate the old slave-owning South, which used to have a small caste of planters (by the way, a few of them black), black slaves working the fields, and a stupid white racist majority accepting economically inferior status in exchange for the pride of belonging to “superior” race.  The civil rights movement of the 1960s demonstrated that most whites are not stupid racists anymore and prefer good economic opportunities to racial pride with poverty. The new arrangement the Democratic party hopes to establish would be automated and globalized production, with wealth concentrated in the hands of the government-controlled by a small caste of credentialed people (some of them black or brown) and distributed from the top-down, with black and brown minority/majority supporting this caste and accepting economically inferior status in exchange for the pride of belonging to “superior” race. The open borders are just a tool to achieve this minority/majority demographics. 


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