Invisible Economy

Originally published in
the

The American Legion Magazine
,
 
July Issue, Vol. 143,
No. 1
.

WHY do I, as an immigrant, worry about immigration?
I have an infant memory: playing with my twin brother
in the back yard of my aunt`s home in a Lancashire
cotton town. Suddenly, great whooping giants in U.S.
Air Force uniforms (although with the crystal-clear
recollection of childhood, I now realize that they had
the lithe figures of very young men) leap out and grab
us.

We are terrified and struggle free, which always made
me feel bad in subsequent years. They were far from
home, lodging with my aunt. And they just wanted a
souvenir photograph.

They were the Cold War tail of that vast host that
had come to Britain during World War II, when the whole
town had resounded night and day to the roar of B-17
engines on the test beds at the great Burtonwood air
base. And everyone had been glad to hear them.

I don`t know what happened to those Americans,
although I remember one young wife showing us the first
color slides we had ever seen, of southern California,
and explaining that they hoped to move to this
breathtaking paradise—it was, remember, the early
1950s—when they got out of the service.

They will be old now, if they are still alive. I
don`t know what they or their children think of the
transformation immigration is bringing to the nation
they so bravely represented. I do know, however, that
they ought to be asked.

Soon afterward, illegal immigration also was allowed
to spin out of control.

The effect of this invasion will be profound. Here,
however, I`m going to focus on just one
little-understood point—from an economic point of view,
it`s quite unnecessary. There`s no evidence that
immigration will do Americans any good.

Today, it is astonishing to read the assurances given
by the 1965 Immigration Act`s floor manager, Sen. Edward
Kennedy, of Massachusetts.

“First, our cities will not be flooded with a million
immigrants annually. Under the proposed bill, the
present level of immigration remains substantially the
same…. Secondly, the ethnic mix of this country will not
be upset…. Contrary to the charges in some quarters,
[the bill] will not inundate America with immigrants
from any one country or area, or the most populated and
deprived nations of Africa and Asia….

“In the final analysis, the ethnic pattern of
immigration under the proposed measure is not expected
to change as sharply as the critics seem to think.”

Every one of Senator Kennedy`s assurances has proved
false. Immigration levels did surge upward. They
are now running at around a million a year, not
counting 3-500,000 net illegal immigration annually.
Immigrants do come predominantly from one area—85
percent of the 11.8 million legal immigrants arriving in
the U.S. between 1971 and 1990 came from the Third
World, 44 percent from Latin America and the Caribbean,
36 percent from Asia—and from one country: 20
percent from Mexico. The ethnic pattern of immigration
into the U.S. did change sharply, because
immigration from Americans` traditional European
homeland has been choked off by the act. And the ethnic
mix of the country has, of course, been upset.

By 2050, when (God willing) my American children will
be in their 50s, there will be perhaps 400 million
people in the United States. But only if immigration
continues. Some 130 million of those people will be
post-1970 immigrants and their descendants. Early in the
next century, African-Americans will no longer be the
largest minority. Around mid-century, caucasians will
slip below half the population.

There is no economic
rationale for our current immigration policy.

There is no precedent for a sovereign state
undergoing such a transformation in the history of the
world. Well, is there some economic rationale for this
extraordinary policy? Extraordinary answer: no.

Economists have usually focused on the fiscal aspects
of immigration—that is, are immigrants costing the
taxpayers more than they contribute? It`s been a fierce
debate which it is increasingly clear that the
pessimists have won: the new immigrants are indeed a net
fiscal burden.

But the more important question, hardly ever asked,
is whether immigration is necessary—does it do
something for the American native-born that they can`t
do for themselves by other means (such as tax cuts)?
Here, surprisingly, there has never been any dispute.
“I`ve never said it`s necessary,” University of
Maryland economist Julian Simon, the much-quoted
champion of immigration, told me in an interview.

Let`s look at both questions in turn.

Are immigrants a burden on the taxpayer?

The United States has had mass immigration before.
The last great wave was at the beginning of this
century. And the U.S. has had the welfare state, from
the 1930s. But it has never had mass immigration and the
welfare state together. It`s not clear the combination
can work.

For example, up to 40 percent of immigrants coming
through Ellis Island at the turn of the century
ultimately went back. They had to. If they failed in the
workforce, there was no government assistance. But now,
if immigrants fail in the workforce, there is welfare.
So they have been staying—less than 10 percent go home.
The dynamic has fundamentally changed.

This problem has been made worse by the perverse
workings of the 1965 Immigration Act. The act uncoupled
legal immigration from the needs of the American economy
by emphasizing so-called “family reunification” over
immigrants with skills that employers wanted. In 1992,
only 13 percent of the 914,000 legal admissions were
“employment-based.”

(I say “so-called family reunification” because it`s
not what Americans think of as reunification. For
example, much of it is immigrants marrying and importing
spouses—a “family” that has never been united. But it
has created uncontrollable “chains migration” from a
small number of Third World countries and enabled them
to shoulder all others aside. American interests are
never considered.)

The “family-reunification” emphasis means that
post-1965 immigrants are, on average, less skilled
relative to Americans than ever before. And getting even
less so.

The Harvard economist George J. Borjas (himself an
immigrant—we are everywhere!) has found that, for
example, in 1970 the average recent immigrant had
0.28 less years schooling than native-born Americans.
But by 1990, the average recent immigrant had almost
2.39 years less schooling than American whites.

Yes, we hear a lot about Ph.D. immigrants working in
California`s Silicon Valley. But the proportion of
highly educated immigrants is small. For example, under
3 percent of recent immigrants had Ph.Ds. The proportion
of immigrants who have not graduated from high school
has sometimes exceeded 40 percent.

Result: in 1970, immigrants on average actually
earned some 3 percent more than native-born Americans.
But in 1990, immigrants on average earned 16.2 percent
less.

And they are going on welfare. George Borjas
estimated that in 1990 about 9 percent of immigrant
families were on welfare, as opposed to maybe 5 percent
of American whites. Including non-cash benefits like
food stamps, perhaps 20 percent of immigrant families
receive government benefits.

In its own way, the pro-immigration Urban Institute
has conceded this reality. Testifying before Congress in
1993, it called for more public spending—”to put it
bluntly, [to] avert the formation of a new urban
underclass.”

Bottom line: George Borjas`s estimates immigrants
imposed a net cost on American taxpayers of over $16
billion in 1990.

And note that this doesn`t include the immense costs
of educating immigrant children. Borjas makes the
conservative assumption that this education will pay for
itself when the students start working. I think that`s
dubious, but in any case it is years in the future. Nor
does Borjas include immigrants` Social Security taxes.
They come with the future obligation to support retired
immigrants.

What about Congress`s 1996 legislation, which
basically required immigrants to become citizens to
receive welfare?

It`s at best a start. Immigrants can naturalize after
only five years—and the screening process has
notoriously collapsed. They can receive payments
intended for their American-born children—current law
absurdly says that even children born to illegal
immigrants are American citizens.

And they can cheat. Legal permanent residents were
already supposed to be deported as a “public charge” if
they used public benefits during their first five years
in the United States. But census data shows they are
massively on welfare.

Why not? From 1961 to 1982, only 41 people were
deported because they were public charges. Then the INS
gave up reporting the category.

Now let`s look at the second question:

Is immigration necessary?

If immigrants work at all—and some don`t—there must
be some growth in overall U.S. output. But it could be
minimal. And most of it is captured by the immigrants
themselves, through their wages.

Moreover, a country`s living standard is expressed by
its output per head, not just its sheer output.
Specifically, the question is how much immigration
benefits each native-born head. Otherwise, why
bother?

Oddly, economists have made little effort to measure
the overall economic benefits of immigration. The best
current estimate was made recently by George Borjas. It
suggests that in 1992 the wealth generated by immigrants
and accruing to the native-born was very small: about
one to three tenths of one percent of total U.S.
economic output, or $6-$18 billion. It`s probably wiped
out by the fiscal cost.

America is being transformed for—nothing.

Surprised that immigration has so little effect?
Remember the U.S. economy is huge and
deeply-capitalized. Immigrants make up only about 9
percent of the workforce. And labor is only a relatively
small factor in economic growth. It`s far outweighed by
technological innovation—which is why Japan has been
able to grow three times faster than the United States
over the last 50 years without any immigration at all.

Indeed, the U.S. economy`s average growth rate has
actually slowed since the late 1960s, when the new
influx began.

But although immigration does little good overall,
immigrant competition does cause immense redistribution
between Americans. Borjas estimates that some 2 percent
of output—maybe $120 billion—is redistributed from labor
to capital. That`s why you hear so many business lobbies
blindly in favor.

I`m not saying that immigration, more particularly
skilled immigration, can never be helpful. After all,
where would Forbes magazine be without me? I like
to think I`m worth at least half a balloon—maybe just
the hot air! But it`s a luxury, not a necessity. And
it`s a luxury that has been frittered away by 30 years
of irresponsible policy.

So there is no economic rationale for current
immigration policy. It must be justified politically.
Immigration enthusiasts must say why they want to
transform America.

And this brings us full circle. Because Americans
ought also to be asked: Do they agree

Republished in VDARE.COM on March 07, 2002