The Economic Impact of Immigration: Paying for the Privilege

(This article originally appeared in the June, 2009, issue of Chronicles. Subscribe online to Chronicles: A Magazine of American Culture. Click here for details.)

I stopped paying attention to Time many years ago.  My twin brother and I, already plotting our emigration to the United States, subscribed as college students in England in the 1960's to get some sense of this world-straddling "indispensable nation"—as Clinton administration Secretary of State Madeleine Albright later called it, possibly not for our reasons—and also because our English liberal professors assured us it was written by "Cold Warriors."

 (We were puzzled to find no sign of this.  We were also puzzled by the extraordinary behemoths reported to be common in American college football.  As Baby Boomers who clearly remembered the Labour government's extension of food rationing until well after World War II, we decided it must be the orange juice.)

But now my American anchor-baby teenage son reads Time as a substitute for conversation while scarfing down breakfast before school.  (Oddly, he doesn't like orange juice.)  So I got to see this item in the April 20 treezine: "Undocumented And Undeterred: A rough economy and tough enforcement have put unprecedented stress on illegal immigrants.  What one Oregon town tells us about why they're staying, by Nathan Thornburgh."

It was mostly the usual twaddle, insisting that eliminating America's illegal ("undocumented") immigrant population is, literally, unthinkable.  This only confirms repeated opinion-poll findings, including the April 14 Rasmussen Reports, which indicated that there exists an enormous gulf on this issue between Americans and what Rasmussen calls the "political class."  (Rasmussen reported that 66 percent of Americans think it is "Very Important" that illegal immigration be dealt with—but only 32 percent of the "political class" agreed.)

Some aspects of Thornburgh's brief for national liquidation caught my attention.  For example:

"As tempting as it is in places like St. Helens to try to send the illegal immigrants packing, it would be a bit like letting AIG or GM collapse: it might feel good and it might be morally justified, but in the long run it would just increase the misery on Main Street.  Like it or not, with more than 10 million Margaritos [the illegal-alien hero of Thornburgh's sob-story lead] from coast to coast, illegal America is simply too big to fail."

Now, I realize that there are differing opinions at Chronicles about the wisdom of allowing the flaky financial superstructure (as opposed to the sound productive foundation) of worthy Midwestern industrial enterprises to "collapse."  But there can be no disagreement that, as an analog for illegal immigration, Time's comparison is absurd.  There are some ten to twenty million illegal immigrants in the United States, but they are overwhelmingly unskilled, and many are children; thus, their total economic output is relatively small—probably less than one percent of the U.S. Gross Domestic Product.  (That's not net of their costs to the American taxpayer, through schools, hospital emergency rooms, etc.)  A systematic rooting out of illegal immigrants, similar to President Eisenhower's very successful Operation Wetback, would cause, at most, economic ripples, many of which would cancel each other out.

Actually, the Time story was far from the worst immigration-enthusiast story I've ever seen.  It conceded fairly that "there is a sincerity to the most ardent activists against illegal immigration in St. Helens, a sense that their town is trapped in the swale of a very bad economic cycle and that the undocumented workers might be making things worse."  It profiled an heroic local activist, Wayne Mayo, who organized a local ballot measure to fine employers of illegal aliens: "He was outspent and outorganized by regional activist groups—he raised $430, they raised more than $70,000—but his proposal still won by 15 percentage points."

Karl Rove and assorted Republican campaign consultants, call your offices!  (On second thought, don't bother.)

What struck me most about the Time story, however, was not its human-interest huffing and puffing—that's par for the course in immigration-enthusiast reporting—but its profound economic illiteracy.  This aspect is distressing to me as a journalist, because the consensus among labor economists has not altered since I reported the state of the technical debate in relatively simple English in my book Alien Nation: Common Sense About America's Immigration Disaster in 1995.

First, the immense influx of immigrants inadvertently unleashed by the Immigration and Nationality Act of 1965, and the simultaneous collapse of the southern border, may raise GDP somewhat—but the bulk of that is captured by the immigrants themselves in the form of wages.  Hence the Time article's anecdotes of happy illegals, which the author evidently expects to be compelling.

Second, the influx has been, in aggregate, of nugatory net benefit to native-born Americans.  Thus, while immigration may not have caused the collapse of the Oregon timber industry, it certainly has not been a cure.

Third, immigration interacts with government transfer-payment systems to impose a net loss on taxpayers.  In some parts of the United States, this is really serious.  In California it exceeded $1,000 per year for every native-born American household as long ago as 1996, according to the National Research Council's report The New Americans.

This point is completely lost on Time's Thornburgh.  One reason his illegal-alien hero Margarito refuses to leave Oregon is that his autistic son gets 24 hours of special education in St. Helens, compared with only 1 in Mexico.  Tragic—but who's paying?

Fourth, while immigration does not benefit native-born Americans in the aggregate, it does cause a significant redistribution of wealth among Americans—shifting as much as two percent of GDP from labor to capital, basically by beating down wages.

Showing restraint unusual for an immigration-enthusiast sob story, Thornburgh didn't quote any local employers saying what good (meaning cheap) workers the immigrants are.  (That may be because he was shocked by the low pay Margarito received for cleaning out the back of a St. Helens store, although such exploitation—the job was obviously off the books—is precisely the point.)  But Thornburgh doesn't have to quote anyone.  As a member of the mainstream media elite, he can interview himself every time he uses his expense account in a Manhattan restaurant.

I reviewed the state of the "economics of immigration" debate in a long interview with Harvard's George Borjas, the preeminent authority in the field and himself a Cuban immigrant, which was published in the compendium Immigration and the American Future (Chronicles Press, 2007).

Borjas reported no serious challenge to the consensus, which he played a considerable part in developing.  We discussed a 2005 paper by economists Gianmarco Ottaviano and Giovanni Peri (Rethinking the Gains From Immigration: Theory and Evidence From the U.S.,[ PDF] published by the National Bureau of Economic Research), which purported to find that immigrants had actually increased the wages of the native-born and which, not coincidentally, had received a lot of publicity.  Borjas criticized the paper on technical grounds.  (The authors have subsequently retreated.)  We also discussed a 2002 paper by economists Donald R. Davis and David E. Weinstein (Technological Superiority and the Losses From Immigration, NBER (PDF), which suggested that immigration was inflicting a much larger loss on native-born Americans than had previously been thought and which, again not coincidentally, had received almost no publicity at all.  Here, Borjas respectfully punted, saying that the result of the study was important but derived from trade theory, which was alien to him as a labor economist.  He added that the authors had a hard time getting the paper published and that, as far as he knew, no Ph.D. students were doing the research necessary to confirm the theory.

Even the ivory tower is not totally unswayed by the political pressures that shape the mainstream media—but it has, at least, acquitted itself more honorably.  Thus, the conclusions of The New Americans—essentially what I outlined above—have never been reported in the Wall Street Journal.

More recently, Borjas himself has returned to the broader question of immigration's economic utility.  In The Analytics of the Wage Effect of Immigration (March 2009, NBER), he argues not only that the short-run effects of immigration must be negative for wages but that the long-run effects may also be negative, depending on the effect of immigration on the consumer base.  In other words, the damage to American workers may be, for practical purposes, permanent.

For me, the ultimate question about the economics of immigration has always been whether it secures some economic benefit for Americans that they could not secure for themselves.  Regardless of the details of its impact, is it necessary?

Somewhat surprisingly, there is no debate about this at all, perhaps because the question is so rarely asked.  I once got Julian Simon, who never really has been replaced as the designated immigration-enthusiast go-to economist since his premature death in 1997, to concede the point.  "I've never said it's necessary," Simon replied (Forbes, August 30, 1993).

If it's not necessary, why does America's political class insist on it?  Why are Americans being required to transform themselves for nothing—and even to pay for the privilege?

This article first appeared in the June 2009 issue of Chronicles: A Magazine of American Culture.

Peter Brimelow (email him) is editor of VDARE.COM and author of the much-denounced Alien Nation: Common Sense About America's Immigration Disaster, (Random House - 1995) and The Worm in the Apple (HarperCollins - 2003)