Immigration And Inequality

National Review Online writer Andrew Stuttaford, contributing to a round table for 2012 Predictions  posted on December 29, 2011, prognosticated, in part:

So far as unemployment is concerned, the picture will continue to be dismal. Any improvements in the headline numbers will have to be seen in the context of the long-term decline of the percentage of Americans holding jobs, a decline that will continue to be of little apparent concern to those (such as advocates of mass immigration) who continue to hymn the benefits of a rising population.

In his corresponding predictions for 2013 (Crystal Ball 2013, December 31, 2012), Stuttaford quoted the paragraph above and added:

Incidentally, when it comes to the question of immigration, the GOP, having “learned” from its 2012 defeat, may well be tempted to yield quite a lot of ground. What it will not do—despite the fact that inequality will be a major feature of the 2013 political debate—is make the essential point that mass immigration has been (and will continue to be) one of the most significant agents of inequality that there is.

That's a useful remark, because "inequality" has recently become a prominent bête noire  in our national conversation, and, indeed, mass immigration contributes to economic inequality.

Harvard economist George Borjas, himself a refugee from Cuba in his youth, explained the basic mechanics of this in his 1999 book Heaven's Door: Immigration Policy and the American Economy image(Princeton University Press, Princeton).

Overall, immigrants, including illegal aliens, modestly increase the Gross Domestic Product [GDP], by several hundred billion dollars per year (against a GDP of about 15,000 billion dollars), but most of the increased output goes to the immigrants themselves. 

However, the economic presence of all those immigrants does boost the aggregate income of the native-born population by a few tens of billion dollars—relatively a very small amount if we estimate, consistently, that the natives' aggregate income would be 14,700 billion dollars if the immigrants weren't here at all.

However again, that small immigration-driven boost in natives' aggregate income encompasses redistribution among us natives from labor to capital amounting to something like $200 billion per year, because the presence of immigrants lowers wages for labor.

As Borjas puts it (p. 90):

Immigration ... has two distinct consequences and these consequences propel the immigration debate.  The nation, as a whole, gains from immigration.  In other words, immigration increases the size of the economic pie available to natives.  Immigration also redistributes income—from native workers who compete with immigrants to those who hire and use immigrant sevrices.  Immigration changes the way the economic pie is split between workers and firms.

This perspective also shows that the benefits from immigration arise because immigrants reduce the wage that native workers get paid.  Without the pain suffered by the workers who compete with the immigrants, no gain would accrue to the employers who do the hiring or to the consumers who do the buying. [Italics in original]

In short, just considering simple arithmetic, small decreases of income for many people (labor) can lead to big increases of income for a few (capital).  Thus to the extent "inequality" is a real problem in the U.S., it provides a leverage point for immigration patriots to use in discussions and arguments. 

Please remember this if we're confronted with another full-bore amnesty crisis this spring.