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July 21, 2004
Remittances Are Good for Them and Us…Up To A Point
A recent study on
Latino immigrants by the
Inter-American Development Bank noted the record
amounts of money—$30 billion—that they will send home
as remittances this year.
But this is how the news was spun in the Wall Street
Journal by reporter Joel Millman, a
notoriously fanatical
immigration enthusiast:
“Much has been made
of the economic lifeline provided to Latin America by
the billions of dollars transferred home by immigrant
workers each year. But according to a new study, more
than 90 cents out of every dollar earned by the
immigrants stays in their adopted communities, creating
a huge boost to local economies.” [Joel
Millman, “Immigrants
Spend Earnings in U.S.” May 17, 2004, p. 8,
Wall Street Journal,]
For “perspective,”
Millman reminded his readers that what he says are
the 16.7 million immigrant workers born in Latin America
(i.e. 12 percent of total
U.S. employment by my calculation) earned gross
income of $450 billion last year.
Millman conveniently
ignores one (at least) large negative: Immigrants
depress wages. (See my earlier article
Immigration Policy Costing American Workers $2,600 A
Year.)
By my estimates:
 | Latino immigrants
depress wages of native workers by an average of 4.2
percent |
| The average wage loss due to Latino immigrants is
approximately $2,230 per native worker |
| Aggregate wages of
native workers are $268 billion lower due to the
presence of Latin American immigrants |
What starts as a $450
billion “gain” to the American economy is thus cut by
more than 50 percent after wage displacement is factored
in.
And, as established for
example by the National Academy of Science’s 1997 report
"The New Americans,"
even this small gain
goes negative after factoring in the taxes that
native-born Americans pay to provide
public services for Latino immigrant workers and
their
extended families.
Furthermore, the $30
billion in remittance outflows may appear unimportant in
the context of an $11 trillion U.S. economy. When
compared to the standard international trade metrics,
however, $30 billion is far from trivial:
| Remittances account for about three weeks (5.6
percent) of the total U.S. current account deficit
($540 billion) |
| Remittances account for 5 months of the current
account deficit with Latin America ($70 billion) |
| Remittances from California alone ($9.6 billion)
are equivalent to three months of the U.S. trade
deficit with Mexico [See
Table 1 for remittances by
state] |
Apologists view
remittances as a form of private investment. Like
international aid flows, which they now surpass in
dollar amount, remittances
fund education, infrastructure, and job-creating
investment. Subsequent economic growth reduces
immigration to the U.S.
Or so the story goes.
The reality is more
complex. Allan Wall, VDARE.COM’s
Mexico correspondent, has
argued that remittances are functioning as a type of
welfare, distorting incentives—not least for
Mexico’s kleptocratic elite, which can avoid reform.
Additionally:
| Remittance receivers in Mexico are more likely to
express an interest in emigrating to the U.S. (26%)
than the general population (19 percent) |
Thus the rapid rise of
remittances not only reflects past immigration, but it
also foreshadows
future flows of people northward.
But don’t look for this
news in the
Wall Street Journal—especially if Joel Millman
can help it.
That’s what VDARE.COM
is for!
[Number fans
click here for tables.]
Edwin S. Rubenstein (email
him) is President of
ESR Research Economic Consultants in Indianapolis. |
