How much of a jerk do you have to be to oppose immigration?
Update: Don't Trip Up does a similar calculation for Britain and EE
Both Alex Tabarrok and Dani Rodrik have come out in favor of immigration into US on the basis that the relevant "moral community" one should consider is the world and not just the US natives. It might be the case that immigration from Mexico into US lowers the wages of the unskilled workers here (the extent of this effect is subject to some controversy, see the previous post on Ottaviano and Peri). However, the increase in the migrants' wages is so large that support for immigration is still justified.
This kind of argument provokes the expected response from the expected folks, roughly along the lines that we should care more about native workers - the citizens - then the migrants - the non-citizens. Ok. But how much more? Let's put on our annoying-economist hat and consider the question; if you consider a foreign national to be only 1/2 a human being (alright, alright, only 1/2 as "important") as a native citizen, are you justified in opposing immigration? After all, it takes a real jerk to argue that foreign people's welfare should not count at all. Suppose the foreigners are only 1/10th as important? Surely, if natives' welfare counts for ten times as much as that of foreigners, we would be justified in banning immigration since it may adversely affect the wages of the unskilled in US? Well, let's see...
Suppose we transfer one person from Mexico to United States (illegally or otherwise). As a result his wages increase compared to what he was making in Mexico. Let us also suppose that as a result of this transfer the wages of some unskilled worker in US fall. Furthermore we will ignore the aggregate gains from immigration that occur and which all economists, including Borjas admit exist. We do this to make our job harder, not easier.
How much do you have to weight the native's welfare relative to that of the Mexican immigrant in order to oppose moving this migrant into US?
Well, in the standard framework we have ourselves a Social Welfare Function - in this case a utiliterian one with unequal weights attached to the welfare of natives and immigrants. The key is actually that there's decreasing marginal utility of wealth. Let
be the weight attached to the well being of the native. So the weight attached to the well being of the immigrant is 
. Let
be the wage rate of the native worker before migration and
be the wage rate of the native worker after migration.
Here we're assuming that
Similiarly let
be the wage rate of the immigrant worker before migration (in Mexico) and 
be the wage rate of the immigrant worker after migration (in US).
Of course
Let utility be a CES function of wage/income:
=\frac{w_{i,j}^{1-\theta}} {1-\theta}$)
Then welfare before migration is given by:
*w_{I,Old}^{1-\theta}$)
and after migration:
*w_{I,New}^{1-\theta}$)
Setting these equal and solving for lambda tells us how much you have to weight the well being of native workers in order to be indifferent between migration and no migration. If your lambda is less than this value (and that's up to you) then you should support the migration, if your lambda is greater then go ahead an oppose the migration. We get:
To calculate the "jerk factor" lambda we have to get some estimates of how much wages change for both migrants and natives.
Let's get crazy and accept the Borjas results, which say that in the long run the migration will depress a native unskilled worker's wages by 5% (note this isn't exact translation of the Borjas findings but close enough). Of course these kinds of estimates are in the aggregate but it makes things simpler here (and doesn't do much injustice to reality) to assume that there's some one particular native worker who bears the full brunt of moving a Mexican worker into US.
In addition, let's use the findings from here that a migrant's wages increase from $2.56 to $9.34 after migration. In fact to make things simple, suppose that once the Mexican worker migrates, the wages of the unskilled native are equal to $9.34 (this assumes there's no premium for being a native, for speaking English, etc. Again, this makes my job harder, not easier). So
which simplifies the above lambda equation to:
Finally, if the migration decreases the natives' wage rate by 5% this means that originally his wage rate was (1.05)*9.34=9.81. So
This still depends on theta which measures the extent of diminishing marginal utility of income. There's various estimates for this. Theta=1 is nice and easy to use because then the utlity function is logarithmic, simplifying many things. On the other hand some macro studies and the equity premium suggest much higher values for theta. At any rate, here's a table of lambda against various values of theta and the implications for the jerk factor - how much more you have to weight natives' welfare than that of potential migrants (click to enlarge):
So, for example, with the implausibly low value of theta=1/2 one would have to consider the welfare of the native worker to count about 20 as much as that of the potential migrant. With logarithmic utility (theta=1) each native worker counts about 26 and a half times as much as a migrant. With a (what I consider more plausible) theta=2 you need 55 and some migrants to make up one native.
Here's the same in a graph:
Clearly one doesn't need to be a rootless cosmopolitan to reject these kinds of weights. One only need not be a jerk.
-- What about the immigrants crowding our schools? Using our health care system? Living on welfare? What about crime? Well. First, most of that is bunk. Most studies which look into the amount of tax money that (illegal) immigrants put into the collective kitty find that it's much more than what they take out in terms of benefits - one obvious reason is that illegal immigrants usually pay a lot in payroll taxes but never collect Social Security or medicare. Likewise the statistics for crime are ambigous to say the least. Illegal immigrants, by and large, are afraid of getting deported which means that they try to stay out of trouble as much as they can. However, even if these things were true in essence this would be a change in the post-migration wage rate (adjusted for externalities) of the native. Given the change in the wages of the migrant, this is not going to affect the results that much.
-- This post has already been edited for civility. What incivility remains pretty much belongs here.
Both Alex Tabarrok and Dani Rodrik have come out in favor of immigration into US on the basis that the relevant "moral community" one should consider is the world and not just the US natives. It might be the case that immigration from Mexico into US lowers the wages of the unskilled workers here (the extent of this effect is subject to some controversy, see the previous post on Ottaviano and Peri). However, the increase in the migrants' wages is so large that support for immigration is still justified.
This kind of argument provokes the expected response from the expected folks, roughly along the lines that we should care more about native workers - the citizens - then the migrants - the non-citizens. Ok. But how much more? Let's put on our annoying-economist hat and consider the question; if you consider a foreign national to be only 1/2 a human being (alright, alright, only 1/2 as "important") as a native citizen, are you justified in opposing immigration? After all, it takes a real jerk to argue that foreign people's welfare should not count at all. Suppose the foreigners are only 1/10th as important? Surely, if natives' welfare counts for ten times as much as that of foreigners, we would be justified in banning immigration since it may adversely affect the wages of the unskilled in US? Well, let's see...
Suppose we transfer one person from Mexico to United States (illegally or otherwise). As a result his wages increase compared to what he was making in Mexico. Let us also suppose that as a result of this transfer the wages of some unskilled worker in US fall. Furthermore we will ignore the aggregate gains from immigration that occur and which all economists, including Borjas admit exist. We do this to make our job harder, not easier.
How much do you have to weight the native's welfare relative to that of the Mexican immigrant in order to oppose moving this migrant into US?
Well, in the standard framework we have ourselves a Social Welfare Function - in this case a utiliterian one with unequal weights attached to the welfare of natives and immigrants. The key is actually that there's decreasing marginal utility of wealth. Let
Here we're assuming that
Similiarly let
Of course
Let utility be a CES function of wage/income:
Then welfare before migration is given by:
and after migration:
Setting these equal and solving for lambda tells us how much you have to weight the well being of native workers in order to be indifferent between migration and no migration. If your lambda is less than this value (and that's up to you) then you should support the migration, if your lambda is greater then go ahead an oppose the migration. We get:
To calculate the "jerk factor" lambda we have to get some estimates of how much wages change for both migrants and natives.
Let's get crazy and accept the Borjas results, which say that in the long run the migration will depress a native unskilled worker's wages by 5% (note this isn't exact translation of the Borjas findings but close enough). Of course these kinds of estimates are in the aggregate but it makes things simpler here (and doesn't do much injustice to reality) to assume that there's some one particular native worker who bears the full brunt of moving a Mexican worker into US.
In addition, let's use the findings from here that a migrant's wages increase from $2.56 to $9.34 after migration. In fact to make things simple, suppose that once the Mexican worker migrates, the wages of the unskilled native are equal to $9.34 (this assumes there's no premium for being a native, for speaking English, etc. Again, this makes my job harder, not easier). So
which simplifies the above lambda equation to:
Finally, if the migration decreases the natives' wage rate by 5% this means that originally his wage rate was (1.05)*9.34=9.81. So
This still depends on theta which measures the extent of diminishing marginal utility of income. There's various estimates for this. Theta=1 is nice and easy to use because then the utlity function is logarithmic, simplifying many things. On the other hand some macro studies and the equity premium suggest much higher values for theta. At any rate, here's a table of lambda against various values of theta and the implications for the jerk factor - how much more you have to weight natives' welfare than that of potential migrants (click to enlarge):
So, for example, with the implausibly low value of theta=1/2 one would have to consider the welfare of the native worker to count about 20 as much as that of the potential migrant. With logarithmic utility (theta=1) each native worker counts about 26 and a half times as much as a migrant. With a (what I consider more plausible) theta=2 you need 55 and some migrants to make up one native.
Here's the same in a graph:
Clearly one doesn't need to be a rootless cosmopolitan to reject these kinds of weights. One only need not be a jerk.
-- What about the immigrants crowding our schools? Using our health care system? Living on welfare? What about crime? Well. First, most of that is bunk. Most studies which look into the amount of tax money that (illegal) immigrants put into the collective kitty find that it's much more than what they take out in terms of benefits - one obvious reason is that illegal immigrants usually pay a lot in payroll taxes but never collect Social Security or medicare. Likewise the statistics for crime are ambigous to say the least. Illegal immigrants, by and large, are afraid of getting deported which means that they try to stay out of trouble as much as they can. However, even if these things were true in essence this would be a change in the post-migration wage rate (adjusted for externalities) of the native. Given the change in the wages of the migrant, this is not going to affect the results that much.
-- This post has already been edited for civility. What incivility remains pretty much belongs here.
posted by YouNotSneaky! at 5:34 PM
535 Comments:
Great post!
This is a very useful post. I put a link to it in my blog.
Also, on a different but methodologically related topic, I had neglected to respond to one of your earlier comments on my blog on the subject of the gains from globalization. This is what I have now put in.
notsneaky says:
"'The microscopic alleged "benefits" to full trade liberalization certainly don't seem worth the massive increase in income inequality they'll cause.'
Will they? This is pretty much wrong. If the benefits of full trade liberalization are microscopic then the inequality effects are microscopic as well.
If .5[t/(1+t)]^2*m*e are the benefits of trade then the change in producer surplus (roughly the loss to the loosers of trade liberalization) is going to be pretty similar, except that it depends on the elasticity of supply rather demand. Essentially, in order to argue that trade has profound distributional effects for an economy like US, you have to argue that the supply elasticity is very very large, much larger than the e=3 elasticity of demand Dani uses above.
There's very little of a way out in escaping the conflict here. Either free trade has large aggregate benefits and significant impact on distribution/inequality, or it doesn't much affect either. For a large, diverse, mature, developed economy like US I'd argue the latter is the case."
Not so fast notsneaky! Actually, the distributional effects can be quite large even though net gains are small. Lets consider a small change in the tariff, t. Then change in producer surplus is Q(dp/dt), while net gain is t(dM/dt) = t(dM/dp)(dp/dt). You can easily check that the first can be arbitrarily large relative to the second by making initial level of t sufficiently small.
You are famous!
YNS,
I did not see where you adjusted for the quantities of workers. It seems to me that we need to use aggregate welfare gains - the change in aggregate immigrant welfare and the change in aggregate native welfare. This is important because they are very different numbers. If we raise 30 million immigrants' wages by x, but reduce 90 million natives' wages by y, the calculation will differ dramatically from what you posted.
Am I in error? I understand the need for simplicity and empathize with your approach of a "representative immigrant" and a "representative native". However, here the "representative native" is several times as large as the representative immigrant.
dani,
thanks for the link. As far as te change in producer surplus relative to total gains - you're right it's possible. I doubt though that it works out that way in the real world.
gabriel, michael,
thanks
david,
yeah this is looking at the change in social welfare at the margin. If you want to consider big changes and weight the costs and benefits by populations you have to be specific about the exact thought/policy experiment. I thought about setting it up as "what if we deported all 12 million illegal aliens" or "what if all the immigrants between 1998-2002 had not come" (which would be more analagous to the Borjas and OP work) but in the end I decided the main was made clearer this way.
Younotsneaky --
I wont't let you get away with your response. The efficiency cost of a small tariff is second-order, while the impact on producer incomes of ANY change in prices is first order. The point is a general one and if it does not apply in the real world, I don't know why we would bother learing economics.
Ignoring the change in tariff revenue, the efficiancy gains of a tariff reduction are equal to the change in consumer surplus plus the negative change in producer surplus. The rate at which each of these change depends on elasticities. Small efficiency gains mean that the change in consumer surplus is only somewhat higher than the change in producer surplus. Of course you can make the change in producer surplus large and keep efficiency gains small by increasing the elasticity of consumer surplus as well. This is sort of restating the fact that the gains are diffused while the losses are concentrated.
So saying that the change in producer surplus is large but the efficiency gains are small is roughly equivalant to saying that the change in consumer surplus is large. I don't think it is.
Maybe I'm missing something but I don't quite understand the first order/second order thing. The order depends on elasticities. Change in producer surplus depends on price elasticity of supply. Efficiency gains depend on both the elasticity of supply and demand.
If the migration decreases the natives' wage rate by 5%, then his original wage rate was actually 9.34/0.95=9.83, rather than (1.05)*9.34=9.81. So the native is losing two cents more than you thought, and with a total loss around 50 cents that suggests that the jerks are about 4% less jerky than you calculated.
I like your post, but think that David is right. In your calibration, the migrant's wage increases by USD 6.78, whereas the unskilled native's losses only 47 cents. If both categories have the same weight, this is not possible under your claim that you ignore the aggregate gains of immigration (you've got an unexplained increase in income of 6.31 USD)
Two comments, the first philosophical, the second more empirical.
1. You seem to be taking a position which is purely consequentalist, not at all deontological. I.e. you apparently believe that all decisions should be taken on the basis of cost-benefit analyses which aim simply to maximise the arithmetic sum of human welfare. That's fine, but its not the only possible moral position, and people that hold other moral positions are not necessarily jerks. For example, one might argue that a responsible national government should not place any particular "welfare weight" on foreign nationals, but should be guided by other rules when interacting with them.
2. I agree that diminishing marg utility of income deserves more attention. However, it is far from clear that a constant value for e operates across all societies. Many studies have shown that reported happiness (yes, yes, I know the problems) is determined more by relative income than absolute income. Relative to who, is the question. If it is simply relative to the society in which we currently live, then moving from being a low-income mexican to a low income american may not make us happier. or it may do. I'm merely pointing out the issue.
p.s. I'm having a bad day, i just posted this comment on another blog post of yours called "assumptions" by accident, please ignore that, sorry
This is a very good post. I think though that an adjustment for PPP needs to be made for the numbers that come out of the model to be valid. So, the utility gain from changing from a state in which one is earning $2.56 per hour in Mexico to a state in which one is earning $9.34 per hour in the U.S. is likely to be less then that used in the post, perhaps significantly so. I would guess that most immigrants would prefer, say, earning $6.00 per hour in Mexico to $9.34 in the U.S. (purely mediated through PPP, without accounting for distance from family, etc).
However I like the approach used. It would be very interesting to see results with a first-order adjustment for PPP.
So if the net benefit to immigrants is so much greater than the net loss to natives, could we not have some sort of compromise where immigrants are taxed to a certain degree and the proceeds go to those most likely to be affected by the wage depression?
I imagine that would have unintended effects as well, but given the discrepancy between the wage depression for natives and the wage increase for immigrants, you could tax the latter enough to compensate the former while hardly affecting their desire to work here.
I think you are simplifying things. The end effect of allowing low IQ immigrants into the United States will be an eventual decline in the ability of the United States to help anyone in the world.
It's a little like arguing that a private citizen should spend time and money feeding the world's poor. OK, but might that citizen not be better off continuing to earn money that he can spend than exhausting his resources all at once?
Also, you are ignoring the fact that by allowing Third World countries to siphon off their most desperate citizens, they can avoid needed reform. Thus, allowing immigration may help perpetuate the economic problems of citizens in other countries.
Finally, I'm curious as to what results you would get if you were to do a similar analysis but instead substitute the United States for families and immigrants for strangers. How much of an obligation should you have to strangers over your own family in order to avoid being a jerk?
"First, most of that is bunk."
If most of the negative effects are bunk, why were there 1.5 million fewer native-born citizens living in California in 2000 than 10 years before?
Taking a flawed premise to its logical conclusion is a standard form of humor. This is a funny post.
Quality of life is not determined only by wages, income, or efficiency of production. It's a fact of nature that destruction is easier than creation. Quality of life is determined by a combination of production and restraint of destruction. Heavily weighted toward the latter.
There's massive utility in social inventions like the rule of law, which more than outweighs small inefficiencies in production. Any analysis of immigration must take into account the effect of immigrants on the more heavily weighted factor, or it's just a joke.
thanks for the excellent analysis! i hate to be that guy, but i think you have a typo in the denominator of your first expression for lambda.
Anonymous #2 - "aggregate gain" refers to "aggregate gain" of the natives only. The native unskilled workers lose their 47 or 45 cents, but native skilled workers, and possibly others gain. What I'm saying is that I'm not counting the gains to the other native workers in the calculation. The 6.31 USD increase to migrants does not need to be explain since they're not included in the standard definition of "aggregate gain"
Neal,
1. I do not believe all decisions should be made on the basis of cost/benefit analysis calculation. I do however believe that cost/benefit calculations should inform our decision making. They're part - a significant part - of the picture, though not everything.
2. There might be something to the whole relative position thing (I'm actually pretty sceptical) but generally Mexican migrant workers are choosing low-position/high-pay in US over medium-position/low-pay Mexico, just like many US natives are choosing low-position/high-pay over high-position/lower pay by staying in US (ok, there's the language and cultural barrier but still).
I mean, it's a little silly to say to the immigrants "no, no, you see, if you stay in Mexico, yeah you'll stay poor, but your relative status in that society will be higher" and then expect them to slap their foreheads and say "you know I never thought of that, I'm going home".
roy, I've always thought that a good compromise policy in this case would be to basically sell visas/green cards. Apparantly the cost of crossing the border an average migrant pays to a coyote (from the same OC paper) is about 2000$. The US government could easily arbitrage that. It could probably charge double that amount since the risk involved would be much lower. Than use the revenue to help native unskilled workers.
Of course there's no chance in hell of that policy ever getting implemented.
anonymous #3, you're probably right about PPP. But the scale of the gains is way too big to change the calculation much.
tommy, I generally don't bother talking to people who want to bring in IQ into discussions of immigration. In regards to the "immigration allows third world countries to avoid reforms" - where's the evidence? There's very little outmigration from many a country that has consistently stayed corrupt. And there's countries which have gradually become less corrupt over time even as they've experience large outmigration. Like, uh, Mexico (I know they have a long way to go but the Mexican polity has definetly improved). In fact if you just opened up the borders, I'd argue this would accelerate reforms in Mexico. This is because then many migrants would go back and forth (which is what happens when there's no limits to immigration, since people enjoy spending time with their family, their native culture and the like). After experiencing some decent institutions in US the ex-migrants would be less likely to put up with crappy institutions back home.
As far as families and strangers - I think the same points apply. You SHOULD help strangers which are much less well of than you, even as you take care of your family and place it first. Otherwise you are a jerk.
Ken, the rising cost of living may have something to do with it (also, too many hippies). Immigration may have something to do with that but I doubt it. And anyway, that's what we call "a free market" around these parts (i.e. it's a pecuniary externality mediated through the market).
Anonymous #4, thanks for the pointer.
Jason, see the comment at bottom of post.
In the future I don't think I'm gonna be replying to all the comments, though I do appreciate'em. Unless I feel like it.
"YouNotSneaky! said...
1. I do not believe all decisions should be made on the basis of cost/benefit analysis calculation."
I agree, but your post implied that anyone who doesn't stand by CBA was a jerk. I actually think it is a great post, and DMUI is an issue close to my heart, I guess I'm just reacting a little to the combined use of "jerk" and implied CBA totalitarianism!
I agree relative position may be weak, but I think its interesting. I too am suspicious of anyone who tells someone else that they don't know how to make themselves better off (often they don't, but neither does the person doing the telling....)
cheers
Neal
If the implied orders of magnitude were not as large as they are I'd hesitate with my choice of words. Like say if all you needed was to count the welfare of natives 2 or 3 times more than that immigrants then yeah, it's perfectly reasonable that other considerations can flip the result.
Also, note that even without DMUI (theta=0) you still get a pretty high lambda simply because the disparity in gains/losses is so large.
tommy, I generally don't bother talking to people who want to bring in IQ into discussions of immigration.
Well, then you are missing out on a lot of the relevant discussion.
In regards to the "immigration allows third world countries to avoid reforms" - where's the evidence? There's very little outmigration from many a country that has consistently stayed corrupt.
Obviously outmigration from some countries is physically easier than from other countries.
And there's countries which have gradually become less corrupt over time even as they've experience large outmigration. Like, uh, Mexico (I know they have a long way to go but the Mexican polity has definetly improved).
Sure there has been reform, but there might be much more reform if Mexico couldn't so readily export its losers.
As far as families and strangers - I think the same points apply. You SHOULD help strangers which are much less well of than you, even as you take care of your family and place it first. Otherwise you are a jerk.
Well, that's a nice sentiment, but how about putting together a few scenarios so that you can quantify it?
I think your expression for lambda is still incorrect.
The denominator ought to be: (w_{N,old}^{1-theta} - w_{I,old}^{1-theta}) - (w_{N,new}^{1-theta} - w_{N,new}^{1-theta})
"Ken, the rising cost of living may have something to do with it (also, too many hippies). Immigration may have something to do with that but I doubt it. And anyway, that's what we call "a free market" around these parts (i.e. it's a pecuniary externality mediated through the market)."
Hmmmm, I wonder why the cost of living rose so much. Maybe it had something to do with the 3.2 million new foreign immigrants that decade, who somehow weren't dissuaded by whatever factor was driving out the previous inhabitants.
Even more damning than the statistics at the state level are the city-level stats: http://www.frey-demographer.org/reports/rr05-572.pdf
By some strange coincidence, the same cities that have the most immigration from abroad are the same ones where citizens are leaving.
Since I don't know you, I have a hard time telling if you're being sarcastic. I can't imagine anyone really doubting that immigration was the cause, so I guess you're also being sarcastic when dismissing the displacement of citizens as a mere "pecuniary externality." Is this whole post just a Swiftian satire?
The argument is interesting in a vaccuum, but the end result is the sledgehammering down of the remaining middle-class, and 2 nations of poor workers competing in the proverbial race to the bottom.
A healthy middle class is the strongest force for democracy history ahs ever seen, let's not abandon it in some imagined act of global charity.
but the end result is the sledgehammering down of the remaining middle-class, and 2 nations of poor workers competing in the proverbial race to the bottom.
The middle class actually gains from immigration. It's the unskilled workers - the bottom of the income distribution - who might loose (and the extent of these losses is subject to debate). I don't see where you get 'race to the bottom' given the magnitude of gains to the migrants. Also, it should be noted that we're not even considering the benefits to those who stay back home in the calculation.
One thing you have not accounted for is that programs paid for by the government are about 25% efficient. Also, many of these programs are harmful to both the citizen and the immigrant, so expanding them by any amount is undesirable. Eg. Public education. The more it expands, the more disproportionate power is has in relation to the individual. That disproportionate control may be an improvement over the immigrant's home country, but a decline for the citizen.
For example, a billion kids coming here and using public schools might technically pay for itself eventually, but in the short term every last vestige of economic freedom would be killed off - so the long term wouldn't have a payout.
Otherwise I totally agree. If you get rid of the coercive tax backed benefits. Then it would absolutely in the best interest of all US citizens to open up the immigration flood gates. Even if a billion people came, that would be a huge benefit - not a burden.
Why don't we auction off immigration permits (I'll let the rest of you fight over how many leads to appropriate assimilation) on Ebay to the highest bidders (who can subsequently be required to pass things like security and language tests in order to be able to use the permits)? This would seem to satisfy many of things that people in this debate want: mutually beneficial exchanges. When I go to a concert, I pay an entry fee. When I went to night clubs (in my single days), I paid a cover charge. When I went to Kings Island amusement park last weekend, I paid an entry fee. People who didn't think that the concert, night clubs, or amusement parks were worth the freight didn't pay and were excluded. Scarce resources were allocated to highest valuing users. Why is it sensible to allocate admission passes to the U.S.A. without an entry fee? I think most who are in the debate above agree that people all over the world are anxious to get here. Well, if there is nothing imnmoral about night clubs, amusement parks, and symphonies or art museums charging significant entry charges, then there would seem to be nothing immoral about the U.S.A. charging what the market will bear. Of course, night clubs have bouncers that prevent free entry (via the back door)because otherwise the willingness of people to pay the entry fee falls off; similarly art museums police entry and exit points (for this and other obvious reasons).
Would you have used the same calculus for the Mariel boatlift?
There are other factors to consider. There are people I would not let in my yard, let alone my house -- and I'm sure you have some standards as well.
People who are against open borders are not necessarily against immigration -- they simply want a legal order to the process. The fact that the current legal process is FUBAR is the real issue here.
I'm signed anon because Google-Blogger is FUBAR as well.
SheetWise
Over the years, the socail security to be collected by the immigrants will increase (as they age etc.). Also, the effects of the decentants of the immigrants need to be accounted for. The long-term effect of large amount of immigrants is not esily predictable!
To whoever said: "you apparently believe that all decisions should be taken on the basis of cost-benefit analyses which aim simply to maximise the arithmetic sum of human welfare. That's fine, but its not the only possible moral position, and people that hold other moral positions are not necessarily jerks."
You're right. But what you imply is flat-out wrong.
The problem with your implication is that those people who "hold other moral positions" are the same people who think "niggers, chinks and wetbacks are an inferior race packed with thieves and smelly people".
I'm pretty much convinced about that, because every anti-immigration advocate I've cornered has eventually blurted out a racist expression or comment. Therefore, whenever I see an anti-immigration advocate, I always secretly chuckle and think "closet racist".
So yes, if it takes economy and math to drive immigration policy, then by all means let's do it.
All in all, condemning people on the basis of their origin or race is simply the WRONG moral position. It's inhuman and evil, and it should not be condoned in an open, democratic society.
"Why don't we auction off immigration permits (I'll let the rest of you fight over how many leads to appropriate assimilation) on Ebay to the highest bidders (who can subsequently be required to pass things like security and language tests in order to be able to use the permits)?"
Hahahaa, if Americans tried to pass language tests, most of them would be left on the wrong side of the Mexican border. So, why should we apply a different standard to immigrants?
Oh, yeah, I forgot. Wetbacks are an inferior, evil race who want to pillage American cities and get American girls pregnant with their ugly mixed-race babies. That's why.
(Sarcasm in the last paragraph.)
You don't "compromise" in matters of principle. Either you're against immigration on principle (*cough* closet racist *cough*) or you're for immigration on principle (say, for example, you actually respect the Declaration of Human Rights).
Thanks for the nod, great post.
rudd-0
The key to maximization is equating at the margin; assuming an increasing marginal cost an diminishing marginal benefit from immigration the solution is unlike to be a completely open border. Obviously terrorists must be excluded whenever possible because most of us would rather not be blown to kingdom come.
Haha! I think you could comfortably allow all potential terrorists in and still be at a greater aggregate risk from all-American arms-bearing citizens. Look back at the history of acts of terrorism in the US and the overwhelming majority were committed to second-or-greater generation American citizens.
alan,
Take a look at John Lott's book and other work on right to carry concealed weapons; he provides evidence that this ability curbs violent crimes.
Your comment about letting in "all potential terrorist" is bizarre. There has been no example of an act of terrorism to rival 9/11; and who did this? Do you know?
Illegal immigrants raise property values? It is very interesting that you somehow view this as an argument for your side, Ken.
anonymous #3, you're probably right about PPP. But the scale of the gains is way too big to change the calculation much.
I think this is far too large of an issue to easily brush aside without supporting data. A quick Google brought me to a .pdf file that indicated a 4:1 difference in PPP in Mexico vs. the USA. That's just one source, would want other ones to confirm that's not out of whack... but if I understand PPP correctly (and please correct me if I'm wrong), a worker therefore needs to earn $10.24 in the USA to afford roughly the same quality of life that he/she could afford earning a $2.56 wage in Mexico. That's a pretty dramatic shift... so much that it would seem the workers actually have a decrease in utility by moving to the US (in addition to lowering the wage of native US workers). The reality, I believe, is that many come to the US, earn $10, live off $7 of that, and send the other $3 home... i.e, make a degree of sacrifice themselves such that their family is able to enjoy a better standing of living back in Mexico... receiving more income from this worker than if he had stayed, and not having to pay his living expenses either (which he pays with the $7 worth of his wage).
Just some thoughts for constructive discussion. :)
Note: You may call me anonymous #47 if you like, as that is my favorite number. I have not previously posted here, just a new person chiming in.
Anonymous #47, I'm pretty sure that the 4:1 you found is the ratio of US income to Mexican income ONCE ADJUSTED for PPP (it would be even higher otherwise), rather than the difference in price levels themselves - checking GDP per capita in PPP dollars over at World Bank or Penn World tables confirms this. So the $2.5 to 9$ change in wages as in the post is definetly in the ball park.
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From The Economist print edition http://www.economist.com/finance/displaystory.cfm?story_id=9256643
The uncomfortable economics of immigration reform
HOW much of a jerk do you have to be to oppose immigration? That question is mischievously posed, and ingeniously answered, in a recent post on “YouNotSneaky”, an economics blog.
The blog's author points out that a low-skilled worker can make $9.34 an hour in America, compared with just $2.56 in Mexico. He also assumes that migrants depress the wages of low-skilled Americans by 5%—a widely cited estimate. Thus Mexican workers gain dramatically by moving north, whereas low-skilled Americans lose out slightly at worst. To justify opposing immigration, the blog concludes, you must attach at least 20 times more weight to the well being of a native-born American than to a Mexican.
etc
nice job, but; Seems like you have some pretty fuzzy stuff in your calculations for an economist. I'm a social worker in LA county:
LA county estimates about 800,000 illegal immigrants total. LA County Jail estimates $80,000,000 direct cost for housing illegal immigrant criminals. LA County Hospital (just one of several healthcare systems) estimates that of 800,000 total patients 200,000 were illegal (an average cost for these would be tough to figure; but perhaps around $5,000?). Schools? Since it is illegal for schools to ask residency status, there's no way to really know; but even if you estimate that half of all immigrants are school age, then that's 400,000 x $13,000 ("true cost" vs. about $8,000 per LAUSD). Against these and other costs we have the benefits of, a) sales tax (not payroll tax, that's federal and btw, your idea of "they pay into but don't collect social security" needs a little more understanding of how social security/Medicare works) b) a few illegals own their own homes and pay local property tax, but this is probably a fairly small number c) illegals do depress wages and therefore hold costs down and all people, while only those in the workforce at the lower rungs suffer the depressed wages (so this is a toss up or slight benefit?).
So for direct cost/benefit, really this comes down to sales tax vs. the aggregate costs of criminal activity, healthcare and education, and I promise you, that the costs exceed the direct benefits. Oh, one last thing. Most people (individuals in the real world marketplace, not economists in cushy universities, or "society") would place the benefit of the next guy (even a legal "next guy") at far less than the value of 1/20th of their own. Otherwise, love your blog.
Steve: Landlords use a portion of rents to pay property taxes. Even though immigrants tend to live in higher-density situations than average Americans (which is actually a good thing), you can't claim they don't support the schools just because they're renting.
Borjas's results (which I assume you are taking from Table 1 in his handbook article) assume that immigration increases the labor supply by 10%. So it seems to me that you need to compare the gains to one immigrant with the losses to (roughly) 10 natives. That means your welfare expressions, the coefficient lambda should be replaced by 10 lambda (but 1-lambda should remain as it is). This changes your results substantially and suggests a much higher cutoff for theta than you're getting.
In particular, it implies that with theta=0, we should *oppose* immigration.
(Of course all of this ignores the gains to native capital, but I'm playing by your rules.)
Am I mistaken here? Have I missed an important point?
Steven, I don't think that's right. I don't have Borjas in front of me right now but I believe it says that a 10% increase in LF lowers wages by 5%. But moving 1 person from Mexico to US is not an increase of 10%. You'd have to rescale the impact on wages on the other side of the equation as well (i.e. much much less).
You may be right if we were starting from a position of no immigrant workers in 1990 (the beginning of the period Borjas is considering if I remember correctly.) and then moved in a number of immigrants equal to 10% of the labor force in 1990. Even then, redoing the calculation for the case where moving 1 Mexican worker to US causes a 5% fall in wages of 10 US workers, for theta=0 I get lambda=.617, still greater than .5
To make it fit the Borjas results exactly you'd have to take all the immigrants that came between 1990 and 2000, weigh'em by (1-l) and take all the native workers by l --> It's not immiediately clear whether one should consider the welfare of the native workers in 1990 or the new native entrants as well.
But this is asking a different question;
rather than asking
"How much of a jerk do you have to be not to want to let 1 more person in" (which is what the post calculates, sloppily)
you'd be asking
"How much of a jerk do you have to be not to have let in all the immigrants between 1990 and 2000"
I'll redo it when I have some numbers available in front of me. My feeling is that it would let some people of the hook, but not many. I think the 'population' weights in that case will be greater than 1-1 but much much less than 1-10.
The problem with this line of thinking is the assumptions
1) Government should decide these ECONOMIC issues and not individuals. (national security is another issue)
2) The right of one American who wants to protect his wage is more important than another American - who wants to hire his (skilled or unskilled) brother/sister/friend from another country. ## College interns also reduce wages for white collar professionals, so do we need to legislate that?
## I'm against minimum wages, tarrifs, and immigration policy that refuses to keep up with economic reality.
This, I think, is closer to the right calculation:
Suppose N Americans currently earn $10 an hour.
Now suppose we admit one foreigner.
According to Borjas, the elasticity of the wage with respect to labor is about -.3 (this seems very large in absolute value, but that's fine; it biases things against us).
Therefore the wage rate should fall
by 3/N. So the total wage collected by all native Americans falls by $3 per hour. At the same time, our foreigner's wage probably rises by about $7 or $8 per hour.
So if theta=0, we certainly admit the foreigner.
For other values of theta, you have to be careful about the calculation---this is not a $3 loss to one American; it's a $3/N loss to each of N Americans.
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Interesting post Sneaky, and I'm not an economist so while your logic seems sound I can't speak to the specifics of your calculations.
However, as a former business reporter and amateur historian, I'd like to challenge some of your assumptions.
1. Low wage earning Americans actually earn far, far less than $9.34 an hour. If you take numbers from the Congressional Budget Office, the average family in the bottom 20 percent of wage earners makes about $16,000 a year, or under $8 an hour. And at that level, even a $.50 an hour decrease due to competition with immigrants is going to hurt.
2. Illegal immigration has an affect not just on wages but also working conditions, since undocumented workers have little to no recourse in complaining about safety issues. Native workers will also keep quiet in such cases because they don't want to be replaced. See the book "Fast Food Nation" for its expose on the horrors non-documented workers face in the meat-packing industry.
3. From a historical perspective (and sometimes history does a better job of predicting how humans really act versus how they should rationally act), uncontrolled immigration in a short period is often a very bad thing. Jared Diamond in his book Collapse does a good job of hypothesizing how rapid mass migration of starving rural Maya into the wealthier cities in the 9th century led to a complete breakdown of Mayan society. Rome also collapsed in no small part to the sudden influx of goths, vandals, etc. In other words, it makes no historical sense to open the floodgates and offer blanket amnesty to tens of millions of immigrants overnight. An immigration reform policy that allows immigrants to be brought into American society over time seems to be a more logical solution IMHO.
What a load of bullcrap!
illegal aliens kill 25 Americans a day.
They've brought drug gangs and gangs like MS-13 into our schools and neighborhoods, they depress wages for those who can least afford to see their wages depressed.
Over 150 hospitals have now closed in California alone - add the rest of the border states and it's over 300 - due to the financial burden of emergency room bills left unpaid by these criminal moochers.
My neice was killed by an illegal drunk driving alien with SIX convictions; every time he had an accident, he gave a fake name, showed a false ID (that goddamn "matricula consular" fucking bullshit card) and then slipped back into Mexshitco till the heat died down.
You know what? fuck you. They're not "here to work", they're criminal mooches and murderers.
I object most to the implied altruism; that capitulation to others is what saves me from being a jerk. I reserve a right to rational discrimination. If I am law abiding, why should my income be diminished by scofflaws. Just as I would shout “thief” if someone stole my worn-out dirty shirt, I have a right to point at illegal immigrants who diminish my income even 1%. That is the glaring defect in your argument; these are illegal immigrants. I gladly support a legal, congressionally sanctioned system that would carefully select 11 million, or 20 million, or 100 million immigrants to legally enter the country. Under those conditions we are all co-equals in wage competition.
YNS,
I think you have a typo when you first solve for lambda. That is, the signs in the denominator are flipped. But when you solve things through, you actually don't use the misprinted equation you posted, but the right one.
Where does it end? If you want to couch it in moral terms, is it not unfair to just assign this consideration to people with easy access, e.g., Mexican nationals? Would we not have an ethical obligation to move every person who currently makes x amount less (depending on the discount assigned) than he could in the U.S. to our country at once? But even a heavy discount still results in WAY too many people to practically move here or allow to move here. Metaphorically speaking, you'd sink the ecological life raft. When the aquifers run dry (already decreasing), the last wetland is gone (already 95% gone in CA which receives a disproportionate share of U.S. immigrants), and final lot of farmland urbanized (already happening at a rapid pace), you can then declare 'moral mission accomplished' and pat yourself on the back for being the ultimate non-jerk (by your logical basis). But at what cost? I pose a different question which needs to accompany yours: How much of a jerk do you have to be to favor inevitable environmental degradation caused by population growth?
Were the framers of the Constitution jerks? After all, by promote the 'general welfare' they were referring to citizens of the U.S., not the world. If you believe in sovereign nation-states and popular sovereignty, I don't think it's proper for elected officials to start down a slope where the interests of its constituents are routinely weighed against those of foreign nationals. That's anti-democratic. Of course, a lot of economists (perhaps you?) don't give much weight to sovereignty and instead see things more through a lens of globalisation and 'interdependence'.
'whenever I see an anti-immigration advocate, I always secretly chuckle and think "closet racist".'
That's a good question to ask, but I wouldn't just assume it like you do. Maybe you are trying to block out rational arguments which go against your preconceived notion by reflexively rationalizing it must be bigotry? The fact that a valid position is held by a particular bigot doesn't make it untrue and unworthy of being adopted as a belief by a non-bigot. A bad intentioned person can be right while a good intentioned person can be completely wrong.
On the other hand, whenever I see an illegal or mass immigration zealot, the first thing I ask is 'Do they have a pecuniary interest?' followed by 'Do they have a political cause this advances?'
What a difference a year and a half makes.
The author misses some very important factors.
First, is the elasticity in production and sticky prices. Below market wages enhance U.S. production without raising labor costs, in the first world, prices are sticky, excess production realized from indentured labor can be dumped at predatory prices into developing markets. This is why the migrant's wages were depressed (at home) in the first place. Predatory bankrupting of the domestic suppliers in Latin America, further depresses wages and increases the motivation to emigrate.
Second, is the effect upon housing. U.S. housing has hyper-inflated since the Mexican Depression in the 1970s when the labor force unexpectedly increased by 10 million. Combined with flatrening wages, there has been an ever declining percentage of the U.S. population who can qualify for a traditional mortgage -- this is the root cause of the creation of EZ and No Doc loans.
Finally, we have the complaint of "sticky-wages." Sticky wages are a function of sticky cost of living, primarily sticky housing costs.
We need to address how American will become globally competitive while the Fed will not allow U.S. housing to find its natural price in the global market. Salary requirement is derived from housing costs.
Since the turn of the Century, our higher earners have also been exposed to third-world wages -- these are the people who were most likely to be performing on a traditional mortgage.
The free communications that the Internet provides and nonimmigrant high skill visas have decimated the ability of many Americans to service their mortgages. Moreover, the "free movement of human capital" depletes inflationary factors in emerging nations due to deprivation of housing and infrastructure demand.
In effect, economic migration is a policy of contraction, overheating an existing infrastructure, while depriving investment in emerging infrastructure.
Any immigration study, that does not consider the housing effect in both the donor and recipient country is incomplete. (309% from 1980 to 2007)
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