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January 2017, Volume 23, Number 1

Borjas: WeÿWanted Workers

The title of George Borjas's easy-to-read, 10-chapter, 200-page book, "WeÿWanted Workers. Unraveling the Immigration Narrative," echoes Max Frisch's comments on European guest workers: "we asked for workers, and got people." Borjas emphasizes that people are more than workers. Cars and clothes do not care who drives or wears them, but people care about the society in which they live. People also reproduce, and the combination of growing numbers of "different" people and ideas can transform societies.

Borjas reviews immigrant self-selection, economic assimilation, the melting pot, the labor market impacts of migrant workers, the economic benefits and costs of immigration, and the fiscal impacts of migrants. He finds much of the social science research that concludes "everyone wins" from immigration is misleading, with the average American neither helped nor hurt significantly by large numbers of newcomers. Instead, there are specific winners and losers, as firms that hire low-skilled migrants win and workers who compete with them lose.

There is a long-running controversy over whether an influx of low-skilled migrants hurts similar US workers. Economic theory suggests that newcomers should depress the wages of similar workers or displace them, but countless studies find few or no such effects, prompting many to assert that since the data do not find negative impacts, there must only be benefits from migration, not costs. This benefits-not-costs narrative fits the interests of elites, who rely on the services provided by low-skilled migrants far more than poorer residents, reinforcing Borjas's argument that immigration is more about redistributing the economic pie than enlarging it.

Borjas attacks the immigration-is-only-beneficial narrative in several ways. His own studies find that 10 percent more migrants are associated with three percent lower wages for similar US workers. The most famous study of migrant impacts involves the Marielitos who arrived in Miami in 1980. This "natural experiment" saw 125,000 Cubans arrive in south Florida in a few months, but a comparison of the wages of Blacks in Miami and other cities that did not receive Marielitos found that the unemployment rate of Blacks in Miami rose more slowly than in the comparison cities, suggesting that the Marielitos benefited Blacks in Miami.

Borjas is skeptical of this no-harm conclusion. In 1994, there was no influx of Cubans because the Coast Guard took Cubans who set out in boats for Florida to Guantanamo instead of allowing them to land in the US. Nonetheless, the unemployment rate of Blacks rose in Miami and fell in comparison cities. Borjas concludes that natural experiments that fail to find expected impacts demonstrate there are many factors in addition to migration that affect the unemployment rate of Blacks.

Borjas finds that immigrant "quality," as measured by the average earnings of immigrants compared to the average earnings of US-born workers, has been declining. Immigrants who arrived in the five years before the census earned 10 percent less than US-born workers in 1960 and 30 percent less in 2000. The earnings of immigrants rise as they gain US experience, but Borjas warns that newcomers today are starting ever-lower on the earnings ladder and may never catch up to the average earnings of US-born workers.

There are also earnings differences by country of origin. Immigrants from Denmark, Germany and Japan earn more than the US average, while those from Mexico and Central America earn less. Borjas explains that some high skilled Europeans move to the US for higher salaries and lower taxes, while low-skilled Latin Americans move to the US for higher wages and a more expansive welfare state.

What about the fiscal costs of low-skilled migrants? The data are tricky. The Survey of Income and Program Participation reported that 46 percent of households headed by immigrants received some means-tested benefit in 2012, compared to 27 percent of households headed by natives. However, Current Population Survey data for individuals show that foreign-born residents are less likely to receive means-tested benefits than the US born.

Borjas points out that the same unauthorized mother with two US-born children who receives benefits is a welfare household in the SIPP but two US-born and one foreign-born individual receiving welfare in the CPS. Restrictionists cite SIPP household data, which Borjas finds most appropriate because most welfare is household based, while admissionists cite CPS individual data. Households headed by Hispanic immigrants have very high welfare usage rates in the SIPP, 62 percent in 2012 received some welfare benefit, compared to 30 percent for households headed by Asian immigrants.

More difficult still is calculating the taxes paid and tax-supported benefits received by immigrants and their children. In 1997, the National Academies of Science estimated the present value of an average immigrant was $80,000, based on many assumptions, such as assuming that the US-born children of immigrants would the same fiscal impacts as other US-born children and that the federal government would reduce benefits and raise taxes for all residents, requiring immigrants and all other US residents pay more and receive less from the government. NAS redid the present value calculations in 2016: if the government does not reduce benefits and raise taxes, the present value of an average immigrant is -$36,000.

Borjas quotes Oxford economists Paul Collier, who said that "social scientists have strained every muscle to show that migration is good for everyone" in order to avoid being associated with racists and xenophobes. Borjas uses the example of abolishing national borders to show the limitations of simple analyses that suggest world GDP could increase by 50 percent or more if more people now in poorer countries could move to richer countries.

Billions of people would have to move to generate these trillions of dollars in extra output, and migrants would capture most of the gains from mass migration. However, if the migrants brought with them the attitudes and cultures that help to keep their countries poor, there could be a net decrease in global GDP instead of an increase, a reminder that mass migration may bring unanticipated changes.

Borjas says that the major lessons of three decades of research on the economic impacts of migration is that migration is more about redistributing the economic pie than enlarging it. In the US, the net benefit of immigration is about $50 billion, but immigration transfers $500 billion from US workers to owners of capital. One percent of US GDP of $18 trillion is $180 billion. If the US economy expands by 2.5 percent or $450 billion a year, the net economic value of immigration is equivalent to just over a month's economic growth.

Borjas ends by concluding that "benign neglect" may be the best policy toward the 11 million unauthorized foreigners, so long as their number does not grow. He notes that many of the unauthorized have US-born children who will benefit from being educated in the US, and some may be able to become legal immigrants via family unification or some other means.

Borjas, George. 2016. WeÿWanted Workers. Unraveling the Immigration Narrative. Norton. http://books.wwnorton.com/books/We-Wanted-Workers/