Throughout American history, immigrants
have been vital contributors to our economy — as workers, consumers, and
innovators. Nevertheless, many people have concerns about increasing
immigration today. I recently explored the common arguments against more
immigration — as well as the merits of various immigration policy proposals — with
my latest podcast guest, Michael Clemens.

Michael Clemens is a senior
fellow at the Center for Global Development, where he is the Director of
Migration, Displacement and Humanitarian Policy. Michael is also a Research
Fellow at the IZA Institute of Labor Economics in Bonn, Germany. He has also
been published in multiple peer-reviewed academic journals, and his research
has been awarded the Royal Economic Society Prize.

What follows is a lightly edited transcript of our conversation, including brief portions that were cut from the original podcast. You can download the episode here, and don’t forget to subscribe to my podcast on Apple Podcasts or Stitcher. Tell your friends, leave a review.

Pethokoukis: How would you describe the mainstream economic position on immigration? To the extent that people might think about this, I believe they would say, “Well, you guys just want to throw open the borders and let everybody just go wherever they want to go. That’s what economists want.” So what do economists generally think about immigration?

Clemens: Well, it’s interesting. People talk about “common sense” with regard to immigration a lot. Stephen Miller uses that phrase, as does Jeff Sessions and many others. The “common sense” is that immigrants are workers, and when there are more workers selling labor, the price of labor (wages) is going to go down. And that’s not just a mainstream view in society in America. It’s also a mainstream view in the profession. Not a lot of economists question that view, although a growing number of them do. This is fundamentally the view that an immigrant is a factor of production — a unit of labor — and when there’s more labor, the additional amount of revenue that a firm can get from employing more labor (the marginal revenue product) goes down, and there’s downward pressure on wages.

We all know that’s not true. Both economists and anybody who’s not an economist and just thinks about what they do in an economy and how they interact with the economy — they don’t just sell their labor. They buy the produce of other people’s labor. They invest in stuff, including financial capital and their own human capital. They innovate, including some of our start-up firms. So I don’t think focusing on immigrants just as factors of production is a helpful view of immigrants’ economic effects, and to me, the common sense is that excluding immigrants from an economy is going to have a whole lot of effects. Some of them would tend to raise wages, and some of them would tend to reduce them.

You’ve described reducing barriers to migration as “trillion-dollar bills on the sidewalk,” because workers become much more productive when they move from a poor country to a rich one. But to a lot of people, this sounds like an excuse to bring people into the country at the expense of those who are already here. So if you’re not an immigrant or someone who’s hiring an immigrant, what does immigration do for you?

Let’s be clear about what the economy is. I’m not taking a job away from you, and you’re not taking a job away from me. All of us give each other jobs by interacting with each other and specializing in different stuff. That’s why, even though female labor force participation over the last century has gone from something like 15 percent to something like two thirds, there aren’t fewer jobs for men because that happened. Women specialize in different things. Women complement men in the workforce. Women start businesses. Women come up with new ideas that some men might never have thought of and vice versa, and we all benefit from each other.

Immigrants are not some sort of species from another planet. 43 percent of Americans have at least one immigrant grandparent, or more, according to Gallup. So we are a bunch of immigrants and descendants of immigrants interacting with each other in an economy. To say that somehow only benefits the owners of capital or firm owners is something that I find really strange.

Notably, when women were first entering the labor force, people said exactly this: “You people who are working on women’s empowerment are really just shills for the firms who just want cheap women to fill up their factories.” Hearing the same sort of things being said about immigrants today shouldn’t be surprising. Still, it doesn’t stand up to scrutiny.

Let me modify that previous question. I think people can see the benefits of letting Nobel Prize winners immigrate into America, but what’s the benefit of bringing people who haven’t graduated from college, or even high school? What does that do for us?

Well, they’re less visible, but they are all around us. Every single person who has a college degree or a Ph.D. depends on a vast army, every hour of every day of people at all levels of education doing all kinds of tasks. The idea that we only need Silicon Valley engineers or something like that just ignores the fact that if you walk through Silicon Valley, you’ll see an economy that runs on child care, construction work, security, warehousing, and farmers hand-harvesting the vegetables that some of those immigrant computer scientists are having in their salads.

That’s what the economy of Silicon Valley is, and that’s what the economy of America is. It’s people at all different skill levels doing complementary tasks, benefiting each other and giving each other jobs. And that’s the common sense we should work with. If you just think about where the stuff in the grocery store comes from, who paved the road that you’re driving down to get to whatever job you’re doing, setting aside the person running the firm you’re working at or the workers alongside you, the economy is just spectacularly more complex than the visual superstars that we see, like Sergey Brin.

I know when I make that kind of argument on Twitter, people respond, “Well hey, you know if we didn’t allow in all those low skill immigrants, maybe a lot of that farm work would already be done by machines.” People say that we’re preventing technological advances that would ultimately be better for everybody — that we’re replacing potential capital machines with low skill labor.

That argument starts out from the idea that somehow having everything done by machines is better than having it done by people, and I don’t accept that argument. Why would we all be better off if every grocery store checker were replaced with a machine, or if every nurse’s assistant were replaced with a robot that doles out pills? The idea that this somehow is the starting point — and that we should pursue that goal to exclude as many immigrants as possible — is something that comes before economic reasoning.

Well, perhaps there’s some cultural reasoning in there then. Some people think that the cultural impact of immigration is bad for America.

Absolutely. There’s a very long history of that in America. You can read the bipartisan congressional debates that resulted in 83 years of Chinese exclusion in this country, starting in 1882 and not definitively removed until 1965. The justification started out as a labor market one. “Look, we just had a six-year depression — the longest in US history. There’s a lot of unemployment, and we’re worried about the potential for new inflows of Chinese people, but what we’re really worried about is that these people are not going to integrate with American society. They don’t believe in democracy. They have some propensity to bring diseases from over there in China.”

Even economists of the time — including Henry George, the leading economist in America at that time — came out strongly in favor of Chinese exclusion on a wage argument, but also mostly on cultural and institutional ones. In retrospect, we can see that those things were not only vastly overblown but, in parts, a consequence of the very policies that people like Henry George advocated for. You can see some of those senators and congressmen at the time saying, “Look, these Chinese people aren’t interested in American citizenship. They’re not interested in education. All they’re coming to do is work in the meanest possible conditions, driving down wages.” But at that time, ethnically Chinese people of any national origin were banned from acquiring US citizenship. That was true from 1871 until 1943. So complaining about folks not wanting to integrate or make long term investments in a society when you’ve told them they categorically couldn’t do that is a dog chasing its tail.

Is there a problem with immigrants assimilating today? Restrictionists will argue that 100 years ago, immigrants assimilated fine, but people coming into the country today don’t need to assimilate, and we’re not doing a good job of turning immigrants into Americans.

You do hear this a lot. I know that some of the best researchers in the world have taken a very serious look at this question. Ran Abramitzky and Leah Boustan are two that come to mind. Integration is difficult to measure, so what they do is use census data to track the degree to which descendants of immigrants start to have more and more American names. I’m talking about Jewish immigrants from Eastern Europe in 1910. Some of them named their son Shlomo, and some of them named their son John. And this is a pretty reasonable proxy for the degree to which they’re feeling American and losing the cultural identity that came with them in the suitcase.

Remarkably, they have studied this phenomenon both in recent waves of immigrants and 100 years ago, and the rate at which people give American sounding names to their kids hasn’t changed over time. So although people seem to say, “Well, we used to be a melting pot, and that’s all gone now,” there’s not a lot of evidence of that.

As for economic measures of integration, when people look at census data — which include people who are foreign-born but authorized and people who are foreign-born but not authorized — and then say, “Well look, it seems to be a very slow process of wage assimilation for people at similar levels of education, for example,” well, the sample that you’re looking at includes people who are barred from assimilating by law. So here again, this is a kind of circular reasoning. “We shouldn’t be admitting immigrants because people aren’t assimilating” — part of which is due to the very barriers against immigrants — is not a careful way to think about the problem.

How has the argument against immigration evolved over the past few years? It seems like it used to focus entirely on illegal immigrants, but now some restrictionists are against almost all immigration. Have you noticed a change?

I think the discussion of lawfulness versus lawful migration has been an important one recently. I think underlying it is a much more fundamental concern about migration itself, regardless of status. For example, if you take a person who has quite reasonable concerns about large-scale unlawful migration and ask them, “Well, how about legalizing it all? How about giving out that number of visas per year to people from that country?” Most of them would say, “Well, hold on now. I’m not sure about that.”

So really, I mean, there’s a concern about lawbreaking itself, which is very important, but underlying it is fundamentally a concern about what happens when people come in. I think it’s really unfortunate that the discussion is driven by anecdotes. Yes, there are obvious anecdotes of firms hiring H-1B workers who are then trained by the US workers that they’re replacing. However, I think it’s important to base policy on systematic evidence.

A group of economists that includes Anna Maria Mayda, who’s a brilliant economist of immigration and many other things at Georgetown University, studied this with a brilliant research design. Basically, they used the H-1B visa lotteries that have occurred in some years but not others. In recent history, there have been years where the H-1B quota was not binding, and then years where it suddenly became binding. So they held a lottery, and lots of firms that in the other years would have gotten H-1B visas to hire workers… didn’t. In those firms where the quota suddenly became binding, they tracked what happens to firms that otherwise would have gotten a worker but didn’t. And the answer is that for every one H-1B worker they lose, firms on average hire 2.3 fewer US workers. So that’s the systematic evidence across all firms.

As always, in these cases, that’s the average effect, and you can find anecdotes to any effect on any side that you want to emphasize. Still, the systematic evidence is where it’s at for rational policy formation.

Speaking of systematic evidence for rational policy formation, what is the systematic evidence at this time about the effects of immigration on low skill worker wages? Sometimes it seems like it is a dueling contest of studies that reach opposite conclusions, but what is your best take of the evidence about the impact of immigration on low skill wages? That seems to be a big part of the public debate.

Absolutely, and it’s a part of the academic debate too. In 2017, the National Academy of Sciences brought together this blue ribbon, diverse commission of some of the best economists to study migration, and they disagreed very strongly about exactly this question. So it’s not settled.

I’d highlight two recent studies that are extremely important. One that just came out studies the flood of Puerto Ricans into the United States after Hurricane Maria in 2017. I think most folks will remember what Puerto Rico went through not long ago. Puerto Ricans, of course, are US citizens and can migrate whenever they want. They tend to go — when they move to the US — to certain parts of the US much more than others.

This study is by Giovanni Peri and two coauthors, and it came out a few months ago. This study uses the fact that there was a big preexisting community of Puerto Ricans in Orlando, Florida. This preexisting community caused a very large share of the people fleeing Hurricane Maria to show up there — not in other parts of Florida, and certainly not in other parts of the country to the same extent. So, you can find lots of extremely similar cities that didn’t suddenly have their labor force go up by 2 percent in the course of a month or two due to this influx, and they find all kinds of different impacts on different parts of the economy. A lot more labor in construction seems to have driven down construction wages a lot. A lot more demand for retail services and hospitality services seems to have driven up wages in those sectors.

The average effect, at all skill levels, is nothing in the short term. That is, as we talked about at the beginning of this podcast, Puerto Ricans coming into Orlando are other people in the Orlando economy, and they shift the economy to some degree. They shift labor markets away from sectors where they might be concentrating. They shift the demand for the labor of other people towards goods and services that they might be using. But they don’t harm the economy overall. There’s no sign that they have a deleterious effect on even the low-skilled workers because they, too, are participating in a very complex system that is not driven in one direction or another.

As for the other study: Christian Dustmann is one of the world leaders on immigration research at the moment. He has a paper in the Quarterly Journal of Economics, which is an extremely highly selective journal. Only the best research gets in there. He studies a change in German policy that let people living in the Czech Republic cross the border to work near the border but not actually live in Germany. So there was a big increase in the labor supply of Czech workers in a specific part of Germany with lots of areas that weren’t affected that you could compare to, and Dustmann finds important negative effects on German employment.

What’s notable to me about that, and a huge difference with this Puerto Rico, Orlando study that we just mentioned, is that these are people who are banned from actually living in Germany. So a lot of the things that they could do — like drive up the demand for housing, drive up demand for local goods and services — that would certainly offset the pure labor market effects — whose forces are present in Orlando when Puerto Ricans show up there and participate fully in the economy, including in housing and goods and services — those aren’t there in the Germany example.

So that’s great for an academic study that wants to isolate the pure effect of labor supply, but again, that’s not all of what people are. That’s not what Puerto Ricans are when they show up in Orlando. That’s not what all US immigrants are. They’re also consumers. They’re also investors. They’re also innovators. A refined academic study like Christian Dustmann’s is absolutely superb in academic terms. Still, you see anti-immigrant groups cite this as, “Well here, now we have in the Quarterly Journal of Economics evidence that immigration drives down wages.” But this misses the point of the study, and if you read it, they go on at length about the fact that there are several reasons why this doesn’t represent immigration in general.

Restrictionists will say that, if you look at the polls about how many people would love to live in America, you can see that opening the border would flood America with way more immigrants than we can handle, and America as we know it would be over. Why is that argument wrong? Wouldn’t everyone come here if they could?

Absolutely not. An example that is often discussed is Puerto Rico. We’ve had open borders and a very large initial economic gap for over 100 years now. There’s been substantial migration from Puerto Rico, but certainly not a depopulation of Puerto Rico of any kind. We also have de facto open borders with Micronesia. It was a quid quo pro basically for putting a military base there that they were giving unlimited ability to legally move to work in the US. A lot of them go to Hawaii. A moderate percentage of Micronesians left, since Micronesia is a relatively poor country. But the vast majority of them didn’t leave.

So this is a great scare tactic. It was definitely used in the Chinese exclusion debates of the 1870s and 1880s. People would frequently refer to the hundreds of millions of Chinese people — how desperately poor they are and, at the first chance, they’d all come to America and we’d be wiped out. The same metaphors of floods, tides, dams, and dikes just don’t change one bit over time. There’s just never been any actual evidence of it.

And really, I think it’s just vastly more constructive to focus, as economists would, on marginal analysis, rather than to engage in a big central planning exercise of trying to calculate the efficient thing to do. Can a bureaucrat in DC sit down and say, “Well, it’d be better for the US if we had 20 percent foreign-born, or 30 percent foreign-born like Australia or Canada? They seem to be doing fine. Why don’t we plan that out?” I don’t think anybody can know that. I mean, we aren’t Australia and Canada. Economic conditions in the future could differ in unknown ways from how they are right now. I don’t think anybody can sit down and say, “Well, the best thing is absolutely open borders,” or “The best thing is that we go back to the foreign-born percentage of the 1950s when America was supposedly great.”

Focusing on marginal analysis means looking at the next group of immigrants. Do we have a sign that they are creating more businesses than natives? Well, yes, that’s the evidence, and all sizes of businesses — not just small and low wage firms but big firms too — which generate lots and lots of employment for natives. That’s the situation right now for the most recent immigrants, and that’s what we can expect at the margin for the next group.

Are they committing crimes at high rates now? No, immigrants have lower crime rates than natives for all kinds of crime across the board. Are they depleting fiscus? No, the National Academy of Sciences report that I just mentioned calculates that for recent US immigration of the skill mix and the age mix that has recently come, if you calculate the net present value of the taxes they expect them and their first generation of descendants to pay minus the benefits that they expect them and their first generation to pay, the balance is positive $250,000 net present value per immigrant.

So that’s where we are at the margin, which suggests there’s a big opportunity for more from where we stand right now. I’m talking in the broadest terms, not in December of this year, but in the sweep of history. Certainly, the administration’s policies over the last four years have not been some sort of crisis measure. They began long before the crisis and have been targeting the sweep of the next 10 or 20 years of immigration — that’s what I’m talking about as well. And the evidence is very clear that there is a big opportunity for the country to have more at the margin. I think that’s just drastically more fruitful than a central planning exercise.

Would you want that “more” to be different in some way? What would be the policy recommendation for US immigration law as you see it? Are you saying we should return to the pre Trump status quo? Or are you arguing for some changes or reforms in US immigration policy?

What’s incredibly clear is that we need a work visa — a substantial work visa for work that does not require a college degree but is also not seasonal. There’s no such work visa. Suppose you are a dairy farmer that depends absolutely and heavily on migrant labor — and this is a substantial part of the dairy industry which makes the milk our kids are drinking. In that case, there is no visa for your workers because the whole dairy industry, almost the entire dairy industry, is not considered seasonal work, so there is no, and almost none of the work requires a college degree.

So unsurprisingly, that is an industry that is heavily dependent on unauthorized labor. And that’s a tremendous problem that’s been recognized for a long time. In 2006 and 2007, there was a serious attempt led by John McCain and Lindsey Graham, among others. To rectify that situation, they proposed a W-Visa. It passed the Senate, but it didn’t quite get the support to become law. But that’s an opportunity to make Americans and immigrants better off working together, no doubt about it. I might add, it also devastates unauthorized migration and promotes the rule of law. But we couldn’t quite get there.

Would you do anything to make it either easier for high-skilled immigrants to come here or students to stay here, or is that system already in pretty good shape?

Oh, it’s in terrible shape. My goodness. If folks think it’s easy for high-skill students from all over the world to stay here and contribute to the American economy and start businesses and create ideas and technologies and employment for Americans, they must not have hung out with too many immigrants, because it’s incredibly difficult. It’s a challenge at all times. It’s years and years of uncertainty. For many of them, it means being tied to a single employer, because if they were to change employers, it would mess up their green card application and have them start all over again. For some of them that I’ve known personally, it means being years without a promotion while other workers get promoted. Thus, their talents are being vastly underutilized, because even changing your job title would require you to start the green card application over again. Tons and tons of bureaucracy that have been set up for purely political reasons without any sort of economic check on the real impacts on firms and otherwise.

Think about that astonishing calculation from the work of Anna Maria Mayda that I mentioned before. Losing an H-1B worker for purely administrative reasons — no economic criteria in there because this year, the quota that is baked into law is binding, so you’re not going to be able to hire a worker — deprived of employment 2.3 US workers (most of them in the tech industry) for every one person who was not able to be employed.

And did that consideration go into the numbers that were carved in stone in the law years and years ago? No. It was a purely political decision with no economic analysis behind it. No economic analysis at all was released publicly of the expected economic effects of shutting down essentially all H-1B visas earlier this year, which will certainly harm the employment of Americans of all skill levels for the reasons I just mentioned. It’s just a really sad state of affairs. Lots of opportunities are thrown away. Many opportunities for employment of Americans, — college graduates and not — because of policy just completely uninformed by economic analysis, are just gone.

As we approach the end here, I’m trying to run a couple of ideas by you quickly. What do you think about place-based visas? There’s this idea that we should bring people on the condition that they live in specific American cities or states, maybe because the city’s being depopulated or has economic problems. You often hear that about Detroit — “Well, hey, let’s just bring a bunch of immigrants here, but they need to live in Detroit. That’s the condition.” What do you think about that idea?

I mean, some economists would call it a politically constrained optimum, but you know it’s the best you can do under the circumstances, so why not? I mean, sure, there are major benefits and costs of such a policy. The benefit is, could it be that Detroit has needs that are not taken into account by voters in Oklahoma when they support national policies that prevent Detroit from getting the workers it needs? Absolutely. It’s also highly inefficient to have workers tied to Detroit when the economic conditions could change. Plants could move. New technologies could arise, which means it would be much better for them to move to Seattle, and suddenly they can’t.

But if that is the way that local economies can flourish more, relative to the alternative of just not having any, then it’s a great idea, and it’s also not any kind of radical idea. Canada, Australia, and other countries have been devolving to provincial levels some aspects of immigration policy for these reasons for several years, and it’s something that’s been quite beneficial for them.

I imagine you like markets. I like markets, and a lot of my readers like markets. Why don’t we just make this a market-based thing, and we can sell off green cards, sell off citizenship to the highest bidder like an auction or something. Make it a pure market-based system.

There’s absolutely a major efficiency case for that, and again, relative to the situation of completely artificial constraints that are cooked up for political reasons, it’s better. An example of that is in the 2006-2007 bill I mentioned earlier that never became law. I was talking about a nonseasonal work visa for workers without a college degree. The quota was set at 200,000, and I asked somebody who was in the room at the time where that number came from? Was there some kind of modeling? Did somebody do a literature review? No, no. Instead, research estimated that there were about 400,000 unauthorized workers per year arriving across the southern border, and some folks in the room wanted zero, so they met in the middle at 200,000. That’s where it came up with. So a market, like all markets, it is going to be drawing information from the real economy and aggregating it in a way that’s just going to vastly improve on “here’s a number I pulled from where the sun don’t shine,” which seems to be the alternative that we get.

However, I don’t think it’s difficult to look in US history and find all kinds of immigrants who would have been priced out of that market by capital constraints, because they would not have been able to borrow against their future earnings, but that also have been visibly, tangibly, unarguably beneficial through the economy and in other ways to Americans. One that comes to mind is Jan Koum, who co-founded WhatsApp that I use daily, and he arrived as a refugee who was so poor at one point that he and his mom were on food stamps. It’s unclear that such a person could have gotten credit on capital markets to convince people to invest in him and his potential, which was realized. So there are some drawbacks to a pure market system, and maybe moving toward a market in important ways — rather than throwing it all to the market — could be helpful.

Do you want border security? I’ve heard people joke, “I don’t want border security. Just put a turnstile on the border, so I know how many people are coming through.” What are your general thoughts about border security and things like E-Verify?

Yes, there’s a lot there. Border security is enhanced by lawful migration mechanisms. No security is enhanced by cat-and-mouse games at the border, by smuggling, by human trafficking, by (in Europe) people showing up in barely seaworthy rafts all over the southern coast. That situation exists in part because of an abysmal system for regulating economic migration in ways that are mutually beneficial. It’s not completely the reason, but absolutely it’s part of it.

I think that it’s absolutely legitimate for countries to know who’s there. That’s an important aspect of law enforcement, terrorism prevention, and what I think to be perfectly legitimate actions of the state that I depend on for my security.

And what I think some folks who are all about security could consider is that all of those efforts are enhanced when migration is safe, orderly, and regular, and that’s just not going to happen without meaningful consideration of the absolutely vast economic and demographic pressures that create a big opportunity for mutual benefit in migration of that kind, that it’s just not going to go away. No matter how intense our focus purely on security is, it needs to be complemented with proper economic regulation.

As for E-Verify, if the point of E-Verify was to improve employment and wages for workers competing with unauthorized workers, there are other reasons that you could think of implementing such a system. Still, if the point was that, Pia Orrenius and Madeline Zavodny, two leading economists of immigration, have studied what happened to US workers in states that rolled out E-Verify at different times. It’s an interesting natural experiment to see well, what was the real impact of this on US, workers since that was a big part of the point of E-Verify? And they’re not able to detect any effect of it.

Now, you could say that’s because it’s not being implemented sufficiently. However, when folks want to believe something in the face of evidence, they always say, “Well, this wasn’t the real test of it,” so they’re saying here that it wasn’t not a definitive test of whether an extremely highly enforced — you might say draconian — E-Verify system locked in on every employer in the country, what that effect would be on US workers. But the evidence that we have is not great.

And finally, are you optimistic or pessimistic about the politics of immigration going forward?

My mentor in undergraduate was this brilliant old anthropologist named Ted Skeeter, and he always used to say, “Michael, I’m an optimistic pessimist. I believe that there is a solution. I just don’t think we’re going to find it.” There have been a whole lot of very reasonable folks working on immigration in both parties for a very long time. Ronald Reagan had some, I think, very highly economically beneficial ideas about temporary workers, about the regularization of irregular migrants in America. George Bush and Vicente Fox worked across the border to find a much better solution than we’ve had for relationships with Mexico, and there have certainly been Democrats that have worked for a better solution as well.

We haven’t gotten very far in a very long time, and a lot of our political disarray that we’ve been living through lately comes from that. I think we’re going to keep suffering until we find a better solution, a better way to regulate it. Jeremy McInerney, a classicist at U Penn, was once asked to summarize the bottom-line lesson of all Greek theater in one sentence, and he actually had an answer. The answer was, “Wisdom only comes through suffering.” That’s what I expect from immigration law. I think we’re going to continue to see the economic and political consequences of how badly we’ve done at it until they get bad enough that we choose another path.

My guest today has been Michael Clemens. Michael, thanks for coming on the podcast.

Thank you, it’s been a pleasure.

The post The economics of expanding immigration: My long-read Q&A with Michael Clemens appeared first on American Enterprise Institute – AEI.