Impact of immigration on economy

[CharonY]

I stumbled over this article at factcheck:

http://factcheck.org/2010/05/does-immigration-cost-jobs/

 

In short, they provide evidence that immigration (legal or illegal) do not cost jobs and provide economic benefits.

 

See also http://www.epi.org/publications/entry/bp255/

 

Using this as basis I would like to ask the question whether anyone has more data on costs of immigration, ideally separating illegal with legal ones. Anyone found peer-reviewed publications on this matter? Just by skimming some articles I got the impression that most articles that argue the inverse tend to be from activist groups rather than economists. But I may be rather wrong on this one. Mind you, I do not intend to argue for or against immigration of either flavor but I am interested in the real as opposed to the perceived impact.

 

Edit, according to the CBO illegal immigration results in a modest net cost: http://www.cbo.gov/ftpdocs/87xx/doc8711/12-6-Immigration.pdf

Edited June 3, 2010 by CharonY

[Pangloss]

I'm not sure I understand the political impact of a joint analysis of the economic affect of both legal and illegal immigration combined.

[CharonY]

That is why I would like to see information in which both are separated.

[iNow]

I need to stipulate that these are not something I've previously explored, but seemed useful after reading your OP:

 

 

 

http://www.mitpressjournals.org/doi/abs/10.1162/003355303322552810

Immigration is not evenly balanced across groups of workers who have the same education but differ in their work experience, and the nature of the supply imbalance changes over time. This paper develops a new approach for estimating the labor market impact of immigration by exploiting this variation in supply shifts across education-experience groups. I assume that similarly educated workers with different levels of experience participate in a national labor market and are not perfect substitutes. The analysis indicates that immigration lowers the wage of competing workers: a 10 percent increase in supply reduces wages by 3 to 4 percent.

 

 

 

http://dx.doi.org/10.1016/S1573-4463(99)03009-6

The study of labor flows across labor markets is a central ingredient in any discussion of labor market equilibrium. These labor flows help markets reach a more efficient allocation of resources. This paper surveys the economic analysis of immigration. It investigates the determinants of the immigration decision by workers in source countries and the impact of that decision on the host country's labor market. The survey stresses the ideas and models that economists use to analyze immigration, and delineates the implications of these models for empirical research and for our understanding of the labor market effects of immigration.

 

 

 

http://www.journals.uchicago.edu/doi/abs/10.1086/262120

Using a calibrated general equilibrium overlapping generations model, which explicity accounts for differences between immigrants and natives, this paper investigates whether a reform of immigration policies alone could resolve the fiscal problems associated with the aging of the baby boom generation. Such policies are found to exist and are characterized by an increased inflow of working‐age high‐and medium‐skilled immigrants. One particular feasible policy involves admitting 1.6 million 40–44‐year‐old high‐skilled immigrants annually. These findings are illustrated by computing the discounted government gain of admitting additional immigrants, conditional on their age and skills.

[ecoli]

Not surprising at all. Immigration improves economies by allowing resources (including labor) to focus on their comparative advantage, thus making everyone richer.

 

These ideas were developed by Ricardo back in the 1810's and we've known this for a long time.

 

http://en.wikipedia.org/wiki/Comparative_advantage

 

 

I'm a proponent of non-regulated immigration (baring terrorists only, I guess)

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I'm not sure I understand the political impact of a joint analysis of the economic affect of both legal and illegal immigration combined.

It's a bit flawed because illegal immigrants are much better at coordinating to the demand of their labor (fewer barriers and restrictions to movement).

[CharonY]

Interesting. I am going to delve into that a bit more soonish. Meanwhile I found some surprising articles regarding Arizona in particular. Well, surprising if one contrasts it with what the local newspapers write here:

 

The top four big cities in America with the lowest rates of violent crime are all in border states: San Diego, Phoenix, El Paso and Austin, according to a new FBI report. And an in-house Customs and Border Protection report shows that Border Patrol agents face far less danger than street cops in most U.S. cities.

I blame the heat. http://www.foxnews.com/world/2010/06/03/ap-impact-despite-calls-troops-data-shows-mexico-border-actually-pretty-safe/?test=latestnews

 

And:

The most thorough study on the fiscal and economic impact of immigration was done by the non-partisan Texas Comptrollers’ Office in 2006, which showed Texas earned more in taxes and economic output from illegal immigrants than governments spent to provide services.

 

According to the Comptrollers’ office, state and local governments spent $1.16 billion to provide services like education, health care and safety, but raised an estimated $1.58 billion in tax revenues. Based on the data, the Texas taxpayer made a $424.7 million profit on its illegal immigrant population in 2006.

 

Fiscally, illegal immigrants contribute mostly to state and local coffers primarily through sales and property taxes, which are mostly unavoidable. A majority of illegal immigrants pay federal, state and local income tax as well - 50% to 75%, according the Congressional Budget office.

 

Figures found in studies such as Texas’ 2006 study, or another 2007 study by the CBO, which did a survey of all data for the past 30 years and concluded that fiscal impact of services provided to illegal immigrants “is mostly modest,” stands in contrast to political rhetoric that fueled the passage of Arizona SB1070.

 

“The additional economic activity and tax revenue that undocumented workers provide to state and local governments simply overwhelms the fiscal cost to provide services,” said Dan Griswald, an immigration policy expert with the libertarian think tank CATO Institute.

 

Arizona and Texas’ economies and tax policies are similar enough that conclusions can be drawn that Arizona may also receive net economic and fiscal benefits from illegal immigrants. Both states rely on sales taxes and fees on cigarettes and alcohol for large portions of tax revenue generation, according to the Tax Foundation. One difference is Arizona assesses both a personal and corporate income tax, which Texas does not.

 

http://www.foxbusiness.com/story/markets/economy/illegal-immigration-provides-benefits-states-despite-rhetoric/

 

(Note the sources)

This is in stark contrast to what you read in newspapers here, in which the contribution of illegal immigrants is considered to be negligible. Apparently they got the data from The Federation of American Immigration Reform. However, I find their executive statement somewhat judgmental and not in the tone or written with the care of a proper report:

 

 

Analysis of the latest Census data indicates that Arizona’s illegal immigrant population is costing the state’s taxpayers about $1.3 billion per year for education, medical care and incarceration. Even if the estimated tax contributions of illegal immigrant workers are subtracted, net outlays still amount to about $1.3 billion per year.

(my bold) and:

 

The unauthorized immigrant population pays some state and local taxes that go toward offsetting these costs, but they do not come near to matching the expenses. The total of such payments might generously be estimated at $257 million per year.

Which is in stark contrast to the above mentioned Texas study. However the number appears to be rather low, considering that they estimate 425k illegal immigrants, as the sales taxes alone could roughly amount to the proposed sum.

[ecoli]

CharonY - These are good arguments to make all immigration legal and unrestricted so that they can pay federal taxes without fearing deportation and/or getting rid of social incentives to immigrate illegally (such as subsidized medical care, education, etc).

 

Politically, focusing on the first point is more feasible.

[Pangloss]

The United States accepts more immigrants each year than all other countries in the world combined. Every year we break the previous year's record for naturalization (citizenship for immigrants). Both Democrats and Republicans recognize the value of immigration to the growth and culture of the nation, and even though there are individuals who do not, they appear to be very much in the minority.

 

What exactly could we be doing better?

 

 

http://en.wikipedia.org/wiki/Immigration_to_the_United_States

[ecoli]

The United States accepts more immigrants each year than all other countries in the world combined. Every year we break the previous year's record for naturalization (citizenship for immigrants). Both Democrats and Republicans recognize the value of immigration to the growth and culture of the nation, and even though there are individuals who do not, they appear to be very much in the minority.

 

What exactly could we be doing better?

 

 

http://en.wikipedia.org/wiki/Immigration_to_the_United_States

 

Your team could win the super bowl, but that doesn't mean there is zero room for improvement.

 

Though this analogy is flawed because I'm not making the claim that having the most immigrants per capita should be the end goal in itself. Just that, from a free trade perspective, open borders is better.

 

You can make the argument that labor markets are inefficient at coordinating themselves. However, I haven't seen evidence that governments to better (for the purposes of economic growth).

[Pangloss]

But I think there are valid reasons for not having an open border, and security is top amongst them. We have not only a right but also an obligation to determine who can become a citizen (and who cannot), and every other nation recognizes that right/obligation and practices it themselves.

 

The point of being aware of just how open we are is to recognize that we're doing a job that, while not above criticism, is clearly above many of the criticisms typically leveled against it.

[ecoli]

But I think there are valid reasons for not having an open border, and security is top amongst them. We have not only a right but also an obligation to determine who can become a citizen (and who cannot), and every other nation recognizes that right/obligation and practices it themselves.

 

Agreed, but I think an analysis of immigration levels (legal and illegal) in general versus immigration of people we'd consider a security threat would show that the economic impact of immigrants outweigh potential security risks.

 

A more open immigration policy would reduce incentives to immigrate illegal and reduce the security risks (in my informal model, anyway). I would venture to guess that legitimizing the people who are immigrating illegal would greatly improve their social condition (through infrastructure support, etc) and again reduce things like criminality and violence.

 

I didn't mean open policy as a literal open border, but reducing 'artificial' limits and incentives

 

The point of being aware of just how open we are is to recognize that we're doing a job that, while not above criticism, is clearly above many of the criticisms typically leveled against it.

 

That's definitely a fair point. But, from a pro-immigration perspective, the loudest criticisms tend to be baseless guises more to do with cultural protectionism than anything else. Even most of the arguments on the pro-immigration sides have little to do with free trade.

 

Right now, I'm living in the most ethnically diverse neighborhood in the most diverse county in the country (in one of the most diverse cities). I see every day how awesome cultural diversity (especially from a culinary standpoint) is. We're doing well, but I can't help thinking if we can be even better.

[Pangloss]

Agreed, but I think an analysis of immigration levels (legal and illegal) in general versus immigration of people we'd consider a security threat would show that the economic impact of immigrants outweigh potential security risks.

 

You know, even if you could show something like that in a meaningful way (which I've seen no evidence of as yet), I don't think it would ultimately matter. There's what works in theory, and there's what works in politics. The two are frequently very different.

 

 

A more open immigration policy would reduce incentives to immigrate illegal and reduce the security risks (in my informal model, anyway). I would venture to guess that legitimizing the people who are immigrating illegal would greatly improve their social condition (through infrastructure support, etc) and again reduce things like criminality and violence.

 

I didn't mean open policy as a literal open border, but reducing 'artificial' limits and incentives

 

I don't see where that would affect security. Terrorists come here for revenge, drug smugglers come here for the customers, etc. We already have the most open immigration policy in the entire world, and yet we have serious security concerns.

 

And in terms of illegals who commit more conventional/routine crimes, like drunk driving, pedophilia, robbery, etc, wouldn't those likely increase under an open border? If we're not even going to TRY to stop such people from coming in?

[ecoli]

And in terms of illegals who commit more conventional/routine crimes, like drunk driving, pedophilia, robbery, etc, wouldn't those likely increase under an open border? If we're not even going to TRY to stop such people from coming in?

 

It may increase, but there's no reason to think it would increase at a greater rate than the population increase. There's nothing fundamentally different about immigrants as people. I think their poverty could be greatly improved if they were here legally, and being forced to pay federal taxes could help build infrastructure, these tends to be negatively correlated with conventional crime.

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You know, even if you could show something like that in a meaningful way (which I've seen no evidence of as yet), I don't think it would ultimately matter. There's what works in theory, and there's what works in politics. The two are frequently very different.

I'm aware these ideas wouldn't work in modern politics. Doesn't mean I shouldn't lobby for them, however.

 

 

 

I don't see where that would affect security. Terrorists come here for revenge, drug smugglers come here for the customers, etc. We already have the most open immigration policy in the entire world, and yet we have serious security concerns.

Right, but illegal immigration is proof that demand to move to this country outstrips the supply that legal channels can handle (both through infrastructure and legal limits). If we lower the barrier to entry, we can increase the number of background checks on immigrants and improve security. The bad guys, the people with something to hide can still immigrate illegally, but they'd stick out more with everyone else cooperating.

 

Do countries with more closed borders have fewer security concerns? In this day and age, I would doubt it.

 

You can see this outcome in markets all the time. You make drugs illegal, and it produces a violent black market (extreme example, because of the addictive nature of drugs).

 

You see what I'm talking about though? you make drugs illegal, and people have to sneak over the border to deliver drugs, increasing the risk of delivery and usage. You make immigration illegal, you increase the risk of working, which harms the nation's productivity and makes immigration dangerous, but hasn't reduced the demand for it.

Edited June 4, 2010 by ecoli
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[Rickdog]

In my opinion by saying open frontiers, doesn`t mean that anybody can pass the frontiers of the country wherever they want to. For this, they must pass through check points, strategically located in main roads that connect between both limiting countries, where local security agencies check the travelling passengers on both sides of the border, therefore by having an open frontier, you will have better control of who gets in or who gets out.

 

By not having an open frontier, whoever wants to trespass the border, will avoid passing through those check points so control of travelers becomes more dificult, since you have long kilometers or miles which should be controled, and you have no security if who trespassed is a good or a bad citizen .

 

In open frontiers, the good citizens from either country wouldn`t have any fear to pass through the check points, since its legal and easyer to get where you want to go. Only the bad citizens will avoid them, so any trespass through an unauthorized passage, will be likely, that it will be done by a criminal in full extent of this word, and if this criminal is stupid enough to try to pass through the check point, it will get caught inmediately by either one of the sides law enforcement officials, same thing goes for unauthorized elements as drugs, explosives or stollen items for example.

 

If I`m not wrong, you`ll have better levels of Security for your normal citizens.

Edited June 5, 2010 by Rickdog
Completing an idea

[Pangloss]

It may increase, but there's no reason to think it would increase at a greater rate than the population increase. There's nothing fundamentally different about immigrants as people. I think their poverty could be greatly improved if they were here legally, and being forced to pay federal taxes could help build infrastructure, these tends to be negatively correlated with conventional crime.

 

Sure, but why would we want to let bad people in when we're overwhelmed with good people who want in? Sure they may be good people who just have had some bad luck and need a break, but as a simple practical matter our prisons are already overburdened -- why make it worse if we don't have to?

 

And we don't have to.

 

 

You see what I'm talking about though? you make drugs illegal, and people have to sneak over the border to deliver drugs, increasing the risk of delivery and usage. You make immigration illegal, you increase the risk of working, which harms the nation's productivity and makes immigration dangerous, but hasn't reduced the demand for it.

 

And then you have two billion Americans and you've just shoveled the poverty from one place to another. I understand what you're saying, but it really just sounds like intellectual hypothesizing to me. I'm a realpolitik kind of guy. Maybe you're just talking to the wrong person.

[Mr Skeptic]

Right, but illegal immigration is proof that demand to move to this country outstrips the supply that legal channels can handle (both through infrastructure and legal limits). If we lower the barrier to entry, we can increase the number of background checks on immigrants and improve security. The bad guys, the people with something to hide can still immigrate illegally, but they'd stick out more with everyone else cooperating.

 

I agree with this. Also, it would make employers much more wary of hiring illegals because they would all be bad people. Considering a largely positive economic of immigrants, and the better contributions of legal rather than illegal immigrants, I really don't see a good reason to restrict legal immigration to a particular quota. Definitely restrict them on based on quality, but not on quantity.

[ecoli]

Sure, but why would we want to let bad people in when we're overwhelmed with good people who want in? Sure they may be good people who just have had some bad luck and need a break, but as a simple practical matter our prisons are already overburdened -- why make it worse if we don't have to?

 

Why trade with China when mercury-laden toys could get in? As a practical matter, our children are already overburdened -- why make worse if we don't have to?

 

And then you have two billion Americans and you've just shoveled the poverty from one place to another. I understand what you're saying, but it really just sounds like intellectual hypothesizing to me. I'm a realpolitik kind of guy. Maybe you're just talking to the wrong person.

 

I think its a kind of a cop-out to avoid certain topics just because you assume they are politically infeasible. What I mean is that, if you are in a position of power or government, how do you know something is actually infeasible if you don't try to push for it?

 

How many ideas would actually gain acceptance, but by the assumption of infeasibility, the idea is not followed through to our detriment.

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I agree with this. Also, it would make employers much more wary of hiring illegals because they would all be bad people. Considering a largely positive economic of immigrants, and the better contributions of legal rather than illegal immigrants, I really don't see a good reason to restrict legal immigration to a particular quota. Definitely restrict them on based on quality, but not on quantity.

I'm not sure if by quality, you just mean not letting terrorists and convicted criminals in. If so, then I agree. However, I think it would be a mistake to decide to let doctors and scientists in but not, say, construction workers and fry cooks.

[Mr Skeptic]

I meant both economic quality and estimated security risk. Eg, give folks who aren't criminals or otherwise a security risk a work visa, let them work in the US for a few years. If they are leaching off the system more than contributing, no citizenship for them.