Anyone wishing to learn more about the economic effects of immigration on America and American workers would do well to read this book. George J. Borjas is a highly respected economist at Harvard’s Kennedy School of Government and one of the world’s foremost experts on the economics of immigration. While most of his past writings have been technical works, We Wanted Workers is chiefly intended for a popular audience. It is very clearly written, contains ample yet easily digestible data, and offers a balanced and careful treatment of an issue that is generally treated in a very different manner.
The “narrative” to which the subtitle refers is the widespread view that immigration is an unalloyed benefit for America and those already here. Borjas argues that the reality is more complicated: Immigration creates winners and losers, and as the laws of supply and demand would lead one to expect, workers who must compete directly with immigrant workers (legal or illegal) suffer as a consequence. Working with census data spanning many decades, Borjas has found that “if immigration increases the size of a group by 10 percent, the earnings of native workers in that group fall by 3-4 percent.”
Borjas analyzes a recent “natural experiment” that supports his data findings, and even suggests that, in some situations, those findings understate immigration’s effects. When, in 1980, Fidel Castro allowed over 100,000 Cubans to emigrate from the port of Mariel to Miami, he inadvertently created a natural experiment on the effect of immigration on wages. Borjas calculates that the Mariel boatlift increased the number of high school dropouts in Miami by about 18 percent, and in subsequent years reduced the wages of native-born high school dropouts by over 20 percent. He discusses a well-known earlier study that examined the Mariel boatlift and found no significant impact on wages in Miami. But as he shows, that study was seriously flawed: It failed to isolate workers with similar skill levels to those of the Mariel immigrants, and more surprisingly, it selected comparison cities partly for their economic similarity to Miami after 1980.
Despite its obvious flaws, this earlier study on the Mariel boatlift has been cited widely in economics literature and in the popular press, and was recently “trumpeted” by President Obama’s Council of Economic Advisors (CEA). Borjas says “the Mariel study has played a crucial role in building the narrative that immigration is ‘good for everyone.’ ” He also discusses a similarly flawed study that was promoted before it was even published by President George W. Bush’s CEA. The flaws in these studies, and the reception they nonetheless received, reveal what one might already have suspected: Many who approach the issue hope to find a certain outcome.
Nonetheless, according to Borjas, our current high level of immigration produces substantial benefits. It creates winners as well as losers; more precisely, it creates winners because it creates losers. The chief winners are employers who pay less in wages and consumers who pay less for many products and services they buy.
The laws of economics dictate that, overall, “the dollar gains accruing to the natives who gain must be numerically larger than the dollar losses suffered by the natives who lose.” Economists call this the “immigration surplus,” and it follows necessarily from the voluntary nature of economic transactions. Borjas’s estimate of the immigration surplus in America is $50 billion annually; by contrast, his estimate of the “redistribution effect”—the amount redistributed from native workers to employers and consumers—is about 10 times as much, $516 billion annually. In other words, immigration currently causes a massive transfer of wealth from workers or labor to owners or capital. It greatly exacerbates income inequality while producing a very modest net increase in wealth. (It is ironic that the political party more vocally opposed to income inequality is the one more that more strongly supports high levels of immigration.)
This calculation does not include the economic gains for immigrants themselves, which are substantial. Borjas notes that these gains are widely acknowledged and uncontroversial. He focuses on the effect of immigration on those already here because it is rarely discussed in a realistic and balanced manner.
The immigration surplus also does not include the fiscal effects immigrants produce, the taxes they pay, and the public services they use. Not surprisingly, the more highly skilled an immigrant, the more positive his or her fiscal effect on the receiving country. Because, at present, our “immigrant population is disproportionately low-skill, a disproportionately high number of welfare recipients are foreign born.” A National Academy of Sciences panel (of which Borjas was a member) estimated last year that immigration currently produces a fiscal burden at the federal level of $50 billion—about the same as the immigration surplus it provides to the rest of the economy. That figure does not include the fiscal burden for state and local governments, which (as any parent of children in an urban public school knows) is considerable. Overall, then, immigration probably produces modestly higher fiscal costs than economic benefits for the native population.
Those fiscal costs, however, can be viewed as an investment for the future: Most of the children now learning English in our public schools will someday be workers and taxpayers. And more important than the immediate fiscal impact of immigration is its long-term impact. Regrettably, we cannot begin to estimate what this impact will be without making assumptions—or, more precisely, guesses—about future rates of taxation and government spending. Using various assumptions, the National Academy of Sciences panel estimated the long-run (75-year) fiscal impact of the average immigrant currently in America as ranging from a gain of $58,000 to a loss of $119,000. Unfortunately, that latter figure is based on what might seem to be the most realistic assumption, that there will not be significant federal spending cuts or tax increases in the years ahead.
We Wanted Workers also contains excellent discussions of the history of immigration in America, the melting pot in theory and practice, and the likely effects of completely open borders, a policy favored by many economists, libertarian as well as liberal. And Borjas concludes with a sensible, if limited, argument that immigration is ultimately a political question more than an economic one. In sum, it’s hard to imagine a more suitable book if you’re genuinely seeking information about what may well be today’s most politically charged issue.
Peter J. Hansen works in financial markets in Cambridge, Massachusetts.
