I Say High, You Say Low…

The immediate reactions to the National Academy immigration report are in, and the media is having a field day. The reactions already range from mindless pablum lifted straight out of a press release to apocalyptic warnings that the sky is falling. Are these journalists reading looking at the same report? How many have actually laid eyes on a single table or figure in the 500-page virtual book, rather than buying verbatim a vague description of what’s in it?

I think it is crucial that if one is going to talk about what the report says, at the very least take some time to browse the key tables that document the report’s findings. This is one of the reasons that I thought my User’s Guide might be helpful. National Review asked me to help clarify the process even more by writing an essay that briefly summarizes what the key findings are, and that allows the reader to see the exact source of those findings. In an ideal world, this type of documentation would help reduce the discrepancies in what people claim the report says. But, let’s face it, the chance of that happening in the world we live in is trivially small.

 

A User’s Guide to the 2016 NAS Immigration Report

The National Academy of Sciences (NAS) has just published a major report on The Economic and Fiscal Consequences of ImmigrationThe National Academy panel that prepared the report consisted of about 20 social scientists, including economists, sociologists, and demographers. The project was led by Francine Blau, a professor of economics at Cornell, and Christopher Mackie, who is a study director with the Committee on National Statistics at the NAS. Fran and Chris did an amazing job bringing this very complicated project to fruition over a three-year period. They were (very) patient, fair, professional, and made sure that all the work done by the members of the panel was somehow weaved into a cohesive whole–and that’s no small feat! And did I say they were very patient?

Full disclosure: I was a member of the NAS panel that prepared the report, but anything I say in this series of posts reflects only my take about what is in the report and what, I think, is important. These posts have not been read or vetted by anyone in the panel.

I think the report has four major conclusions. But it is near 300,000 words long with big chunks of it written in “technical-ese,” comprehensible only to trained economists and likely to appeal only to immigration geeks. So I’m going to write five posts that together make up “A User’s Guide.” The User’s Guide will link to the main tables and figures in the report that document those conclusions. (The entire User’s Guide is available as a pdf here).

Let me start by giving a brief outline of my User’s Guide. All quotes below are from the report’s summary:

  1. There has been a slowdown in assimilation during the immigrants’ lifetime (User’s Guide, 1). “As time spent in the United States lengthens, immigrants’ wages increase relative to those of natives and the initial wage gap narrows. However, this process of economic integration appears to have slowed somewhat in recent decades; the rate of relative wage growth and English language acquisition among the foreign-born is now slightly slower than it was for earlier immigrant waves.”
  2. Immigration has a harmful effect on the earnings of low-skill workers (User’s Guide, 2):”When measured over a period of 10 years or more, the impact of immigration on the wages of natives overall is very small. However, estimates for subgroups span a comparatively wider range, indicating a revised and somewhat more detailed understanding of the wage impact of immigration since the 1990s. To the extent that negative wage effects are found, prior immigrants—who are often the closest substitutes for new immigrants—are most likely to experience them, followed by native-born high-school dropouts, who share job qualifications similar to the large share of low-skilled workers among immigrants to the United States.”
  3. Immigrants and their dependent children create a fiscal burden (User’s Guide, 3; and User’s Guide, 4): “On average, individuals in the first generation are more costly to governments, mainly at the state and local levels, than are the native-born generations…For 2013, the total fiscal shortfall (i.e., the excess of government expenditures over taxes) was $279 billion for the first generation group…Viewed over a long time horizon (75 years in our estimates), the fiscal impacts of immigrants are generally positive at the federal level and negative at the state and local levels.” But these fiscal impact estimates are, rightly, stamped with a Consumer Warning label: “Assumptions play a central role in analyses of the fiscal impacts of immigration.”
  4. The bottom line (User’s Guide, 5): The NAS report does not conduct the final (and obvious) calculation that adds up the  economic gains and compares that number with the fiscal burden. But anyone with a pencil and a proverbial back-of-an-envelope can do so using the numbers in the report. The only time the NAS comes close to estimating the total gains is when it reports the “immigration surplus”–the increase in the aggregate wealth of natives resulting from the productive contributions of immigrants. Although much is left out when calculating this theory-based surplus, it seems evident (at least to me) that the bottom line is very simple: The economic impact of immigration is, at best, a net wash for the average native-born person. The gains accruing from the immigrants’ productive contributions are probably offset by the fiscal burden. But even though the mythical average person is unaffected, some groups gain a lot and some groups lose a lot.

Finally, let me re-emphasize that this User’s Guide focuses on topics that I personally find interesting and important. There’s much more in the report, including (long and dense) discussions of immigration, innovation, and economic growth, where the foundational research is still a work in progress. Nevertheless, they provide an excellent introduction to many research and policy questions.

User’s Guide to the NAS Report, 1: Assimilation

It is well known that immigrants have an economic disadvantage when they first enter the United States. Many are not fluent in English; they are not familiar with how the US labor market works; and on and on. So it is not surprising that, at first, they earn far less than natives. Over time, the immigrants learn the language, acquire new skills, and begin to “catch up” or assimilate to the native norm.

Economic assimilation is obviously an important component of any assessment of the impact of immigration. And despite all the hype claiming that immigrants today are assimilating just as well as earlier waves did (including another NAS report focusing specifically on assimilation and released just one year ago; here’s that report and the media spin), the new NAS report gives a far more realistic and measured assessment of the situation.

Continue reading “User’s Guide to the NAS Report, 1: Assimilation”

User’s Guide to NAS Report, 2: Labor Market Impact

Chapter 5 of the report, entitled “Employment and Wage Impacts of Immigration,” weighs in at over 32,000 words (for context, that’s over half the length of my new book, We Wanted Workers). I am cynical enough to know that most of the people who will bother to wade through the verbiage are fishing for “talking points” that will support their ideological point of view. But they’ll be missing something. This is, by far, the best and most extensive survey of a difficult and voluminous literature. The report’s emphasis on the diversity of findings, and the many caveats that go along with those findings, reflects the doubts and uncertainty in the existing academic literature.

Continue reading “User’s Guide to NAS Report, 2: Labor Market Impact”

User’s Guide to NAS Report, 3: Short-Run Fiscal Impact

The NAS panel calculated the short-run fiscal impact by comparing the cost of providing public services to immigrants with the taxes that those immigrants pay in a particular year. Both Chapter 8 and Chapter 9 give estimates of the short-run fiscal impact.  Chapter 8 includes federal expenditures and taxes when calculating the impact in 2013, while Chapter 9 focuses on the impact at the state and local level for the years 2011-2013.

Continue reading “User’s Guide to NAS Report, 3: Short-Run Fiscal Impact”

User’s Guide to NAS Report, 4: Long-Run Fiscal Impact

By looking only at expenditures and taxes during a given year, the calculation of the short-run fiscal impact ignores that some of those expenditures actually yield a return. The cost of sending the children of immigrants to school today leads to higher earnings for those children in the future. Plus the aging of the native-born population is creating severe fiscal problems, as there is not enough money to fund the liabilities in Social Security and Medicare unless we drastically raise taxes or cut benefits. Immigration brings in new taxpayers who can fund some of those liabilities in the future.

Chapter 8 of the NAS report presents the calculation of the long-run fiscal impact. To see how this is done, imagine the following sequence of events. An immigrant arrives today, paying taxes and receiving public services. That immigrant has children. Those children may be costly, but they eventually grow up and pay taxes. The children have children, and the process goes on. The panel did this calculation by “tracking” the immigrant and all descendants over the 75-year period after arrival and adding up all the taxes paid and expenditures incurred. The difference between total taxes and total expenditures is the long-run fiscal impact.

Continue reading “User’s Guide to NAS Report, 4: Long-Run Fiscal Impact”

User’s Guide to the NAS Report, 5: The Bottom Line

Immigrants have both a labor market impact and a fiscal impact. Do the economic gains generated by working immigrants outweigh the fiscal burden that immigrants impose? The NAS report (probably wisely) avoids putting two and two together, but the report contains all the necessary ingredients to let us do it ourselves. So let’s take a crack at it.

Continue reading “User’s Guide to the NAS Report, 5: The Bottom Line”