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.
Joan Monras and I have been working on a paper that presents a comprehensive documentation of the labor market consequences of refugee supply shocks; the working paper version is here. We examine four episodes:
- The Mariel supply shock in 1980.
- The Soviet émigrés who moved to Israel in the early 1990s after the collapse of the Soviet Union
- The influx of French repatriates and Algerian nationals into France at the end of the Algerian War of Independence in 1962.
- The flow of refugees into several European countries from the many conflicts that made up the Yugoslav Wars of the 1990s.
The paper differs in two key ways from what’s been done before. First, rather than “pick and choose” a different methodological approach to examine each of the four shocks, we use the same regression model, derived from economic theory, to measure the labor market impact. Second, we estimate not only the “own effect” of the refugees on competing natives, but also the “cross effects” of the refugees on complementary natives. So, for example, existing studies of the impact of the very low-skill Marielitos look at what happened to the earnings of native high school dropouts. But what about the earnings of more skilled Miamians? Similarly, existing studies of the impact of the very high-skill Soviet émigrés in Israel look at what happened to the earnings of Israeli college graduates. But what about the earnings of lower-skilled Israelis?
Here’s what we find:
The evidence reveals a common thread that confirms key insights of the canonical model of a competitive labor market: Exogenous supply shocks adversely affect the labor market opportunities of competing natives in the receiving countries, and often have a favorable impact on complementary workers. In short, refugee flows can have large distributional consequences.
We will be presenting the paper in Florence at the 64th Panel Meeting of Economic Policy in October 2016.
Politico publishes an annual list of the 50 “thinkers, doers and visionaries transforming American politics,” and I made this year’s list at #17. And why did I get chosen? “For telling it like it really is on immigration.”
A few weeks ago, Politico asked me if I could excerpt some of the themes from my new book, We Wanted Workers, framing the discussion in terms of the immigration debate in the presidential campaign. Here is the excerpt they also published today. The last few paragraphs capture the essence of the policy argument:
We’re worrying about the wrong things, with policy fights focused on how many and which immigrants to accept, and not enough on how to mitigate the harm they create along the way.
[We] cannot ignore the reality that immigration has made some natives poorer. A policy that keeps them in mind might tax the agricultural and service companies that benefit so much from low-skilled immigrants, and use the money to compensate low-skilled Americans for their losses and to help them transition to new jobs and occupations. Similarly, Bill Gates claims that Microsoft creates four new jobs for every H-1B visa granted; if true, firms like Microsoft should be willing to pay many thousands of dollars for each of those coveted visas. Those funds could be used to compensate and retrain the affected natives in the high-tech industry.
But let’s not be naive…To even partially compensate those Americans who lose from the current policy would require massive new government programs to supervise a massive wealth redistribution totaling tens of billions of dollars. The employers that profit from the way things are won’t go along with these transfers without an epic political struggle. And many of the libertarians who obsessively advocate for open borders will surely balk at such a huge expansion of government. To make this work, Clinton and her supporters will have to acknowledge that our current immigration policy has indeed left some Americans behind. And Trump and his supporters will have to acknowledge that a well-designed immigration plan can be beneficial. All this is probably not going to happen. But only then can we have a real debate over immigration policy.
And I even have a catchy name for the legislation. How does “No Native Left Behind” sound?