Do We Need a RAISE?

I am away on a family vacation. But a couple of days ago, sitting on a beach at an undisclosed location, my iPhone started beeping and shaking. It turned out that Senators Cotton and Perdue had introduced their “Reforming American Immigration for Strong Economy” (RAISE) proposal. Politico asked me if I had any thoughts on the matter and here they are.

There have been a lot of rushed reactions that overlook the actual details of the proposal. Let’s face the hard truth. No conceivable change in current immigration policy will please everybody. So I tried to look at the legislation from a different angle. Does it fix some of the glaring flaws in the “broken system” we have now?

One of the points I make is that the proposed point system is a far more transparent way of allocating visas to high-skill workers than the employment preferences now used. Here is the point system (courtesy of Senator Cotton’s office) in case you haven’t seen it.

Another point is that the family preference system needs fixing and RAISE proposes one way of doing it. The current policy allows a branching out so that the relatives of my close relatives qualify for entry. As I put it in the Politico piece: “Does it really make sense to have a policy that eventually guarantees an entry visa to the immigrant’s brother‘s wife‘s father‘s sister?”

i suspect that the intense emotions triggered by immigration so corrupt the debate that we will not get a RAISE in the end. But it’s really too bad that we can’t even talk about ways to update an outdated 50-year old policy.



Liberals and Immigration

Peter Beinart has an excellent essay in The Atlantic entitled How the Democrats Lost Their Way On Immigration. The article perfectly encapsulates the conundrum faced by liberals when they think about immigration:

Progressive commentators now routinely claim that there’s a near-consensus among economists on immigration’s benefits….There isn’t. According to a comprehensive new report by the National Academies of Sciences, Engineering, and Medicine, “Groups comparable to … immigrants in terms of their skill may experience a wage reduction as a result of immigration-induced increases in labor supply.” But academics sometimes de-emphasize this wage reduction because, like liberal journalists and politicians, they face pressures to support immigration…

The problem is that, although economists differ about the extent of the damage, immigration hurts the Americans with whom immigrants compete. And since more than a quarter of America’s recent immigrants lack even a high-school diploma or its equivalent, immigration particularly hurts the least-educated native workers, the very people who are already struggling the most. America’s immigration system, in other words, pits two of the groups liberals care about most—the native-born poor and the immigrant poor—against each other.

Beinart also raises an issue that is only whispered about in private and swept under the rug in public: Who is paying for all the pro-immigration research in economics? Whoever came up with the phrase “Follow the money” surely had an exquisite sense of where the bodies are buried. There need not be any intellectual corruption for this flow of money to influence the debate. As Beinart aptly puts it, “the prevalence of corporate funding can subtly influence which questions economists ask, and which ones they don’t.”

Finally, anyone who knows me knows that I would not be classified as progressive-leaning on economic policy (although I’m a live-and-let-live type of guy when it comes to social issues). Beinart actually cites the very progressive suggestion for “mitigating the problem” that I proposed in We Wanted Workers:

A better answer is to take some of the windfall that immigration brings to wealthier Americans and give it to those poorer Americans whom immigration harms. Borjas has suggested taxing the high-tech, agricultural, and service-sector companies that profit from cheap immigrant labor and using the money to compensate those Americans who are displaced by it.

This is one of those articles that is worth reading in full and thinking about very carefully.




The New Narrative: Less Immigration Is Bad

If one follows the political debate over a divisive issue for a long time, it is not rare to see ideological advocates switch to making arguments they would never have made years earlier. The political environment changed, and the claims that need to be made to further the ideological objective must change as well.

Maybe it’s just me because I instinctively read in between the lines whenever I read anything about immigration, but I’m beginning to detect such a seismic shift in the immigration debate. We all know the party line by now: Immigrants do jobs that natives don’t want to do. As a result, natives do not lose jobs, and natives do not see their wages reduced. And anyone who claims otherwise is obviously a racist xenophobic moron. They obviously don’t like immigrants, and they obviously are not educated/credentialed enough to understand and appreciate expert opinion.

The flurry of immigration restrictions proposed by the Trump administration demands a switch in tactics–with a corresponding switch in the argument linking immigration and wages. The party line must now be that less immigration is bad. But how can one show that in simple-to-grasp economic terms that can be mass-marketed to the masses? By far the simplest way is to come up with examples that less immigration raises labor costs and makes us miserable because everything becomes more expensive.

I first noticed the tactical switch back in March when the Washington Post published a story headlined After decades in America, the newly deported return to a Mexico they barely recognize, The point of the story, of course, was to imply that Trump’s deportation initiatives are bad because they are making Mexicans worse off. And how exactly are Mexicans made worse off?

More returnees means lower wages for everybody in blue-collar industries such as construction and automobile manufacturing, where competition for jobs is likely to increase, economists say.

I love the “economists say” add-on. Too bad that those economic experts remain unnamed. But don’t be shocked if they are the same exact economic experts who have been claiming the same exact opposite for two or three decades in the context of the American labor market.

Then there’s this story in a local New England paper. The goal again is to demonstrate the economic costs created by Trump’s immigration restrictions. The Bangor Daily News article is headlined Amid foreign worker shortage, Bar Harbor businesses turn to local labor. The article starts off by noting that “Businesses in Maine that rely on summer help are hoping that Congress will come to the rescue.” And what do these businesses have to be rescued from? Higher wages, of course.

Because of new limits on the seasonal worker visa program, restaurants, hotels and other tourist-centered operations are scrambling to find seasonal employees. Until Congress opens the door to more H-2B foreign workers…Bar Harbor area employers are enticing workers in other ways. Higher wages are part of the solution.

The Dallas Morning News joins in the fun with a story blaming the immigration slowdown for higher housing prices. The story is headlined One Reason for Dallas’ soaring home prices and labor shortage: Immigrants aren’t coming to work:

Dallas home prices are climbing rapidly, and homebuilders are complaining about labor shortages and soaring wages for construction workers.

Duh! Who could have possibly guessed that fewer construction workers meant higher construction wages?

Finally, the highly credentialed economic experts at the Federal Reserve are out in force documenting just how costly the immigration-related actions of the Trump administration are. In a recent Bloomberg article headlined Fed Officials Sharpen Concerns Over Trump’s Immigration Policy, those credentialed experts expertly make the point:

Patrick Harker, president of the Philadelphia Fed, became the latest policy maker to call attention to the struggles of companies in finding low-skilled labor…The Chicago Fed said one manufacturing firm raised wages 10 percent to attract better applicants and improve retention of unskilled workers. A freight trucking firm in Cleveland reported granting raises of almost 8 percent in an attempt to retain workers.

There is no upper bound to the hypocrisy of experts. It might be a lot of fun to keep track of this over the next few years, watching the dominos fall and all those “immigration-does-not-affect-wages” experts fall all over themselves as they switch to proving the economic awfulness of Trump’s actions because fewer immigrants mean higher labor costs, higher prices, more inflation.

But don’t hold your breath for any admission that they were wrong in the past. They will instantly switch to the former party line the minute the Trump immigration restrictions fade into history.

Op-Ed In New York Times

Today’s New York Times published my op-ed on “The Immigration Debate We Need.” Having worked on this for far too many years, I’m not holding my breath that this is, in fact, the immigration debate we’ll have.

Who Is A Public Charge?

According to the Washington Post, the Trump administration is considering a number of changes in current immigration policy, focusing more on the economic side of things this time around. That WP article is already cluttered with half-truths (spouted by the usual suspects at Cato and the like), so I thought it’d be a good idea to clarify the muddied waters regarding one particular proposal that is being considered to reduce welfare use in the immigrant population.

Since 1882, the United States has banned the entry of anyone who has the potential of becoming a “public charge.” This is how current law reads:

Any alien who, in the opinion of the consular officer at the time of application for a visa, or in the opinion of the Attorney General at the time of application for admission or adjustment of status, is likely at any time to become a public charge is inadmissible.

Since 1903, the United States has allowed for the deportation of immigrants who became a public charge after they entered the country, and this is how the law now reads:

Any alien who, within five years after the date of entry, has become a public charge from causes not affirmatively shown to have arisen since entry is deportable.

Given these very straightforward–and very old–restrictions, it seems puzzling that we would find many immigrants on welfare. But, as always, the devil is in the details. The law is often not enforced, and the common-sense definition of a public charge that we carry in our heads has little to do with how the immigration regulators have defined it. This is how that definition now reads:

For purposes of determining inadmissibility, “public charge” means an individual who is likely to become primarily dependent on the government for subsistence, as demonstrated by either the receipt of public cash assistance for income maintenance or institutionalization for long-term care at government expense.

Note the big elephant in the room. Immigrants who receive non-cash benefits–including the most expensive benefit of all, Medicaid–are not considered to be public charges. In the words of DHS: “Non-cash benefits (other than institutionalization for long-term care) are generally not taken into account for purposes of a public charge determination.”

If we began to actually enforce the law with a common-sense interpretation of the century-old statutes, the policy shift will affect an awful lot of people. I took data from the March Current Population Surveys (CPS) from 1994 through 2016 to calculate the fraction of immigrant-headed households who receive some type of assistance (either cash, food stamps, or Medicaid). I then divided the foreign-born households into 2 categories–those where the household head is naturalized, and those where the household head is not. Any proposed shift in policy would affect the non-naturalized households. And this is what the trend in the fraction of households receiving assistance looks like:


In 2016, there were 8.9 million households headed by a non-citizen. Almost 42 percent of those households received some type of assistance. Put bluntly, taking the public charge provisions of immigration law seriously could potentially affect 3.7 million households, making the recent kerfuffle over a relatively small number of refugees look like small potatoes.

The policy challenge is obvious, and the economic and social ramifications will be dramatic. Before we start envisioning deportations by the hundreds of thousands, however, let’s remember that we all respond to incentives. Few economists would be surprised if some of the affected households begin to find other ways of providing for their needs.

Some additional information:

  1. No need to take my word for the graph. The trends are very easy to reproduce by anyone who is willing to spend a little time looking at the publicly available CPS data. Here is the program, the data can be downloaded here; and click here if you are really geeky and want to see the computer output and detailed statistics.
  2. The recent immigration report of the National Academy of Sciences (NAS) has similar statistics on the number of immigrant households on welfare. Table 3-15 shows the fraction of households with children receiving some type of assistance (here’s a screenshot of the table). According to the NAS, 41.8 percent of native households and 55.8 percent of immigrant households receive assistance (but they do not break up the immigrant households according to citizenship status).
  3. The NAS report also calculated the size of the fiscal burden implied by these numbers; that discussion is in Chapters 8 and 9 of the report. See here and here for a User’s Guide to the NAS fiscal impact discussion.
  4. The CPS data are notorious for understating the extent of welfare participation in the population. The Survey of Income and Program Participation (SIPP) is supposed to provide much better measures of welfare use, but it is a much harder data set to manipulate. As I note in We Wanted Workers (Table 9.1), the welfare participation rate of immigrant households implied by the SIPP is far higher than what the CPS suggests (at least 10 percentage points higher).

We Wanted Workers On EconTalk

Russ Roberts and I talked about immigration and We Wanted Workers for over an hour back on December 20. Obviously, there’s no discussion of the various immigration-related brouhahas from the past week, but I think many people will still find it to be an interesting conversation. Russ and I have known each other since 1977, dating back to our University of Chicago days. Immigration was not something that I (or many other people) gave much thought to back then. Funny how times change.