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.

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New Paper on Refugees

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:

  1. The Mariel supply shock in 1980.
  2. The Soviet émigrés who moved to Israel in the early 1990s after the collapse of the Soviet Union
  3. The influx of French repatriates and Algerian nationals into France at the end of the Algerian War of Independence in 1962.
  4. 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.

 

Immigrants do jobs that…

…natives could have done. The demolition of the narrative that large numbers of immigrants can enter a labor market without having much of an effect on native employment opportunities continues apace.

The new paper by Christian Dustmann, Uta Schönberg, and Jan Stuhler looks at what happened in some German labor markets after the fall of the Berlin Wall. It turns out that German localities bordering Czechoslovakia were affected by a policy that allowed some Czech workers to commute to jobs in Germany, but did not grant those workers any type of residency rights. The amount of commuting was substantial, “averaging to about 10% of local employment in municipalities closest to the border.”

So what happened?

On average, the supply shock leads to a moderate decline in local native wages and a sharp decline in local native employment.These average effects mask considerable heterogeneity across groups…A 1 percentage point increase in the inflow of Czech workers relative to employment in the baseline has led to about a 0.13 percent decrease in native wages, a 0.93 percent decrease in native local employment…A 1 percentage point increase in the employment share of Czech workers decreases the local wages and employment of unskilled natives by 0.20 and 1.37 percent, respectively, but of skilled natives by only 0.11 and 0.50 percent.

Obviously, I’m not surprised by these effects. What I find really interesting, and what makes the paper important, is the conceptual analysis of how immigration jointly affects wages and employment. For reasons that we do not yet fully understand, immigration sometimes has a large impact on native wages and a small impact on native employment. And, yet, the opposite is true in other contexts. The Dustmann-Schönberg-Stuhler paper opens up new avenues for research by introducing a technical framework that should eventually enable us to get a fuller understanding of why different labor markets react differently along different margins.

The paper is forthcoming in the Quarterly Journal of Economics.

 

The Economist on Mariel

The Economist just published a very nice writeup of my Mariel paper.The article captures the essence of the paper very nicely. Over 60 percent of the Marielitos were high school dropouts. It seems more than obvious today that if we want to find out what Mariel did, perhaps we should look at what happened to the wage of similarly educated workers who were living in Miami at the time. Remarkably, that had not been done until I wrote my Mariel reappraisal. As The Economist puts it: “Mr Borjas’s paper shows that empirical results may depend on exactly where researchers look.”

There is a lot of wisdom in those words. Just keep looking in all the wrong places, and one will never discover what the impact of immigration really is. For example, one empirical trick that is often used to “hide” the impact is to define the population of low-skill workers as the aggregate of high school graduates and high school dropouts (click here for a technical discussion, and pages 14-17 here for an English translation). Because there are tens of millions of high school graduates, the impact of immigration on the smaller group of the least skilled workers gets diluted. And it’s usually too late, only after the inevitable political reaction occurs, that we find out that some people were really harmed.

Here’s a quick link to a description of my Mariel analysis, to the paper itself, and to the data.

Odds and Ends on Mariel

Warning: Very geeky post.

Since I posted the final version of my Mariel paper earlier this week, I have heard from a number of people asking for all kinds of details about the paper. One of the nice things about having this blog is that I can quickly address these reactions/questions/doubts without having to resort to writing yet another paper. So here are some responses for those who are really into the minutiae of this stuff.

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Final Version of Mariel Study

My Mariel paper has now gone through the peer review process and it’s officially forthcoming at the Industrial and Labor Relations Review (the same journal that published Card’s original Mariel paper a quarter-century ago).

Mariel_Figure_2

Here is a nice-looking graph that tells the whole story. The graph shows the 3-year moving average of the wage of male, non-Hispanic high school dropouts in and outside Miami between 1972 and 2002; the shaded area is a 95% confidence interval (i.e., the margin of error). It is obvious that something happened in Miami after 1980, the year of Mariel. It is also obvious that something happened in Miami after 1995, when coincidentally there was another large influx of Cuban refugees. All the data-fudging and wishful thinking in the world cannot change those simple facts. As I say in the paper, “The wage of high school dropouts in the Miami labor market fell significantly after the Mariel supply shock. Any attempt at rationalizing this fact as due to something other than the Marielitos will need to specify precisely what those other factors were.”

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An Empirical Exercise: Mariel

The immigration debate is very contentious, with “factual” claims coming from every which way. Not surprisingly, I often hear people say that “you can’t believe anything anymore because you don’t really know what the guy/gal did to reach that result.” And those suspicions are perfectly justified.

I’ve been teaching for a long time, but it wasn’t until last semester that I discovered how useful it was to show students how research gets done in real time. I first tried it out with my Mariel paper, where I could go from the raw CPS data to this striking graph showing the negative effect of the Marielitos in a few minutes with a bare minimum of statistical manipulations.

Mariel Interactive Exercise

The top (blue) line gives a 3-year moving average of the weekly wage of working men outside Miami; the bottom (red) line gives the corresponding trend in Miami. I’ve now made this by-the-numbers exposition a standard part of my show whenever I present the Mariel paper at a seminar. It is far more convincing than my claiming: “This is what the data look like. Trust me!”

Some professors have told me that they would like to do something like this in their own classes. And it occurred to me that readers of this blog, many of whom have probably never seen how this type of data analysis is done, would be interested in taking a short video tour that illustrates how you can start from the raw data (publicly available at the IPUMS website); select the sample of low-skill, non-Hispanic men aged 25-59; calculate the average weekly wage of those workers in Miami and elsewhere; and, presto, end up with the graph above, documenting that something did indeed happen in Miami after 1980. Enjoy!

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