195 Comments
Dec 27, 2022Liked by Noah Smith

Good piece.

I saw the labor demand thing in action during the 1990s. I was posted overseas for much of that decade and probably spent only one week a year in/around my old American suburb (to check on the house I was renting out). The nearest town center to my old place was reasonably prosperous (due to suburban shoppers), the urban residents were largely African-American, but outside the main retail core there were a lot of vacant and decaying buildings in the early 1990s.

By the late 1990s, all those commercial buildings were occupied - there was a Salvadoran pupusa place, a Colombian restaurant, Honduran tamales, grocery stores, clothing stores, etc. There was a construction boom in the 90’s (low interest rates) that attracted a lot of immigrant workers. Those workers spent money.

However, the influx of willing, hard working people loathe to jump from job to job (which was the norm for low wage Americans did in the 1970s and 80s, and many were not particularly reliable or hardworking) most certainly drove marginal Americans out of the workforce.

Moreover, immigrants don’t just go to boom towns- they go to industries looking for that type of reliable low wage labor. Forlorn Midwestern grain elevator towns have lots of migrants. Midwest Cattle slaughterhouses are entirely staffed by migrants. Chicken processing across the rural southeast is all staffed by migrants.

That ready and willing workforce supplanted any hope of locals getting hired, and quickly the situation became one where non-Spanish speakers would not be hired. However, let’s be honest, the firms would have had to invest in training locals (from high school onward)- but why invest in training when hard workers can be found cheaply?

Effectively, the illusion of cost less government deficit spending has made it easier for low end American workers to leave the workforce and be replaced by more reliable immigrant labor.

There is a different scenario - one in which companies invested in training, internships and apprentices and people were given government incentives (or requirements) to work rather than being paid not to work.

This is especially important because a good portion of the second generation of these hard working immigrants become marginally employable low status workers themselves, adopting the worst habit of Americans.

I am pro-immigration (coming from illiterate, immigrant stock myself- none of my grandparents went to college, only half attended high school), but the idea of an immigration policy that allows uneducated people to stream over the border on the basis of walking proximity to the border is insanity and is driven by politics, not policy, logic or common sense.

The US is very attractive - immigrants from Africa, Asia, Europe and South America want to come here (in addition to the Mexicans and Central Americans that can walk here). There should be a lottery and only provisional permission for uneducated migrants around the world (meaning more people from Africa and Asia than Latam, and more from Brazil or Argentina than Mexico or Honduras) as well as educated migrants on more permanent permits. Having a diverse set of migrants will also prevent the continued expansion of the Spanish-speaking monoculture prevalent in low wage industries (where non Spanish speakers are discriminated against in hiring) and perhaps result in greater use of English as lingua Franca in these workplaces.

I think of we had a global lottery, e-verify, deported illegals, etc a lot more people would be pro-immigration. The craven politics of immigration and the uncontrolled nature of it is what has many people opposing it.

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It is pandering, offensive, simplistic, and unsophisticated to suggest that people are "anti-immigration."

I am wildly enthusiastic about LEGAL immigration--we should allow any person who is educated in teh US in a STEM degree program to stay in the US forever -- not so much about illegal immigration and what it implies: a broken border, gross inflows of deadly fentanyl, criminal activity, and gargantuan funding for the cartels/coyotes.

Unfortunately, these other serious societal impacts have become hopelessly interwoven with the issue of immigration because of their geographical location. Had the prior administration's wall been completed, and had DHS appropriately staffed the wall, all of these problems would have been favorably impacted whilst still providing ample flexibility for Joe Biden to impose whatever unlawful policy he desired.

All I want as to illegal immigration is to enforce the God damn existing laws. What is wrong with that? A POTUS swears an oath to do just that.

What we learned during the Pandemic is that the EXPERTS got it entirely wrong. The studies you cite are either of such narrow focus -- case in point the Mariel Boatlift from Cuba -- or over such a short period of time as to be inconclusive.

What I do know from living in Texas and being in the real estate development/construction business is this -- craft and labor wages are depressed by massive amounts of illegal labor being used by legitimate contractors in every trade. I built high rise buildings in ATX and that is the voice of actual experience on the ground.

I lost a considerable amount of money in another business because I hired legal workers and provided health insurance whilst my competitor worked illegal labor hard.

From a micro perspective:

1. In Austin by God Texas, 25 years ago I paid a very capable stone mason $25/hour to build a small stone wall along the edge of my property in Pemberton Heights. He did a superb job.

2. A few years later, I paid $25/hour to a crew of masons who built an 8' wall around my backyard and pool, pool equipment. Bloody work of art.

3. A year ago, I paid $20/hour to a very capable stone mason to build a matching wall to the one that I built 25 years ago. Fabulous job.

In 25 years, wages for stone masons went from $25 to $20/hour. Why?

Because every illegal coming across the border knows how to set rock.

You cannot inject 5,000,000 low skill, low wage expectation workers into an economy and expect there to be no impact on wages when they are competing for jobs.

The fiction that these low wage earners are stimulating the economy is nonsense. The largest source of revenue in Mexico is illegals sending money home. They are not spending it in the US and they have limited funds with which to do it.

Know what is true? The incredible burden placed on property owners to pay property taxes to build schools and educate these illegal children.

Then, again, if we all stand 6' away from each other and wear a paper mask we can defeat Covid.

Expert opinion must be taken with a grain of salt as big as a Cybertruck.

Happy New Year

JLM

www.themusingsofthebigredcar.com

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So the legal CA roofers who are routinely underbid by firms that hire (and are often run by) illegal immigrants are just part of that "a very small slice of less-educated minority workers" who are hurt by illegal immigration. No big deal. And the fact that you can't work in the non-customer-facing part of the hospitality industry without speaking Spanish... that must be another part. Again, no big deal.

Noah complains that immigration opponents won't listen to evidence. I think the same could be said of libertarian economists.

And as for "how reliable economics research is"... I've heard to many professors spouting MMT nonsense to believe that.

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Dec 27, 2022Liked by Noah Smith

I love this. So obvious and clear. That's evidence for you!

One thing to considee Noah. The time constant of fungiblity. Unlike commodities of say gasoline, bread, corn flakes, labor wages have an intrinsic viscosity. Commodities work like a spring. Push and react. Pull and react.

Labor is a dashpot...your shocks. Together this viscoelasticity shows labor as not reacting quickly on labor under or over supply. Businesses will "take the hit" and not raise wages until desperate for employees. We saw this in the pandemic which has created great and significant changes resulting in under supply. Evidence.

But, lowering wages? Businesses resist to the n'ťh degree. Wages have an intrinsic antislip rachet. I'd be surprised to find much evidence of wages going down significantly. Like 10 to 30%. Maybe the 30s depression but even then, I don't know.

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Dec 27, 2022Liked by Noah Smith

Very good summary of evidence! I’m wondering how an increase in immigration now would effect service industry labor shortages (is that still happening? I feel like I still see a lot of help wanted signs). Also, would like to hear more about immigration effects on inflation.

Also, I wonder, if labor shortages lead to companies hiring more (service sector) candidates that they wouldn’t otherwise hire, would more immigrants lead to improvements in job overall performance/ service quality? I realize this would be highly subjective, but it is something I have thought about while being served by sullen teens in various contexts. I know that there are lot of factors here, and also customer service is not an easy gig at all, but still I wonder.

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Imagine a company about to hire 10000 workers at medium wages. A passing of an act of Congress allows unlimited immigration so they hire 10000 workers at low wages. There’s some extra demand there because 10000 new people are in the economy but while that increases GDP slightly or missed the point that the demand from the 10,000 new workers is less than would have been, and they are - to begin with - unemployed.

We know from history that the Black Death increased farm wages in England by 100% at a time of no productivity increase, so labour clearly benefited from being scarce.

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Dec 27, 2022Liked by Noah Smith

Hey Noah. Good piece, but:

1. We don’t have “20 years to wait”

2. I agree that one can’t convince hard liners, but how do we move the needle regardless? State and Regional programs for example ?

The US doesn’t keep its global advantages without MUCH higher levels of immigration. So … what can be done … now?

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Dec 27, 2022Liked by Noah Smith

Isn't this the post that somebody turned into a hilarious video using the engine of some Japanese lawyer video game?

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Dec 27, 2022Liked by Noah Smith

Well you can watch this in real time as Canada is planning on massively ramping up immigration - many think it will be a negative due to a lack of infrastructure - housing - healthcare - transit etc. main issue is the bulk of the people end up in either southern Ontario or Lower BC.

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If immigration is productive shouldn't we see an increase in real wages?

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Dec 27, 2022·edited Dec 27, 2022

I'm generally pretty pro-immigration, but I don't think the article addresses certain key concerns that anti-immigration folks have. Or, at least the ones that have resonated with me..

In particular, the USA is characterized by high pre-tax income inequality and relatively high levels of redistribution. We tend to think of the US as *not* being as redistributive as other developed nations, but that view stems from ignoring both pretax income inequality and low middle/lower-class taxes.

This state of affairs lends itself to the viewpoint that *most* Americans are essentially subsidized by the higher-earning Americans. For arguments' sake, suppose that only the top 20% of Americans are net financial assets to the nation. Then, immigrants must reach that income threshold eventually, or else may represent a public charge.

It is hard to get people into that high-earning top 20% in the USA, whether native- or foreign-born. Maybe it was different at some time in the past, but we are not able to run our country today in a way that the majority of people contribute more than they take out. All this suggests that immigration must be selective in order to advance comprehensive national success.

Turning our attention to the Southern border... amid all the accusations of racism and xenophobia, there is a very real underlying phenomenon of adverse selection. We make it quite hard to legally immigrate, and quite dangerous to cross illegally, but not impossible. That is going to tend to attract those with "nothing to lose", i.e. low levels of education and job skills.

American progressives tend to have a belief in the infinite malleability of people. If government provides quality schooling, healthcare, etc. then everyone ought to succeed similarly over time. Conservatives tend to think there are key ingredients to success (community, family, religion, culture, etc.) that the government can't provide.

The reality on the ground is that there are very distinct/visible groups in the US, namely African Americans and Latinos, that experience large and persistent income and wealth disparities relative to the rest of the country. Whether you want to blame the victims or the conservatives, it seems imprudent to just assume that the next wave of immigrants from the South will completely buck the trend.

It's impossible to be sure how productive new immigrant families will be, particularly after a generation or two stateside. Given the large number of would-be immigrants though, it behooves us to be selective. Why not?

Part of the issue, of course, at the Southern border is that we are already trying to be selective, but the incentive to cross over is so high that we have a huge number of undocumented. There isn't a great way to deal with this short of opening fire on migrants. The rhetoric from the left is that we are already doing very inhumane things at the border and the rhetoric from the right is that borders are porous and we're exploited. The reality is a very messy fraught balancing act.

With respect to the research you summarized, it was unclear from my surface reading whether these studies adequately accounted for automatic deficit spending triggered by the migrations. In many places, government will automatically spend more as population grows, e.g. via increased enrollments in schools, healthcare, housing services, etc.

To summarize all these thoughts into one concise question---

If immigrants tend to be low-skilled / low-wage, and the disparity seems to persist for generations, then isn't there a deficit-busting affect over time?

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I changed my mind!

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People at the bottom of the wage scale don't consume nearly as much extrafamilial labor as they provide. So while your explanation is true generally, there are some important exceptions. If you're talking specifically about the kind of immigration that people want to build a wall to stop - low-wage immigration - the impact on wage levels is very real and we've been seeing a lot of it in the lower-level jobs in e.g. food service, farming, construction, meatpacking.

However there's a huge difference between theatrically mimicking a crack-down on immigration and actually cracking down. What "build the wall" really means is, "we hate those people, we want some theatrical cruelty to be inflicted upon them." What really determines low-wage immigration is the availability of jobs and conditions in home countries. One can see this especially in estimates of the US population of unauthorized immigrants: there was a massive drop during the peak of the Covid pandemic, as lockdowns reduced available low-wage jobs, followed by a massive rebound as the pandemic subsided, demand for low-wage workers suddenly outstripped supply and inflation surged. Trumpism didn't have much real impact, because Trumpists don't want to crack down on industries that employ illegals, because that would increase wages in those industries and drive inflation. On the contrary, when the pandemic raged among immigrants in the meatpacking sector, Trump resorted to the Defense Production Act to keep them working.

https://cis.org/Report/Estimating-Illegal-Immigrant-Population-Using-Current-Population-Survey

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This isn’t only a US topic of debate.

Here in the UK, since we left the EU we have severe shortages of labour at the lower end of the income scale but these shortages are now spreading to other parts of the economy.

At the same time, we have migrates washing up in beaches who are making their way across the treacherous English Channel in small boats.

The ruing Conservative Party are arguing for lower immigration because that’s what it thinks voters in the poorer northern regions want.

We are a small island but we are no where close to being over run. We need people, we need skills and we need to be more open so that our economy can grow.

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I think driving up aggregate domestic demand is the main economic reason for a country to have very high levels of net immigration. The other arguments for it seem to me to be marginal, and do have some down sides. Plus, O1 Visa type highly skilled immigration is only a small part of mass immigration.

The Acemoglu/Restrepo paper “Demographics and Automation” from 2018 looked at the low immigration OECD countries of East Asia: Japan and South Korea. They’ve mostly avoided labour shortages by investing heavily in robots, giving them good productivity gains. They’re even making pretty good use of their senior citizens. But the one thing they can’t do without immigrants is really ramp up domestic consumer demand. If you double a Japanese person’s wages, they’re not going to buy twice as much food, cleaning products, mobile phones, cars or whatever. But if you double Japan’s population, that would do it (It would also inflate land values and house prices, which will benefit some people.)

Can all countries have permanently rising domestic consumer demand fuelled by permanently rising population for ever and ever? It feels unsustainable.

It’s worth pointing out that, for rich countries, high population density seems to depress the birth rate. Hong Kong, Singapore and Taiwan all have highest high population density and lowest low fertility, for instance. I could imagine some countries getting caught in a vicious circle: the immigrants arrive, the population density goes up, the fertility rate goes down, leading to calls for more immigrants to counteract the declining demand caused by the fertility drop.

I wonder if the first country to figure out how to healthily grow per capita living standards with a static or declining population will own the future.

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"….in my experience, anti-immigration people are completely set in their belief that immigration should be restricted."

This is my experience with open borders people too. IOW, it is a feature of political rationalizing on both sides. This post would have been even better if you tried to acknowledge that people tend to be set in their beliefs, but that one argument that does not hold up very well is that immigration tends to lower general wages. The other arguments — for or against some or all immigration — are still open to honest debate among reputable people.

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