Does Immigration Increase Income Inequality?

Image result for immigrants

According to Harvard economist Edward Glaeser,

Cities aren’t full of poor people because cities make people poor, but because cities attract poor people with the prospect of improving their lot in life. The poverty rate among recent arrivals to big cities is higher than the poverty rate of long-term residents, which suggests that, over time, city dwellers’ fortunes can improve considerably. The poorer people who come to cities from other places aren’t mad or mistaken. They flock to urban areas because cities offer advantages they couldn’t find in their previous homes…The absence of poor people in an area is a signal that it lacks something important, like affordable housing or public transportation or jobs for the least skilled. The great urban poverty paradox is that if a city improves life for poor people currently living there by improving public schools or mass transit, that city will attract more poor people.

In short, “The flow of less advantaged people into cities from Rio to Rotterdam demonstrates urban strength, not weakness…Urban poverty should be judged not relative to urban wealth but relative to rural poverty.” In my view, Glaeser’s insight is incredibly important. Not only does it stress the need for proper comparisons, but also highlights the difference between absolute mobility and relative inequality. This indicates that if city officials were to focus solely on the poverty rate or level of inequality within their cities without tracking mobility and length of residency, they could very well be misdiagnosing the situation.

I think a similar approach can be taken concerning poverty and inequality within the United States. What if inequality in the United States isn’t necessarily because of some abstraction like “the rich,” but is due to the amount of low-income immigrants we’ve taken in over the last several decades? Yes, within-country inequality has grown, but is it in part due to low-skill, low-education workers escaping the poverty of their origin countries and becoming better off by coming here (therefore, lowering between-country inequality)?

A new paper from Mission Foods Texas-Mexico Center at SMU explores the effects of immigration on inequality. After reviewing the economic literature, the authors conclude

that low-skilled immigration to the U.S., much of it from Mexico, has only played a minor role in rising income and wage inequality. To the extent that there is an effect, it has come through the presence of immigrants, and less as a result of immigration’s effect on natives’ wages. Immigrants’ bimodal skill distribution, with clustering at the top and bottom of the U.S. skill distribution, has widened the overall income distribution slightly. At the same time, low-skilled immigration to the U.S., and migrants’ remittances, have played a large role in lowering global inequality by moving millions of low-income Mexican families further away from poverty and closer to the global middle class.

Migration from poor to rich countries represents a reallocation of labor that increases the wage of the migrant while also raising wages in the sending country. It moves labor to capital-rich countries where businesses readily employ it. Productivity and output rise. As long as business investment responds to the worker influx, wage effects on native workers will be limited. Migration is the last frontier of globalization. Removing barriers to international mobility would result in large economic gains that far outweigh any costs (pg. 11-12).

Though it only plays a small role, immigration has increased inequality within the U.S. because poor non-citizens became less poor. Elsewhere, Pia Orrenius–vice president and senior economist at the Federal Reserve Bank of Dallas and one of the authors of the paper above–explains further:

We surveyed the literature that’s out there and we found two high quality studies that showed that all this out migration from Mexico has actually increased wages in Mexico. That is consistent with economic theory. If there’s fewer workers they should command a higher return…You might think that if migration raises wages in Mexico, it should lower them in the U.S. But what the surveys of literature say is that there’s actually only a very small impact on the wages of native workers in terms of the competition with immigrants, and there’s many reasons for that. The main reason is that there really aren’t a lot of low-skilled workers in the U.S. who compete with immigrants. You’re looking at a small and shrinking group of workers and so there’s not a lot of effect there.

Where we did see an impact is on the income distribution. When Mexican immigrants come in, for example, they have very low levels of education and so they come into the U.S. and they initially earn very low wages. So just by virtue of them coming into the country they’re actually broadening the income distribution by coming into the low end. So just mechanically there’s more income inequality because they’re coming in at very low wage jobs that generally Americans are not filling.

So there’s a mechanical reasoning for the increase in income inequality that’s partly related to migration, but generally we found in looking at the literature the bigger reasons are what’s called routine bias technological change and the hollowing out of the middle of the income distribution. And that’s due to technological change and the replacement of workers and routine-based occupations. We call that labor market polarization.

Labor market polarization or the hollowing out of the middle class is not consistent with migration from Mexico because again immigration from Mexico is coming in at the very low end of the distribution. So that’s how we concluded that there’s a lot going on here, but generally the main driver for income inequality in the U.S. and other countries is not low-skilled immigration.

…The other thing that we noted, and this is actually really important, is that if we’re looking at income inequality in the United States or in western Europe, yes you do see increasing income inequality. We’re unhappy with that—obviously that isn’t something that people want to see. But what we urge people to do in the paper is to look at the global income inequality. Thanks to globalization, we’ve actually seen falling income inequality in the world. So the world as a whole is better and better and better off. We’re richer as a world; we’re less unequal as a world, thanks to all of these trends that are going on. So what’s going on in the world globally is not the same as what’s going on in these individual countries.

It’s very important to remember that some of these trends that we see as negative in the U.S. are actually positive globally because they’ve allowed the poorest people in the world, like the people in India, the people in China to come out of abject poverty and actually join at least the lower middle class or the middle class.

The globalization of capital and labor may contribute to inequality within rich countries, but it’s making the world as a whole a more equal place.

Immigration, Ignorance, and Redistribution

The link between political ignorance, immigration policy preferences, and support for redistribution are well-established. I’ve shared this portion from my BYU Studies Quarterly article before, but it’s worth repeating:

A particularly interesting aspect of public attitudes toward immigration is that of political ignoranceMultiple studies have shown that political ignorance is rampant among average voters, and this holds true when it comes to immigration policy. As legal scholar Ilya Somin explains, “Immigration restriction . . . is one that has long-standing associations with political ignorance. In both the United States and Europe,survey data suggest that it is strongly correlated with overestimation of the proportion of immigrants in the population, lack of sophistication in making judgments about the economic costs and benefits of immigration, and general xenophobic attitudes toward foreigners. By contrast, studies show that there is little correlation between opposition to immigration and exposure to labor market competition from recent immigrants.” One pair of economists found that those voting to leave the European Union in the Brexit referendum, who were motivated largely by a desire to restrict immigration, “were overwhelmingly more likely to live in areas with very low levels of migration.” Similarlyvoters who supported Donald Trump during the US election were more likely to oppose liberalizing immigration laws (even compared to other Republicans), but least likely to live in racially diverse neighborhoods. In short, both political ignorance and lack of interaction with foreigners tend to inflame anti-immigration sentiments. These sentiments are what George Mason University economist Bryan Caplan refers to as antiforeign bias: “a tendency to underestimate the economic benefits of interaction with foreigners.” In fact, economists take nearly the opposite view from the general public on immigration (pgs. 80-82).

In regards to immigrants’ impact on welfare and the fiscal budget, I wrote,

A 2017 literature review by the National Academy of Sciences finds that the “fiscal impacts of immigrants are generally positive at the federal level and negative at the state and local levels” because state and local governments are the main providers of education benefits. Thee authors of the review are also quick to point out,“the net fiscal impact for any U.S. resident, immigrant or native-born,  is negative. When fiscal sustainability is assumed to result in future spending cuts and tax increases, immigrants are more valuable than native-born Americans (that is, their net fiscal impact is greater in a positive direction).” These findings echo those of [Alex] Nowrasteh’s review of the literature. According to Nowrasteh, between 1950 and 2000, “immigration grew the US economy and produced more net tax revenue. . . . The low-skilled first generation consumed more welfare than they paid in taxes,but their descendants more than compensated for that initial deficit by producing a more positive dependency ratio for entitlement pro-grams, leading to a slightly positive contribution to the federal budget in the long run.” While many economic models “find that immigrants slightly diminish net tax revenue for state and local governments,” they increase the federal net tax revenue by more than the state and local decrease. Furthermore, “there is little evidence that migrants choose their state destination based on the generosity of the welfare system. . . .New immigrants are mainly choosing to reside in states with low levels of social welfare spending and growing economies and are moving away from states with high levels of social welfare spending and low economic growth.” Nonetheless, even if welfare spending did increase due to immigration (evidence suggests quite the opposite), this would be an argument for increasing restrictions on welfare, not immigrationOverall, as Nowrasteh concludes, “The economic benefits of immigration are unambiguous and large, but the fiscal effects are dependent upon the specifics of government policy over a long time period, which means that the net fiscal impact of immigration could be negative while the economic benefit is simultaneously positive. Looking at the results of all of these studies, the fiscal impacts of immigration are mostly positive, but they are all relatively small” (pgs. 99-100).

A recent study provides further support for these findings:

In a recent study (Alesina et al. 2018) we used commercial market research companies to run a large-scale survey and experiment on a representative sample of more than 22,000 natives in six countries: France, Germany, Italy, Sweden, the UK, and the US, mostly between January and March 2018. The sample countries were chosen because they have different economic and social systems, but all have recently faced policy challenges around immigration…In five of the six countries, the average native believed that there are between two and three times as many immigrants as there are in reality. For instance, in the US legal immigrants are about 10% of the population, but US respondents thought the figure was 30%. Similar gaps existed in Germany, France, Italy, and the UK. In Sweden, the country with the highest proportion of immigrants, the public perception of 27% was closest to the true share (18%).

Natives also got the origins of immigrants wrong. They particularly overestimated the shares of immigrants coming from regions that have recently been described as ‘problematic’ in the media, and the share of non-Christian immigrants – Christianity being the mainstream religion in their country. In all countries except France, respondents overestimated the share of Muslim immigrants. The US and Sweden had the biggest misperception. In the US, respondents thought the share of Muslim immigrants was 23% when in reality it is 10%, and in Sweden they believed the share was 45%, when it is 27%. In the UK, Italy, and Germany, this overestimation ranged from 10 to 14 percentage points. In all countries, including France, respondents underestimated the share of Christian immigrants by at least 20 percentage points. For instance, US respondents thought that 40% of immigrants were Christian, when 61% are. UK respondents believed 30% of immigrants were Christian, when the true figure is 58%. 

In all countries, immigrants were viewed as poorer, less educated, and more likely to be unemployed than is the case. For instance, US natives believed that 35% of immigrants lived below the poverty line, while the real number is less than 14%. Natives also believed that immigrants relied heavily on the welfare state, with roughly one-third of all US, Italian, and French respondents, and one-fifth of all UK and German respondents, believing that an immigrant would receive more benefits than a native, even if both had exactly same income, family structure, age, and occupation. A large share of respondents also thought that immigrants were poor mainly because of lack of effort, rather than adverse circumstances.

These misperceptions were widely spread across all countries and groups of respondents. They were larger for respondents who are not college educated, who said they supported right-wing parties, or who worked in low-skilled occupations in immigration-intensive sectors. Respondents who personally knew an immigrant had less biased perceptions. Respondents in all countries also greatly exaggerated the share of immigrants among the poor or the low-educated. For example, US respondents thought that 37% of the poor were immigrants; the true number is 12%. 

These skewed perceptions may lead natives to conclude that immigrants are a burden on the public finances of their country, and that they disproportionately benefit from redistribution. In fact, there is a strong negative correlation between the perceived share of poor who are immigrants and support for redistribution. This was captured by a redistribution support index that summarised the answers to all redistribution-related questions. Respondents who perceived that a larger share of the poor were immigrants supported less redistribution, even controlling for a detailed set of personal characteristics. Similarly, respondents who supported more immigration overall, as captured by an immigration support index that aggregated the answers to all questions related to attitudes towards immigration, also supported more redistribution.

The authors also found that “simply making respondents think about immigrants and their characteristics made respondents much more averse to redistribution. These respondents also decreased their actual out-of-pocket donations to charities that support low-income groups but do not target immigrants.” The good news is that accurate information regarding “the true characteristics of immigrants – their share, their origins, and their work ethic…significantly increased support for immigration policies.” For example, “Showing the respondents a day in the life of a hard-working immigrant fostered support for redistribution – confirming the importance of views about effort and ‘deservingness’ of the poor, as highlighted in the case of poor natives in Alesina and Glaeser (2004) and Alesina et al. (2018). But the experiments that showed respondents the true share and origins of immigrants did not generate significantly more support for redistribution.” Unfortunately, “negative priors dominated in subsequent answers to redistribution questions, even when they also received favourable information about immigrants.”

It’s an uphill battle.

Do Undocumented Immigrants Commit More Crime?

From the Oxford Research Encyclopedia of Criminology and Criminal Justice,

Despite recent research that shows the lack of a direct connection between immigration and increases in crime, the American public still believes that immigrants are a dangerous group…Illegal immigration occurs when a person unlawfully enters the United States or overstays their visa once in the country; it is estimated that between 30 and 50% of undocumented immigrants in the United States have overstayed their visas (Blondell, 2008; Metcalf, 2011). The perception that “all” undocumented immigrants have nefariously crossed the U.S. border is not accurate. More refined analysis regarding legal and illegal immigration and crime has been done by researchers in recent years.

Researchers in the United States have begun to distinguish between the act of being an undocumented immigrant, which is illegal, and crimes committed by immigrants. Metcalf (2011), for example, found that if an undocumented immigrant is processed by an immigration court for deportation, deportation is most likely to actually occur if the person committed a serious felony. In other cases, the individual is likely to be released and will continue to unlawfully reside in the United States. Concern about crimes committed on or near the U.S. border has also resulted in some studies about the nexus among migration, victimization, and criminal offending. Hickman and Suttorp (2015) analyzed whether undocumented immigrants were more likely to be a recidivist one year after release from jail than nondeportable immigrants. Analyzing a month of data from the Los Angeles County Jail in 2002, they found that 21% of inmates were “foreign born.” For those whose immigration status was known, and for which the inmate was not released to another agency, about 60% of the inmates were nondeportable and 40% were deportable immigrants. One year after release from the county jail, deportable immigrants were no more a threat to public safety than immigrants who were nondeportable (Hickman & Suttorp, 2015). Hickman and Suttorp concluded that the fear that undocumented immigrants are a disproportionate threat to a community’s safety is not empirically supported by analysis of data for the immigrants subjected to criminal justice sanctions at a local jail level. The re-arrest rate for all the immigrants (both deportable and nondeportable) in their study was relatively low (about 38%).

I’ve covered this topic before, but it is worth revisiting. The above ORE article is from 2017, but is there even more recent evidence? As reported by NPR,

Michael Light, a criminologist at the University of Wisconsin, Madison, looked at whether the soaring increase in illegal immigration over the last three decades caused a commensurate jump in violent crimes: murder, rape, robbery and aggravated assault. “Increased undocumented immigration since 1990 has not increased violent crime over that same time period,” Light said in a phone interview. Those findings are published in the current edition of the peer-reviewed journal Criminology.

In a separate study, these same researchers previously looked at nonviolent crime. They found that the dramatic influx of undocumented immigrants, similarly, did not drive up rates of drug and alcohol arrests or the number of drug overdoses and DUI deaths. “We found no evidence that undocumented immigration increases the prevalence of any of those outcomes,” Light said.

third study, by the libertarian Cato Institute, recently looked at criminality among undocumented immigrants just in Texas. The state records the immigration status of arrestees, creating a gold mine for criminologists. Cato found that in 2015, criminal conviction and arrest rates in Texas for undocumented immigrants were lower than those of native-born Americans for murder, sexual assault and larceny.

Finally, a research paper appearing in the current edition of the U.K. journal Migration Letters shows that youthful undocumented immigrants engage in less crime than do legal immigrants or U.S.-born peers.

As The Washington Post notes, “These two studies are far from the only ones showing that immigration, legal or otherwise, does not lead to rising crime. But the evidence they present is some of the strongest offered to date. The Trump administration, however, does not seem to be listening.”

DR Editor in Deseret News: The LDS Church and Immigration

Back when I published my immigration article in BYU Studies Quarterly, I was asked to write a condensed version for Deseret News as part of their “Faith & Thought” column. It was initially meant to provide more publicity for the latest issue of the journal. However, the article apparently ran into a few hiccups along the way. But with the LDS Church’s latest statement on immigration policy in the US, it looks like the article was able to be pushed through. Though my critical tone was muted a bit by the editors (I come off as far more moderate than I actually am on the matter), I’m happy to see it in print. A few highlights:

A cursory acquaintance with LDS history and scripture shakes up caricatures of migrants by reminding the faithful that many revered prophets in LDS scriptures were themselves migrants. It’s easy to forget that the story of migration is the story of holy writ. God’s biblical people were often displaced and migrating, often due to persecution or war. Consider the exile of Adam and Eve, Abraham’s overland journeys, Jacob and his family’s famine-driven journey into Egypt, the Exodus, the deportations under the Assyrians and the Babylonians, the Jewish dispersions under the Greeks and Romans, Christ’s status as a refugee in Egypt and the early Christian scatterings.

The Book of Mormon contains similar accounts, detailing numerous mass migrations, including the departure of Lehi’s family from Jerusalem to the New World and that of the Jaredites from Babel to the promised land. Even the early years of the LDS Church started with several interstate migrations (often due to local persecution and governmental hostility), from New York to Ohio to Missouri to Illinois until the Saints’ eventual settlement in what was then Mexican territory (Utah). As recent events have revealed, it can be easy to assume the worst about migrants from a comfortable, settled position. However, the scriptures and Mormon people’s own history disturb any negative, simplistic ideas about the worth and dignity of migrants in God’s eyes.

Furthermore, one of the most prominent and consistent themes throughout the Judeo-Christian scriptural canon is the obligation to care for those in need. Included among the list of the disadvantaged classes in need of provisions and protection — widows, orphans and the poor — are also “strangers” and “sojourners.”

The biblical tradition warns God’s people against “vexing” or “oppressing” the stranger. The book of Exodus reminds, “ye were strangers in the land of Egypt.” As many scholars have noted, hospitality was considered one of the highest virtues in antiquity, and the violation of this virtue through the mistreatment of the stranger seeking refuge is given in the Bible as one reason for the destruction of Sodom.

…Beyond religious and scriptural commitments, LDS statements acknowledge the positive economic impact of immigrants. The Utah Compact underscores the contributions immigrants make to their communities.

2011 meta-analysis by economist Michael Clemens found that dropping all current immigration restrictions would result in a doubling of world GDP. A more recent analysiscorroborated these findings, concluding that lifting all migration restrictions would increase world output by 126 percent. Similarly, a 2013 study found that dropping all immigration barriers would result in an additional income of $10,798 per worker (migrant and non-migrant alike); doubling the income of the world’s most deprived.

Despite these economic benefits, many rich country natives worry that an overabundance of immigrants will make things worse. Some accuse immigrants of stealing native jobs, depressing native wages, undermining native culture and institutions, bloating the welfare state, and/or being criminals and terrorists. The vast majority of empirical studies, however, contradicts these arguments. Several large literature reviews — including two from the National Academy of Sciences and one from Oxford University — find that the long-term effects of immigration on jobs, wages and the fiscal budget tend to be neutral to slightly positive. Immigrants also assimilate rather well into their host countries and even appear to boost the economic freedom of their institutions.

…In 2011 the church stated that “The history of mass expulsion or mistreatment of individuals or families is cause for concern especially where race, culture, or religion are involved.” The church called for “immigration reform” that adopts a “balanced and civil approach to a challenging problem, fully consistent with its tradition of compassion, its reverence for family, and its commitment to law.” Seven years later, perhaps the United States is now ready to listen.

Read the whole thing here.

Did Mass Immigration Improve Jordan’s Institutions?

Image result for jordan country

The following is from my article in the latest BYU Studies Quarterly:

Another objection [to immigration] is what is known as the “epidemiological case,” which argues that immigrants may bring with them foreign values that undermine the culture and institutions of the host country. In essence, immigrants transmit to rich countries those elements that make their source countries poor. What makes this rather prejudiced argument all the more jarring is the fact that it has virtually no supporting evidence. Unfortunately, very little empirical research has been conducted exploring the impact of immigrants on cultural, political, and economic institutions at all. However, the research that is available should calm fears and actually provide reasons for optimism. For example, there is no association between growth of total-factor productivity (TFP) in rich countries and the ratio of migrants from low-income countries, indicating that migrants do not “contaminate” their new homes with the low productivity of their source countries.

The Canada-based Fraser Institute publishes its oft-cited Economic Freedom of the World report annually. Its indicator—known as the Economic Freedom of the World (EFW) Index—defines economic freedom based on five major areas: (1) size of the government, (2) legal system and the security of property rights, (3) stability of the currency, (4) freedom to trade internationally, and (5) regulation of labor, credit, and business. According to the institute’s most recent report (which looks at data from 2015), countries with more economic freedom had considerably higher per-capita incomes and economic growth. Relying on this index, a 2015 study found that a larger immigration population marginally increases the economic freedom of the host country’s institutions. No negative impacts on economic freedom were found. Several authors from this study looked at Israel during the 1990s as a natural experiment in mass migration. During the 1990s, Israel’s population grew by 20 percent due to immigrants from the former Soviet Union. Yet, instead of experiencing decline, Israel shot up “from 15% below the global average [in economic freedom] to 12% above it and improv[ed] its ranking among countries by 47 places.” Similarly, a 2017 study found that higher diversity—measured by levels of ethnolinguistic and cultural fractionalization—predicts higher levels of economic freedom. While this particular study mainly discusses development economics,the correlation between high diversity and high economic freedom is an important aspect of the immigration debate. Barring members of different ethnolinguistic groups from entering the country may actually be holding back economic development (pg. 95-97).

Now, a new Cato working paper adds more evidence to the pile. The authors write,

In 1990 and 1991, about 300,000 Palestinians were expelled from Kuwait by Saddam Hussein’s invasion and could not return after the war (van Hear 1992, 5; Colton 2002). These Kuwaiti-Palestinians were forced to Jordan where, due to a quirk of Jordanian law, they arrived as citizens who could vote, work, own property, and otherwise influence the political and economic system of Jordan even though most of them had never lived in Jordan before. The surge of 300,000 Kuwaiti-Palestinians was equal to about 10 percent of Jordan’s pre-surge population. If such a proportionally large, sudden surge of immigrants entered the United States in 2015, it would be as if 31.6 million immigrants entered in a single year. To make it more challenging, the Kuwaiti-Palestinians arrived in the midst of a severe recession in a country with far weaker economic institutions. While this example does not speak directly to emigration from the developing world to the developed world, it does provide another example of how institutions change under migratory stress.

Natural experiments like these are valuable because they remove concerns about endogeneity and are more convincing than large cross-sections of many countries. Economists have successfully used natural experiments to study how exogenous immigration shocks affect labor markets (Card 1990; Hunt 1992; Carrington and de Lima 1996; Angrist and Krueger 1999; Friedberg 2001; Lach 2007; Kugler and Yuksel 2008; Alix-Garcia and Saah 2009; Cohen-Goldner and Paserman 2011; van der Vlist, Czamanski, and Folmer 2011; Glitz 2012; Ceritoglu, Yunculer, Torun, and Tumen 2017; Balkan and Tumen 2015; Borjas 2015). We turn these empirical methods to understanding how an exogenous surge of immigrants affects institutions (pg. 5-6).

Their findings?:

Jordan’s absolute economic freedom score was 5.43 in 1990 and rose rapidly to 6.14 in 1995 and then 7.06 by 2000 (Figure 1). It also increased relative to the average economic freedom score for all non-developed, OECD, and Organization of Islamic Cooperation (OIC) nations after 1990…Relative to all non-developed nations, Jordan went from having an absolute economic freedom score of 0.5 above all non-developed countries in 1990 to 1.1 points above in 2000. Relative to Organization of Islamic cooperation countries, Jordan went from 1 point ahead in 1990 to 1.5 points ahead in 2000. It also closed the gap with OECD countries from 1.3 in 1990 to around 0.5 in 2000. Jordan’s economic freedom score was slightly above those of the non-OECD world in 1975, but it converged with the economic freedom score of the OECD nations by the early 2000s…Relative to the OECD mean, Jordan’s economic freedom score gap widened from 0.50 points to 1.12 points from 1980 to 1990 but then narrowed to 0.57 in 2000 and 0.44 in 2002…Jordan’s economic freedom score climbed from one similar to the average of the non-OECD world in 1980 to one much closer to the OECD mean in 2002 (pg. 15-16).


“The Ugly Coded Critique of Chick-Fil-A’s Christianity”

Stephen Carter at Bloomberg suggests the secular Left doesn’t realize who it’s mocking. Key points:

  • Women are more likely than men to be Christian.
  • PoC are more likely than white people to be Christian, and particularly more likely to be Christian traditionalists.
  • White Christians are aging while Christians of color are youthening.
  • Among Latinos and Asians, Christians are overwhelmingly first generation immigrants.

Read the full article here.

The Economic Impact of Immigration: UK Edition

Image result for brexit

Economist Jonathan Portes has an excellent summary of the research on immigration’s effects in the UK:

  • Employment: “To the considerable surprise of many economists, including me, there is now a clear consensus that even in the short-term migration does not appear to have had a negative impact on the employment outcomes of UK natives. Studies have generally failed to find any significant association between migration flows and changes in employment or unemployment for natives (see, for example, BIS 2014 for a review).  Since 2014, the continued buoyant performance of the UK labour market has further reinforced this consensus. Rapid falls in unemployment, now down to just over 4%, have been combined with sustained high levels of immigration. Nor is there any evidence that immigration has impacted the employment prospects of specific groups such as the young or unskilled. Crudely, immigrants are not taking our jobs – the lump of labour fallacy, that the number of jobs or vacancies in the economy is fixed (which generally refers to the medium to long term) turns out to be a fallacy in the short term as well.”
  • Wages: “While the evidence on wage impacts is less conclusive, the emerging consensus is that recent migration has had little or no impact overall, but possibly some, small, negative impact on low-skilled workers. Dustmann et al. (2013), using UK LFS data for the period 1997-2005, find that immigration put a downward pressure on the wages at the bottom of the distribution (below the 20th percentile), while the effect on the rest of the distribution (in particular above 40th percentile) is positive. Their estimates show that a 1% increase in the foreign-born/native population ratio leads to an increase of between 0.1% and 0.3% in average wages.”
  • Productivity: “Immigrants’ skills may complement those of natives.  A number of papers support this hypothesis: for example, Barone and Moretti (2011) found that low-skilled migration increased the labour force participation of highly skilled native women; Peri and Sparber (2009) and Foged and Peri (2016) found that low-skilled migration increased the wages of native low skilled workers.  In particular, they argue that natives may have a comparative advantage in jobs with more communication-intensive tasks with respect to foreign workers, and that immigration ‘pushes’ low-skilled natives to occupations with a higher intensity of such skills, increasing the level of specialisation in the economy and hence productivity, as signalled by the corresponding increase in wages. Immigration might also influence the level of human capital in the economy, either directly if immigrants have high educational attainment (Kerr and Lincoln 2010, Hunt and Gauthier-Loiselle 2010), or indirectly by increasing the incentive on natives to acquire human capital. Some evidence (Hunt 2017, McHenry 2015) suggests that increased low-skilled immigration increase school performance and outcomes for US natives…Looking at the service sector, Ottaviano et al. (2015) show that a 1% increase in immigrants’ concentration in local labour markets is associated with a 2% to 3% rise in labour productivity, measured as gross value added per worker, mainly as a result of the cost-cutting dynamics implied by immigration-induced labour supply shocks. In addition, immigration represents a substitute for the import of intermediate inputs and is associated with an increase in exports to immigrants’ countries of origin.   Rolfe et al. (2013) found that immigrants concentration within specific industries was associated with slight increases in productivity, but the impact was small. At the aggregate level, recent literature uses cross-country evidence to estimate the impact of migration on growth and productivity in advanced economies. Boubtane et al. (2015) find that migration in general boosts productivity in advanced economies, but by varying amounts; for the UK, the estimated impact is that a 1 percentage point in the migrant share of the working age population leads to a 0.4-0.5% increase in productivity. This is higher than in most other advanced economies and reflects the relatively high skill levels of migrants to the UK. Jaumotte et al. (2016) find that a 1% increase in the migrant share of the adult population results in an increase in GDP per capita and productivity of approximately 2%. This result is consistent across a variety of empirical specifications.  Perhaps surprisingly, the estimated aggregate impacts of high and low skilled migration are not significantly different (although the distributional implications are very different). In a within-country perspective, Peri (2012), with a state-based analysis in US, finds that a 1% increase in immigration raises total factor productivity by 0.5%, mainly thanks to increased specialisation induced by immigrants’ inflows.”
  • Fiscal: “Dustmann and Frattini (2014) found that recent migrants, especially those from the EU, had a more positive fiscal impact on average than natives.  Of course, it is hardly surprising that young migrants in employment make an initial positive fiscal contribution; proper assessment of fiscal impacts requires a life-cycle perspective (Preston 2014).   In this context, there are various reasons to expect the impact to still be positive (in particular, migrants tend to arrive after they have left compulsory, publicly financed education). However, a positive net impact on public finances at the national level does not preclude a significant impact on demand (and hence cost) at the local level, particularly if funding allocations do not adjust quickly (or at all) to reflect pressures resulting from migration (George et al. 2011). A notable recent example is the shortage of primary school places in some parts of the UK (especially London); this appears to be largely the result of poor planning on the part of central government, given the rise in the number of young children resulting from recent increases in migration (from both the EU and elsewhere). But broader concerns about the potential negative impacts on public services appear to be largely unsubstantiated: higher immigration are not associated, at a local level, with longer NHS waiting times (Giuntella et al. 2015); and in schools, increased numbers of pupils with English as a second language doesn’t have any negative impact on levels of achievement for native English speaking students (Geay et al. 2013). If anything, pupils in schools with lots of non-native speakers do slightly better.”
  • Prices: “Frattini (2008) analyses the impact on tradable, non-tradable goods and services prices across UK regions over the period 1995-2006 and shows that immigration is associated with a fall in prices for non-tradeable goods and services, but a rise in the price of tradeables.  Sá (2015) focuses on the impact on housing prices in UK local authorities from 2003 to 2010 and shows that immigration actually reduces house prices at a local level, since natives leave the area in response to high immigrant inflows; although this does not imply, of course, that immigration does not overall exert upward pressure on house prices at a national level.”

So what are the likely results of Brexit? He concludes,

The conclusion is that the reductions in migration resulting from Brexit are likely to have a significant adverse impact on UK productivity and GDP per capita. The broad scenarios (not forecasts) we depict imply that the negative impacts on per capita GDP will be significant, potentially approaching those resulting from reduced trade.  By contrast, the increase in low-skilled wages resulting from reduced migration is expected to be, if at all, relatively modest.

Political Opposition to Immigration

Image result for anti immigration

From a recent job market paper:

In this paper, I exploit variation in the number of immigrants received by US cities between 1910 and 1930 to study the political and economic consequences of immigration. Using a leave-out version of the shift-share instrument (Card, 2001), I show that immigration had a positive and significant effect on natives’ employment and occupational standing, as well as on economic activity. However, despite these economic benefits, the inflow of immigrants also generated hostile political reactions, inducing cities to cut tax rates and limit redistribution, reducing the vote share of the pro-immigration party, and increasing support for the introduction of immigration restrictions.

Exploiting variation in immigrants’ background, I document that natives’ backlash was increasing in the cultural distance between immigrants and natives. These findings suggest that opposition to immigration may arise not only because of economic, but also because of cultural considerations. Moreover, they highlight the existence of a potential trade-o§. Immigrants may bring larger economic gains when they are more different from natives. However, higher distance between immigrants and natives may trigger stronger political backlash. Ultimately, by retarding immigrants’ assimilation, and favoring the rise of populism and the adoption of inefficient policies, natives’ reactions may be economically and socially costly in the medium to long run (pg. 38-39).

A 2016 paper found that accurate information regarding immigration can change minds, but I’m becoming less and less hopeful.

Does Population Diversity Lead to Economic Growth?: Evidence from the Age of Mass Migration

Image result for immigrants ellis island

A brand new study seeks to answer the following questions:

  • “Does having a very diverse population at one point in time lead to persistently higher levels of economic growth?”
  • “Is the economic impact of diversity only evident in the short term, vanishing once the different population groups become part of the society’s ‘melting pot’?”

The researchers “assess these questions by examining the extent to which the high degree of cultural diversity in US counties generated during the Age of Mass Migration of the late 19th and early 20th centuries has left an enduring impact on the economic development of those US areas that witnessed the greatest heterogeneity in population. Their analysis

identif[ies] the presence of a strong and very long lasting impact of diversity on county-level economic development. Counties that attracted migrants from very diverse national and international origins over a century ago are significantly richer today than those that were marked by a more homogeneous population. Highly diverse counties after the Age of Mass Migration strongly benefited from the enlarged skillset and the different perspectives and experiences the arriving migrants brought with them and from the interaction among those different groups. The result was a surge of new ideas and a newfound dynamism that was quickly translated into lofty, short-term economic gains. These gains proved durable and, albeit in a reduced way, can still be felt today.

Yet the benefits of diversity came with a strong caveat: the gains of having a large number of groups from different origins within a territory (fractionalisation) only materialised if the diverse groups were able to communicate with one another (low polarisation). Hence, past population diversity in the US has become a double-edged sword: it has worked only where the different groups were able to interact, that is, in those places where the ‘melting pot’ really happened. Where such ‘bridging’ did not occur, groups and communities remained in their own physical or mental ghettoes, undermining any economic benefits from a diverse environment.

Moreover, the benefits from diversity have remained over time. Where high levels of diversity have been coupled with ‘bridging’ across groups – high population fractionalisation with low polarisation – the associated economic gains were felt in the short, medium, and long term. With the exception of the highly turbulent 1920s to 1940s, a strongly positive and robust impact of fractionalisation on regional income levels, as well as a negative one of polarisation is evident…The only change in this enduring relationship is that both connections, while remaining strongly statistically significant, became weaker after the 1920s.

They conclude,

At a time when many developed countries are rapidly closing down their borders to immigration, trying to shield what – particularly in the case of Europe and Japan – are still rather homogeneous populations from external influences and the perceived security, economic, and welfare threats often unjustly associated with migrants, restricting migration will limit diversity and is bound to have important and long-lasting economic consequences. By foregoing new migration, wealthy societies may be jeopardising not only the short-term positive impact associated with greater diversity, but also the enduring positive influence of diversity on economic development.

The large, positive, and persistent impact of societal diversity on economic development seen in the US would therefore be difficult to replicate – something that ageing and lethargic societies across many parts of the developed world can ill afford. However, if migration is to be encouraged, it is of utmost importance that mechanisms facilitating the dialogue across groups and, hence, the integration of migrants are in place to guarantee that diversity is transformed into higher and durable economic activity over the short, medium, and long term.