(Part of the Intra-Madison Immigration Debate)
Update: Jenna's response to this post.
When I last wrote about immigration, I was talking about the gross disparity between the number of green cards issued and the number of people wishing to immigrate. I advocated lifting the green card limits and giving residency to anyone who wishes to immigrate -- regardless of skill levels, country of orgin, or anything else.
Can We Absorb Them?
Jenna challenged that idea, quoting Jib. Both Jenna and Jib argued that large-scale immigration is unsustainable in the long term. Jib argued that large-scale immigration would cause a crisis at the lower economic rungs of society. He reasons that the influx will create a huge demand for low-paying jobs. This demand will drive down the wages in these jobs, causing a strain on the social safety net (as more and more low-income people use Medicaid / Badger Care). Jib ends his argument by stating:
Bringing in that many legal immigrants is anything but compassionate for poor legal immigrants looking for a better life. If anything, it is going to keep them buried at the bottom of society. I'm all in favor of robust legal immigration at the skilled and unskilled ends, but let's do it at sustainable numbers, shall we?
I'd like to begin my counter-argument with the idea of "sustainable numbers". Our nation has absorbed several waves of immigration during its history. I think it would be useful to compare immigration then with immigration now.
The nation's first immigration quotas were established in 1921. Prior to that time, Congress only limited the types of people that could immigrate (the insane, criminals, anarchists, etc), not the numbers. According to the U.S. Census Bureau:
As a percentage of total population, the foreign-born population rose from 9.7 percent in 1850 and fluctuated in the 13 percent to 15 percent range from 1860 to 1920 before dropping to 11.6 percent in 1930.
Today the foreign-born population is estimated at 9.7 percent of the total population. (That estimate is from 1997. The percentage may be slightly higher today.) Although the modern immigration numbers seem high, they're actually right in line with historical standards. Right now we have fewer immigrants, as a percentage of our population, than we did during the 60 year period from 1860 to 1920.
Not only is our foreign-born population lower than in the past, our ability to absorb immigrants is dramatically greater. Our per capita resources are greater now than they were in the early 1900's:
Consider that in 1915 the typical dwelling in America housed 5.63 persons; today it houses fewer than half that number -- 2.37 persons. Combined with the fact that today's typical dwelling has about 25 percent more square footage than its counterpart had back then, our ability to absorb immigrants into residential living spaces is today more than twice what it was a century ago.
In many other ways America today can better absorb immigrants. For example, compared to 1920, per person, today we:
- have 10 times more miles of paved roads
- have more than twice as many physicians
- have three times as many teachers
- have 540 percent more police officers
- have twice as many firefighters
- produce 2.4 times more oil -- as known reserves of oil grow
- produce 2.67 times more cubic feet of lumber -- as America's supply of lumber stands grows
- have conquered most of the infectious diseases that were major killers in the past.
Our current situation is far from critical. During the late 1800's we absorbed a proportionally greater number of immigrants, while benefitting from far fewer resources. I think the evidence shows that America can not only absorb the immigrants we already have, but that we are capable of absorbing far more than we ever have before.
A Drain on the Economy?
The second half of the "sustainable numbers" argument is that immigrants are creating a pile-up on the lower rungs of the economic ladder. Jib worries that a continuing inflow of immigrants will drive down wages. He linked to a column by Robert Samuelson that expanded upon this theme. Mr. Samuelson fears we will create a drag on our economy by gaining immigrants who consume social services without generating sufficient tax revenue to pay for those services. JoeFriday left a comment on my previous article claiming that:
the real incentive to come here illegally is to bypass the tax system and be absorbed into our government as a citizen.. they know that would take a chunk of the change they send back home to their families in Mexico (an amount that surpasses the national foreign aid we give Mexico).. meanwhile, they use our schools and health care benefits, while staying "off the books" intentionally
Is it true? Does immigration drive down wages? Are immigrants stealing from the American people by using social services but not paying taxes? Are immigrants creating a drag on our social services? No. I think the evidence demonstrates otherwise.
Let's look at the first claim: immigration drives down wages. At first glance, this argument seems logical: a greater supply of labor will lead to a lower cost of labor. The economic theory is sound, but the assumptions underlying the claim are bad. Claiming that immigration drives down wages is to claim that the number of jobs (the demand for labor) is fixed. But the demand for labor is not fixed. There is not a limited supply of jobs that must be carefully parcelled out. There never has been. Rather as the price of labor falls, the demand for labor generally rises (new jobs are created, using the cheaper labor), thus pushing the price of labor back up.
This has been true throughout American history, whether discussing the wages of native-born or foreign-born workers:
Would New York City (or any other city) be richer today if it had held its population to what it was in 1850? 1900? 1950? 1980? Does the inflow of people into New York lower the wages of the people already there? Does it make them poorer? Does it matter whether rich or poor people, high-skilled or low-skilled people are the ones moving into New York?
This is not just idle speculation. Recent research has indicated that once job creation is taken into effect, overall wages are unaffected by immigration and wages for high-school drop-outs are pushed down by -- at most -- 0.4%. Over the long run, immigration does not appear to pose a threat to the high wages that Americans currently enjoy.
Are immigrants coming here illegally because they can work "off of the books" and avoid paying taxes? No, they're not. They're coming here illegally because they have no other way to come here. Last year, the U.S. offered 5,000 visas for unskilled workers. Last year, the U.S. gave two of those visas to Mexican immigrants.
Contrary to popular belief, most immigrants do pay their taxes.
It is impossible to know exactly how many illegal immigrant workers pay taxes. But according to specialists, most of them do. Since 1986, when the Immigration Reform and Control Act set penalties for employers who knowingly hire illegal immigrants, most such workers have been forced to buy fake ID's to get a job.
Currently available for about $150 on street corners in just about any immigrant neighborhood in California, a typical fake ID package includes a green card and a Social Security card. It provides cover for employers, who, if asked, can plausibly assert that they believe all their workers are legal. It also means that workers must be paid by the book - with payroll tax deductions.
Our assumption is that about three-quarters of other-than-legal immigrants pay payroll taxes," said Stephen C. Goss, Social Security's chief actuary, using the agency's term for illegal immigration.
Because these taxes are paid with fake Social Security Numbers, it is "free money" for the IRS and the SSA. During the 1990's, the SSA's "earnings suspense file" increased by $189 billion.
Far from getting off tax-free, the vast majority of illegal immigrants do pay taxes and may, in fact, be responsible for keeping Social Security solvent.
Finally, do poor immigrants (legal or illegal) create a drag on our social services? Undoubtedly, they do. But I think it's fair to say that it's a short-term drag, not a long term one. Once in the United States, immigrants move rapidly up the socio-economic ladder. True, first generation immigrants are often poor and uneducated compared to native-born Americans. But by the third generation, they are on nearly level ground with native-born citizens both in education and in income.
Claiming that immigrants create a drag on social services is to misunderstand the type of people that choose to immigrate:
America is an amazing natural experiment -- a continent populated largely by self-selected immigrants. All these people had the get-up-and-go to pull up stakes and come here, a temperament that made them different from their friends and relatives who stayed home. Immigrants are the original venture capitalists, risking their human capital -- their lives -- on a dangerous and arduous voyage into the unknown.
Not surprisingly, given this entrepreneurial spirit, immigrants are self-employed at much higher rates than native-born people, regardless of what nation they emigrate to or from. And the rate of entrepreneurial activity in a nation is correlated with the number of immigrants it absorbs. According to a cross-national study, "The Global Entrepreneurship Monitor," conducted jointly by Babson College and the London School of Economics, the four nations with the highest per capita creation of new companies are the United States, Canada, Israel and Australia -- all nations of immigrants. New company creation per capita is a strong predictor of gross domestic product, and so the conclusion is simple: Immigrants equal national wealth.
Immigrants may create a short-term drain on social services. However, their children and grandchildren will be most likely be valued, successful members of America's middle class. Moreover, today's immigrants will be creating jobs and business that will employ tomorrow's workers.
Limiting immigration will prevent a short-term drain on social services, but will cost America many valuable entrepreneurs and future middle class workers and investors. I think the trade-off is a worthwhile one.
In conclusion, high levels of immigration cause little to no long-term economic harm for the United States. The United States is much more likely to be harmed by preventing high-levels of immigration than by allowing it. I think I've demonstrated that America is more than capable of absorbing and assimilating immigrants. Next I'll tell you why I think that the U.S. must encourage higher levels of immigration.