This is the first of a series of entries many people asked me after I published a very long but comprehensive entry with my proposals on this issue. The only one thing I ask from those who, whether agreeing or disagreeing with me, posted comments on my previous entries is to do some research to back their comments so we all can win with the additional information.
At the end I publish the unedited and extended version of the letter the Examiner published me criticizing the last article of Jay Ambrose and their last editorial on immigration. I am a liberal and the Examiner is a conservative newspaper with usually very rabid anti-immigration positions but I cannot put in doubt the honesty of their Threads section, which has published me many letters despite my liberal points of view.
Economic myths on immigration (12/10/2005)
1. They take our jobs and depress our salaries
For years, anti-immigrant groups used the Borjas study to supposedly prove that the effects of immigration on wages and salaries were negative. Today sequels made by the Center of Immigration Studies and the Heritage Institute are not but updates of that same study. Nevertheless, George J. Borjas’s wrong estimation that immigration had depressed American wages in the 90s by 3% was the result of his unrealistic assumptions. In his model, an increased labor supply met a fixed labor demand but in real life businesses make additional short-term and long-term (according to their expectations) investments to satisfy the new demand, higher in aggregated terms due to the immigration inflow. Another flawed assumption of that model is that what businesses try to preserve is the amount of capital instead of the return on capital. With the same methodology, but correcting these assumptions, Ottaviano and Peri estimated that immigration in the same period increased the average wage of native-born workers by 2.7 percent.
As foreign-born workers are not ''perfect substitutes'' of American-born workers, hiring immigrants also lead to hire Americans with complementary skills due to differences in education, training and even culture. These characteristics of immigrants can improve the experience of Americans they work with even in the cases in which they concentrate in the same occupations. Nevertheless, immigrants usually concentrate in different occupations competing mainly with other immigrants at all levels of education. The result is that immigration only affects negatively the wages of the least educated (school dropouts), a 9% of the population that has been declining over time. For these, closing the economy, restricting the inflows of immigrants, is not real help. The opium dreams of having dishwasher jobs at $20 per hour if we get rid of immigrants and with which the Right tries to seduce many workers are plainly dishonest. If getting rid of immigrants were magically possible, employers would have to fill the positions formerly occupied by immigrants at almost any price to fulfill their contracts but once the rigidities of those short-term contractual obligations had passed, employers would be able to adjust to the new circumstances. Employers whose products has many substitutes, including their competitors that now can outsource their production, will not be able to offer their remaining employees much better conditions than those offered to their now disappeared immigrant workers but those conditions are those native born did not find acceptable in the first term so the empty positions had to be filled with immigrants. Employers able to outsource will most probably outsource the whole line of production and not just the part worked by immigrants so affecting negatively jobs performed by native born, especially the complementary ones. Finally, the few employers whose products had little substitutes would have to increase prices, making them less accessible to part of the public who could afford them before the adjustment. Thus among employers the most adversely affected would be the smallest, whose competitors can outsource their production overseas or afford to switch to capital intensive technologies. In other words, not big corporations but small companies and workers, for whom moving to other countries is not that easy, would be the most affected. Not even the dishwashers of our imaginary world could escape such reality after the adjustment. This is the most probably outcome of the short-term increase in Swift hiring to fill the positions of illegal immigrants raided in its plants some months ago.
Of course, this analysis is not considering the effects of such magical disappearance of immigrants on the demand of local business, especially ethnic businesses, whose profits fall to dangerous levels after part of their demand falls. This is the reason why legal residents’ businesses in Hazelton have even had to close as the fall in their demand made them unviable.
If we now eliminate the assumption of the magical disappearance of immigrants, we have the same scenario but with an undesirable additional component: a black labor market in which the strategy of enforcement by attrition make possible an increasing abuse that affects negatively the least educated even more.
For the unsound theories of the Heritage Institute and the Center for Immigration Studies had some validity we would have to live in a world in which unauthorized workers are perfect substitutes of the authorized ones and in which the elasticity to wages (the speed at which an employer would fire his former employee to replace him with a cheaper one) is infinite. In such a world the unemployment rate of unauthorized workers should be close to zero because they take over the jobs of authorized ones as soon as these are fired and no new jobs are created so there are no incentives for additional unauthorized workers to come. Nevertheless, daily experience tells us that only the most bizarre comics could accept such a scenario as possible. No real employer will fire their trusted employees to hire you if you, whether documented or not, show up saying that you will do the same job for a couple of bucks less because for real employers reliability and productivity could be even more important than wage with respect to their employees. Other reason is that unauthorized worker cannot apply to most best paying companies because these usually have a more thorough scrutiny of documents. Likewise, for these undocumented workers it is more difficult to get driver licenses, to fly across states or operate independently as subcontractors.
So, in case of a good comprehensive immigration reform, the only jobs that could be at real risk are those of alien smugglers, forgers of documents and subcontractors whose real services are to shelter the main contractor from fines in case of an immigration raid.
2. They don’t pay taxes
Actually they could be paying even more as they cannot count with credits like the Earn Income Tax credit. Independent laborers usually are not given a form 1099-MISC because subcontractors know or suspect their legal status so they employers do not include them as expenses. If for any reason the independent laborer files taxes, his income would be paying taxes on his head and on the head of the subcontractor; if he does not, at least that income would be paying taxes on the head of the subcontractor. If the undocumented worker pays taxes because he needs a copy of his return or a Tax Identification Number, he pays not only income taxes but also the Self Employment Tax (their share and their employer’s share of the Social Security and Medicare contributions). Nevertheless, unless they have a Tax Identification Number and call those contributions to their accounts, they will never get any benefit from the amounts they pay for Social Security and Medicare. So the only part subject to real debate is the Self-Employment Tax of those who are off books. Of course, many independent laborers do not file taxes and many negligent or dishonest tax services do not include the Self-Employment tax in their preparation but the truth is that we do not have an reliable estimation of the tax payments of immigrants, whether legal or not. The Heritage Institute and Center for Immigration Studies not only do not consider these circumstances in their pseudo-analysis but also constrain their attention to the income tax as if all other taxes did not apply to them, from excise taxes and taxes on gasoline to state sales taxes. Have you ever seen an illegal immigrant before a cashier at any McDonald’s requiring not to be charged the sales tax because the Heritage Institute says that they do not pay taxes?
Even in the most bizarre scenarios of these dishonest think-tanks, in which illegal immigrants do not pay any income tax, as this could not be the case of an employee receiving a W-2 in January, this means that their employer could not include them as expenses and so he would have to pay taxes on the amount paid to those illegal employees as if it would still be part of his income and most probably at an even higher rate than the rate applicable if those wages had legally been acknowledged as expense. In the science of the Heritage Institute and the Center for Immigration Studies, if an employer saves $1 hiring an immigrant instead of a native-born, that $1 disappears in the air so it does not have to pay taxes on the return of that employer. Likewise, the state government is not interested in what its income is going to be due to the fact that there is an immigrant in the market but in how much that immigrant pays in taxes so, is as serious studies has shown, the effects of immigration on wages and jobs are positive for the labor supply as a whole, the state conceived for the science of this think-tanks magically do not receive the increase in taxes related to those positive effects. How amazing the advances in science are!
3. They will come in bigger numbers if they are pardoned. We would lose control over them
No if we do offer a number of visas that fits the needs of the market. Yes if we reduce again unrealistically the number of visas below the needs of the market, as conservatives have done after the 1986 amnesty.
Nobody hires a worker because he is cheap but because he needs the worker and information about the labor market cross back the border through phone calls and e-mails of relatives and friends. Those friends or relatives are the way the person abroad gets informed about the labor demand. If you are a person abroad willing to immigrate illegally and there are not jobs available, your friend or relative here will not want to lend you the at least $7,000 that in average you will need to pay the smuggler. You yourself will not be willing to assume such a debt, high for the standards of a Third World country, and default those who are your only one shelter here because you cannot get a job to repay them. Nevertheless, if you came in better times willing to work for some years and now you find yourself in the middle of a low season or a recession, it is too risky and expensive to go back to your country during the low season, so you wait here for the rebound of the labor demand. This is why many Mexican temporary workers at the Southern border, an example of this case, have decided to stay at this side of the border. If you were legal (and the number of visas would keep pace with the labor market and you could trust the speediness of the immigration procedures, different from what has happened to applications under the Section 245(i)), you could leave during the low season and the market (not some redneck conservatives in Congress or the White House) would adjust itself to the cycles more easily. This evidence reflects itself statistically in the fact that Mexican migration follows the trends of US employment rate and not of the Mexican labor force growth rate. When the economy grows, the same logic applies: increasing the number of visas closes new windows of opportunity for illegal immigrants.
4. They will leave by themselves if we make their life harder
Those conditions would have to be harder that those in the Third World countries they come from. Could you imagine how such conditions would have to be? Do you think an illegal immigrant from Guatemala is going to return to Guatemala because he has to take to bus and walk because he cannot get a driver license? We are talking about people who are willing to risk their lives in the dessert to have a chance in America.
5. They bring the poverty of the Third World Countries they come from
This is really a silly one. As you introduce poorer-than-the-average people in a sample, the new averages are going to be lower but an average is not a forecast. If an immigrant is poor when he comes it does not mean that he will be poor the rest of his live as if poverty were a chronic illness among immigrants. If the criteria used to select them are bad, then it is very likely that you will have more than one reason to complain about the outcome but then what are wrong are not immigrants but the criterion to select them. Immigrants are not a standardized product; they are people. If the wires of your house are a mess, it would be wise to change your wires instead of blaming electricity.
As in the case of deciding for building a new plant you do not judge its profitability before it has begun to produce and sale, in the case of the economic decisions about immigration you also have to choose the right horizon. The fairer horizon is to consider the first three generations, with the immigrant being the first generation as usually the first generation created the base of capital that native-born take for granted and so it could take two additional generations to see the desirable upward social mobility. This is especially important if what you are evaluating is the impact of immigrants on taxes, Social Security or Medicare through their children and grandchildren. Once you have chosen the right horizon, you can compare the Net Present Value of the projects immigrant X is admitted to our market (the value of what he is going to produce in the future with what he knows and what he is going to learn, his investments, his effects in the NPV of other projects, etc.) versus immigrant X is not admitted to our market. To have a NPV zero or negative, he would have to be a thug or be heavily on welfare so even his positive cross effects on other projects is traded off.
6. They take more than what they give to our society
That depends on what assumptions the study makes. If you pick a study that assumes that immigrants does not pay taxes, make no investment here, live on welfare or a study that even includes costs of border enforcement, the result is not going to be more serious that those of the XIX Century ‘demonstrating’ the superiority of the white race.
Linked to the point 2 is the debate of the net effect of immigration on our society. If you had already measured seriously the direct and indirect contributions of immigrants, now you have to identify the costs. Schools and health care are obviously part of the cost. Border security would exist for security reasons even if illegal immigrants did not exist; criminal aliens are criminal aliens, not criminals and a serious comprehensive immigration reform should not allow to allocate to immigration more than a very thin and marginal part of that cost so border security is a cost that should not be allocated to immigrants in a share bigger than the share corresponding to any native born.
Even though you can identify the part of the costs of the criminal system related to native born and immigrants, you have to identify the part of this cost that really is allocable to immigrants. An important part of illegal immigrants in jail are charged for having been found in possession of forged documents to work; not of stolen identity but of possessing forging documents to work, what is a result of the unfairness and inefficiency of the present immigration system. In other words, you cannot charge immigrants the cost of the inefficiency of your system.
When considering the net economic effects of immigration you have to be careful to isolate the effects of trade agreements with proper labor and environmental clauses (or with the enforcement of those clauses suspended); the effects of decreasing transferences from the federal to state governments; the increasing trend of education, housing and health costs with respect to the purchasing power of wages and the decreasing trend of our educative competitiveness compared to other developed and developing countries. Unfortunately, a serious study considering all this variables is still to make.
And the money they send to their home countries or the cases of welfare abuse? If you recognize their right to be part of America, tax reasonably those remittances and adjust the system to avoid the few cases of welfare abuse. What is the problem?
7. The real solution is enforcement.
We should have learned something from the Prohibition at this point of history. Even at those times people had to face that enforcement was possible but prohibitively expensive (as Chertoff has admitted with respect to illegal immigration) just to please the susceptibility of some conservatives. Today we have an alcohol market regulated in terms of health and security. History taught us that trying to constrain or ban a legitimate market lead us to worse chaos and abuse than we wanted to avoid. Nevertheless we refuse to give the same treatment to the immigrant labor market. The side effect of the enforcement-only option was then the birth of the organized crime that corrupted the system and even got mayors elected and a widespread skepticism with respect to the value of the law. Now other criminals take advantage of the restrictions put on another legitimate product: work but the consequence could be this time scarier: a Hispanic community alienated by xenophobic Right-wingers and seduced by demagogues skilled in the Latin American ways of making politics and policy. That Hispanic community will be able to decide elections in 40 years and its effects on the mainstream culture could be felt even before and only a serious comprehensive immigration reform now, in our terms, could lead that Hispanic community inside the mainstream, where its effects could be positive if adopted instead of rejected.
The expensive dreams of some conservatives of massive deportations would lead not only to improve the business of smugglers and other criminals but also to more deaths in the dessert, to fine maybe 2 million small businesses and to about the same number of illegal aliens in a few months as new immigrants will come to fill directly or indirectly the positions left by those deported when the cost of continuing enforcement becomes unbearable. If you impose the use of a database to verify the identity of those applying to jobs, you will get more undocumented workers off books. If you increase the fines on employers, you will get lower wages for undocumented workers (as the employer will try to cover itself from the risk of a fine or simply find an opportunity to abuse) but also for the 9% of less educated Americans, not to say the effects on tax revenues.
Who should have a temporary labor permit and who a green card? That depends on who fit the profile of the character of the immigrant we want, the immigrant X of our project. Unfortunately, we don’t have such a profile in the law. Worse, even though the five categories of employment-based immigration are not a profile of the desired immigrant, this kind of immigration have been reduced over the years to just 10% of the total legal immigration.
Finally, this leaves the moral question about the moral values of the market economy; about the hypocrisy of preaching for a free flow of goods, capitals and services but at the same time impeding the labor market to adjust itself when the flow is of brown people. Maybe, the moral values of the advocates of free market who oppose immigration are just prejudices in disguise.
Useful liks:
Ottaviani and Peri’s study:
www.econ.ucdavis.edu/faculty/gperi
Pew Hispanic Center:
www.pewhispanic.org
Cato Institute:
www.cato.org
The next is the unedited and extended version of the letter the Examiner kindly published me today on Ambrose’s Spitzer making New York an illegal-immigration magnet and your editorial Make ‘sanctuary’ states pay for endangering the public (which can be find in the Web page of the Examiner):
Dear Sirs
Ambrose’s surrealistic approach shows us once again why he is not George Will or David Brooks. In his new involuntary joke Ambrose states that:
- Drivers are "dangerous because (...) of the reasons they were denied licenses in the first place" meaning that illegal immigrants are dangerous drivers due to their legal status. Jay, alcohol could affect your driving; your legal status, hardly in the real world.
- Illegal immigrants would not buy insurance even if given the so hardly sought driver licenses that could help them improve their lives because they have "wangle(d) around the purchase in the past". Jay, are illegal immigrants so idiotic and self-destructive or they are only that way in your autistic stereotype?
- "New York will become a magnet for still more illegal immigrants". Jay, immigrants are mostly attracted by jobs; without them, driver licenses are unattractive. And "granting them amnesty would only attract still more millions". Jay, if "millions" of illegal immigrants come despite the labor demand is satisfied, who will pay their bills? No, Jay, the number of illegal immigrants is determined by the market. With a market efficient immigration system, bumps like that of 2004, originated by that January Bush guest-worker speech, would not have happened.
- "In the 9/11 attacks (...) most of the hijackers were aided in their evil by driver’s licenses, just as future terrorists could be aided in their murderous mayhem by the Spitzer policy". Not only the 9/11 terrorists who obtained driver licenses were here legally but also is ridiculous to state that driver licenses were essential to their plan. Without driver licenses, they would have aborted their plan? No Jay, they never had to work in America; they had plenty of money to hire drivers if needed. If the driver licenses were not essential to their plan, should we ban flying schools because they enrolled in them or pizzas because they ate them?
- "Society (...) will witness increases in the poverty the immigrants bring with them." That relation immigrants-poverty, is a genetically proved one? Otherwise your statement could be as absurd as the studies of the late XIX Century postulating the inferiority of blacks due to their poverty but without paying attention to the injustice of segregation that keep them poor. Your article states that immigrants bring poverty. We are lucky not to have a more extended poverty among immigrants if we consider the poor criteria of the immigration law for their selection and, in the case of illegal immigrants Jay, you condemn the poor ones but advocate denying them the main tool to escape their poverty?
- "(Spitzer) should join in discouraging illegal immigration". Then he says that "instead of scoffing at federal law, Spitzer ought to respect it". Jay, the Supreme Court itself has recurrently reserved immigration for the federal government. What you are asking Spitzer to do is precisely to "scoff at federal law"!
With respect to your editorial of September 28, you do not release additional information to back your assertion that driver licenses for illegal immigrants regulations have failed in the states you mention. If illegal immigrants engage in reckless driving or drive uninsured, that privilege should be revoked indefinitely for those individuals in addition of any other legal consequence resulting from their fault and their status but that is not a reason to label and pack the whole group.
Reading you,
Alfredo M. Bravo de Rueda E.
Gaithersburg, Maryland