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April 16, 2006

A True Must-Read

By Ezra

If you only ever read one news story on immigration, make it this one.

April 16, 2006 | Permalink

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» Illegal Immigrants and the Economy from Political Animal
ILLEGAL IMMIGRANTS AND THE ECONOMY....Remember that study suggesting that illegal immigration had modestly reduced the wages of native-born high school dropouts? Well, it turns out there's even less to that than meets the eye:George J. Borjas and Lawre... [Read More]

Tracked on Apr 16, 2006 5:07:09 PM

Comments

Dear Sir: My daughter works for the license bureau in Ohio. She tells me that she confiscates on average, eight bogus Mexican ID's a week. She also tells me that they cannot speak English and they have to get translators on the phone to let those people know that their ID's are being confiscated. There are lots of Mexicans (illegals) in Ohio, lots around Toledo picking tomatos. I work in Matamoros, Mexico with a guy who graduated from Canton-McKinley High School and his parents still live in Canton. One oher point, my daughter also tells me that the state of Ohio is not peritted to pass the bogus ID's onto Homeland Security by law! HOMELAND SECURITY INDEED!

Posted by: mike bales | Apr 16, 2006 2:58:29 PM

Item one: I guess those stories about African-Americans not being able to get jobs post-Katrina because contractors hired illegals was bogus, huh?

Item two: This isn't economic, but immigration (legal and illegal) has contributed to something like over 3/4 the population growth in California in the last 40 years. That has contributed to a substantial lowering of the quality of life. The infrastructure is overwhelmed. Mobility, in the sense of getting from place-to-place on a daily basis, is nothing like what it used to be.

Posted by: Quiddity | Apr 16, 2006 3:13:27 PM

Everyone is pointing the finger at poor desperate Mexicans for taking jobs away from Americans while ignoring the fact that it is UNFAIR GLOBALIZATION that is causing the problem.

According to Walmart Mexico's web site, there are 796 Walmart stores in 109 cities in Mexico. They sell the same made in China and India products that are sold here. Mexicans can no longer even find the $0.90 an hour that factory workers were willing to work for. Walmart can get it for less in China. So much for the promises of NAFTA!
It mystifies me that all those Bible thumping so called Christians ignore Crist's most important teching: "Love thy neighbor as thyself"

Posted by: Carola | Apr 16, 2006 4:24:44 PM

that without illegal immigrants, some products now made in the United States would likely be imported.

This seems to apply directly to farm produce and meat production. There is still a larege non-importable labor factor in service industries. Without these immigrant workers, many other costs would surely rise: restaurant food, hotel rates (room maintenance), commercial real estate (janitors), and household care (lawns and children), among others.

The article is significant, but this information has clearly not been distributed and accepted by a large part of the population.

As for the high-school dropouts, there is real failure there. Bill Clinton harped through the 90's on global trade requiring the US to increase its level of education to compete, and tried some programs to help. Those programs are now largely gone under Bush.

The big failure is that schools have not gotten this message out, and public officials have not done enough to strengthen schools to meet the challenges.

And of course, the dropouts themselves must accept blame for their plight. With hard work they can reduce the impact of their earlier mistake and increase their education level. More public funding to sustain this drive to continue education by dropouts would surely help as well.

Mexico and other central and south American countries haven't accepted the education challenge as well. East and south central asia is doing a far better job of education than our neighbors - and the neighbors and the US will pay the penalty for failing to compete.

Posted by: JimPortlandOR | Apr 16, 2006 6:23:18 PM

An accompanying graphic to the New York Times article shows that a high school dropout in California, where supposedly 6.9% of the population are illegal immigrants, averages $8.71 per hour in wages versus merely $8.37 in Ohio, where only 1.0% are illegal immigrants.

Case closed!

Well, no, not exactly. What about the cost of living difference between California and Ohio? Don't they tell you in Econ 101 and in Journalism 101 to always adjust for the cost of living?

According to the data gathered by the nonprofit organization ACCRA, which measures cost of living so corporations can fairly adjust the salaries of employees they relocate, California has the highest cost of living in the country with an index of 150.8 (where 100 is the national norm). Ohio is below average at 95.4. So, relative to the national average cost of living, high school dropouts in Ohio average $8.77 versus $5.78 for the equivalent in California. That means they are 52% better off in Ohio than in California.

So, the Law of Supply and Demand hasn't been repealed after all...

Interpreting these numbers sensibly doesn't require a mastery of quantum mechanics. It's all just Econ 101, but the American upper middle class so despises the American working class today that self-evidently shoddy thinking deleterious to the welfare of the American working man is routinely trumpeted in both conservative newspapers like the Wall Street Journal and liberal newspapers like the New York Times.

http://isteve.blogspot.com/2006/04/does-illegal-immigration-lower-wages.html

Posted by: Steve Sailer | Apr 17, 2006 6:32:47 AM

Ohio is below average at 95.4. So, relative to the national average cost of living, high school dropouts in Ohio average $8.77 versus $5.78 for the equivalent in California. That means they are 52% better off in Ohio than in California.

So, the Law of Supply and Demand hasn't been repealed after all...

Maybe they are 52 percent better off, but was that difference in cost of living there before 1980? (Since that seems to be the date after which everyone is saying "illegal immigration has increased by [X]." And there's hidden assumption in there - I would assume they choose 1980 because there was a change in immigration rates then, but what if they only choose that date because it's a nice round number and old but not too old?)

The point is, I don't have time to check right now - it's easy to mock journalists, but some of us do work hard - but you can't attribute how little a dollar buys in CA to illegal immigration if that difference existed before CA's rate of illegal immigration and/or proportion of illegal immigrants was as high as it is today.

Posted by: Cyrus | Apr 17, 2006 10:52:09 AM

The relevant point thugh, Steve, is whether the Californian dropouts were making 52 percent more than the Ohioans before the influx of illegal immigration. Since absolutely no economic analysis I know of has deomonstrated anything above a potentially 8% wage depression, I'm skeptical. As you say, it's basic economics, and for now, the case seems to ct in favor of immigration.

Posted by: Ezra | Apr 17, 2006 12:40:53 PM

The relevent piece of information that Steve ignores - deliberately, I assume - is that wages for high-school dropouts in Ohio have fallen 31%, while those in California for the same demographic, during the same period, fell 17%.

There is also an extreme diversity of geography and economy in California, especially compared to a state like Ohio. People in Blythe do not make what people in Palo Alto make, nor do they pay anywhere near the same costs. Saying that California has a certain cost of living is like saying that all of Iraq is safe because there haven't been any attacks in the Green Zone lately.

Posted by: Stephen | Apr 17, 2006 3:28:20 PM

"Maybe they are 52 percent better off, but was that difference in cost of living there before 1980?"

- We know that housing inflation in California from 1980 through 2004 was 315%. In Ohio over the same period, it was 155%.

"The relevant point thugh, Steve, is whether the Californian dropouts were making 52 percent more than the Ohioans before the influx of illegal immigration."

- No, they weren't. We can calculate their 1980 wages directly from the article. Even failing to adjust for the striking disparities in the inflation rate between Ohio and California, one obvious differences is that high school dropouts used to be paid a lot more in Ohio, probably due to greater unionization. In contrast, Southern California was traditionally anti-union. The 1980 wage in Ohio was $12.13 versus $10.49 in California. Obviously, the decline in unionized heavy industry jobs hit rust belt Ohio harder than growing California, which had fewer unionized heavy industry jobs to lose.


Posted by: Steve Sailer | Apr 17, 2006 4:26:36 PM

"There is also an extreme diversity of geography and economy in California, especially compared to a state like Ohio. People in Blythe do not make what people in Palo Alto make, nor do they pay anywhere near the same costs."

- True, and the Central Valley is definitely cheaper than Silicon Valley. But, a huge fraction of California's illegal aliens live in Southern California, which is enormously expensive. The median house price in Los Angeles County is now $506,000, and it's higher in Orange, Ventura, and San Diego counties.

Look, this was a weak piece of punditry that the NYT should have subjected to some simple reality checks before agreeing to publish. The Law of Supply and Demand really does apply to illegal immigration, no matter how much a lot of people wish it didn't.

Posted by: Steve Sailer | Apr 17, 2006 4:35:20 PM

By the way, Cesar Chavez fought hard against illegal immigration, exactly because of the Law of Supply and Demand:

Growers fought back against United Farm Work organizing by busing the reserve army of the unemployed up from Mexico. In 1979, Chavez bitterly testified to Congress:

" … when the farm workers strike and their strike is successful, the employers go to Mexico and have unlimited, unrestricted use of illegal alien strikebreakers to break the strike. And, for over 30 years, the Immigration and Naturalization Service has looked the other way and assisted in the strikebreaking. I do not remember one single instance in 30 years where the Immigration service has removed strikebreakers. … The employers use professional smugglers to recruit and transport human contraband across the Mexican border for the specific act of strikebreaking…"

In 1969, Chavez led a march to the Mexican border to protest illegal immigration. Joining him were Sen. Walter Mondale and Martin Luther King’s successor as head of the Southern Christian Leadership Conference, Ralph Abernathy.

The UFW picketed INS offices to demand closure of the border. Chavez also finked on illegal alien scabs to la migra. Columnist Ruben Navarrette Jr. reported in the Arizona Republic, “Cesar Chavez, a labor leader intent on protecting union membership, was as effective a surrogate for the INS as ever existed. Indeed, Chavez and the United Farm Workers Union he headed routinely reported, to the INS, for deportation, suspected illegal immigrants who served as strikebreakers or refused to unionize.”

Like today’s Minutemen, UFW staffers under the command of Chavez’s brother Manuel patrolled the Arizona-Mexico border to keep out illegal aliens. Unlike the well-behaved Minutemen, however, Chavez’s boys sometimes beat up intruders.

You can read the rest at: http://www.amconmag.com/2006/2006_02_27/article.html

Posted by: Steve Sailer | Apr 17, 2006 4:48:52 PM

I think that last is exactly right, Steve. Illegal immigrants are the problem -- unprotected by labor laws, easily exploitable. That's why we need to legalize themm bring them out into the bright sunshine of minimum wage and the NLRB.

As for the cost of living issue, I think you miss the point slightly: It's well and good to say that poor Ohioans are better off than poor Californians, but the question, when evaluating the impact of immigration, is what the differential was before that. As Stephen points out, the evidence seems to be that unskilled Californians did better during the same period and, while your explanation for parts of that is sound, it's clear that if we want to help either group, we should stop worrying about immigration and go towards more unionization. I'm just not seeing the evidence that immigrants deeply harm low income native workers, and given how much immigration helps immigrants, I can't see the case, without better evidence, for turning against it.

Posted by: Ezra | Apr 17, 2006 5:40:32 PM

I don’t understand why Sailer is not pointing out the real reason the article is junk:

It idiotically ignores the high school economic class fact that the American labor market is a MARKET. That means that supply of unskilled labor in California will affect wages in Ohio, since the markets are linked. Duh. Or do you people actually think that workers, capital and goods cannot move between American states?

Further, just looking at education level is silly. High school dropout are heterogeneous, and not the same in different states/industries. Some guy from a small town in Ohio who like many of his peers dropped out of high school to get work in the local plant and had 30 years of work experience in 1980 is not the same worker as today’s dropouts. Where only 6% of white students drop out, and are likely to be quite different in characteristic (if you get my drift.

It may shock NYT readers to hear, but more than one factor can influence wages in an economy over 25 years. It is not just unionization either. The main reasons the wage of unskilled Americans fell is skill based technological change. Now this will, of course, hit workers that are productive and earning good money due to long experience in manufacturing in Ohio more than busboys in Los Angeles.

That does *NOT* mean that the laws of supply and demand cease to work in order to save politically correct liberals from moral dilemmas. Import more unskilled voters that will depend on the state hurts the living standard of their unskilled base. Two things ca

The most comprehensive estimates made by Economists shows that increasing unskilled workers by 10% decreases wages by 3-4%. This translates to about 7.4% decrease in the earnings of average high school dropouts 1980-2000.

http://ksghome.harvard.edu/~GBorjas/Papers/cis504.pdf

From reading the blogger I get the impression she is aware of this. Why than recommend the silly article in NYT that ignores the established facts in economics?

Let me guess: You are going for the Straw Man that all the downward pressure on unskilled American workers is due to immigration (Unskilled Americans are in fact somewhat better of than 1980 in total income).

No economist is claiming that. But the other factors, such as technological change that makes unskilled manual workers obsolete and shifts in demand are impossible to influence. (globalization is no longer important American workers wages, even if it once was. Why? Because your trade competing unskilled- manufacturing sector is all but gone, unskilled workers are now in the non-tradable service and construction industries).

Nor can you magically make today’s dumb unskilled Americans into computer programmers, No matter what fantasy of the world liberals have.

Illegal immigration however is something politicians actually *can* affect. The approxl. 7.5% dropp in wage could have been avoided if you had restricted importing more unskilled foreigners.



PS.

I you please mention exactly which working Clinton era education program Bush cancelled? Because:

1.Bush unfortunately didn’t cancel much, he expanded government education.

2. Studies of adult government education programs by for example James Heckman have demonstrated beyond doubt that it is inefficient waste of recourses.

Posted by: Teller | Apr 17, 2006 6:10:24 PM

“it's clear that if we want to help either group, we should stop worrying about immigration and go towards more unionization.”


Haha, liberal “economics” at it’s best. Please explain to me how you imagine that artificially decreasing the supply of unskilled workers through unionization is an efficient mechanism to increase wages, but reducing the supply through restriction immigration is not?

Is this some sort of magical labor supply that reacts completely differently in order to satisfy your political correctness?

Now let me explain to you why unionization is a horrible policy to help Americans, but restricting immigration is not.

The mechanism behind unions raising wages is by not allowing enough workers to be hired. There is no way to avoid this, you HAVE to restrict supply in order to raise wages. In practice, this means high levels unemployment.

During this glorious golden years of Working Class supremacy American workers had Europeans double digit unemployment’s rates. This is not seen if you only look at hourly wage data, that naturally restricts the army of workless poor.

So unionization helps some Americans by hurting other poor Americans. Because overall efficiency is lower, unionization in net hurts the US more than it helps.

Restricting immigration however works by forgone gains by NON-AMERICANS. The rest is similar, indeed even Borjas admits the gains to immigrants is larger that the losses incurred by American workers.

But of course American voters and politicians are not in the business of securing Mexican welfare. If you want to do it, go ahead, but do it honestly. Admit that competition by immigration will, of course, hurt unskilled Americans, but that you are willing to pay the price (well, you are willing to let the unskilled Americans pay the price).

This is by the way why Sailer so often shoots himself in the foot. He accepting large parts of confused leftwing argument, such as the myths and nonsense abut unionization and environmentalism, when trying to argue against the rest of their fallacies.

Do you know why Ohio is no longer unionized? Largely because those unionized, factory workers were, even if uneducated, very skilled in what they did though years of practical experience and due to their American work ethics. This made them hard to replace, and made it easy to organize.

But this relatively high standard of living was not enough. They became greedy, and unionized the industries while the times were good. When technological, trade and demand shocks hit them the industries were not competitive, and quickly went out of business.

Do you ever wonder why France and Ohio face similar problems? Because of similar practices. Stop romanticizing the mistakes of socialists and of the working class.


Posted by: Teller | Apr 17, 2006 6:29:53 PM

It's striking how out of touch liberal Democrats are today with the basics of labor economics that their grandfathers understood in their bones.. Unions thrive when the supply of labor is limited. The larger the supply of labor, the more easily employers can make end runs around unions. If there is a huge supply of labor, whether you call the supply illegal immigrants or guest workers or citizens is of marginal importance. That's why union hero Samuel Gompers, himself an immigrant, was a major supporter of the 1924 immigration restriction law.

Posted by: Steve Sailer | Apr 17, 2006 7:01:18 PM

Sorry Steve, but I think it's best we let the AFL-CIO speak for itself on this one. So much as I trust that you have their best interests at heart, I'm even more certain that they're invested in their own success. The logic you use here, by the way, would also work for keeping women out of the workforce. Maybe it would be better if we simply instituted card check laws and made organizing easier, as the AFL-CIO wants, rather than build a wall, which neither the ALF-CIO nor Change to Win seem to support.

Posted by: Ezra | Apr 17, 2006 7:13:38 PM

"Sorry Steve, but I think it's best we let the AFL-CIO speak for itself on this one."

What the current leadership of the AFL-CIO wants is more dues-paying members to pay for the leaders' perks. The welfare of the members is secondary.

My goodness, you are naive.

Posted by: Steve Sailer | Apr 17, 2006 7:24:01 PM

Ezra got this right. Restricting women from working would raise men’s wages, same with unionization. Anyone who likes the latter should like the former. In both cases Insiders are better off, but the cost to the unemployed is more than the gain to members (we know this because aggregate output is smaller in both cases, someone must have paid for it, and since capital is mobile it must be some form of labor).

That’s why we should not encourage unionization nor laws that keep women from the workplace (which, incidentally, unions used to support).

Restriction immigration would do the exact same. But in the first two cases the losers are Americans, so you are net worse off. With immigration the losers are foreigners, and the winners unskilled American.

Why do you support the policy when the cost is on poor Americans but oppose it when the cost is on Mexicans?

Unions in Europe are adamantly opposed to labor immigration, because they understand this simple logic.

American unions are controlled by Democrat, who seem to case more about getting votes for their party than protecting their members.

Posted by: Teller | Apr 17, 2006 7:54:42 PM

Ah, I'd forgotten, it's bad for unions to unionize more members...

This is getting a bit bizarro world, is it not? If you believe the point here is helping workers, more workers unionized is better, as are more poor immigrants from a neighboring country whose economy we've majorly impacted (often negatively) getting good, union jobs. I see your point if all we're worried about is the absolute condition of native born high school dropouts, but given that immigration has absolute benefits to the economy and the slight hurt on low-income workers is nothing compared to the massive gain for immigrants (and the increased stability for Mexico through remittances), I'm really just missing your case here.

And come now -- ascribing the desire of union leaders to unionize more workers as all about dues is so 1950s. The dues, after all, go back into unionizing, particularly within Change to Win, which contains the most immigrant heavy unions.

Posted by: Ezra | Apr 17, 2006 8:29:33 PM

“the slight hurt on low-income workers is nothing compared to the massive gain for immigrants”

Why don’t you ask the low-income workers that lost 7.5% of their annual income. At any case the article you praise claims there is no such effect.

Furthermore, if the US were to give 900 billion, or 7.5% of it’s National Income per year in forign aid that would help the poor much more than immigration ever could. That is incidentally 10 times more per year than the annual cost of the Iraq war for the average american.

Is the equivalent of ten times more than the Iraq war a “slight hurt”? Maybe, but than why the fuss about the cost of the war?

I don’t really understand why you would support Mexican immigration. Afterall, mexico is the second richest Latinamerican country, with a Gdp per capita of 10.000 $ capita. (oddly enough northern Mexico is much richer than southern Mexico, clearly despite the “often negative” major impact of having the US as a neighbour…). Why not take legal immigrants from Bangladesh and Senegal?


You think it is “bizarro” of unions to want to restrict workers? For someone so possitive in favour of intrested in unions you don’t know much about how they work (well, maybe that’s why you are so possitive).

If unions cannot restrict the workforce they serve no porpuse for their members. Excluding some is the CORE of how unions work (in Scandinavian countries where everyone is a member of unions they have a lot of political power, but have not been able to raise wages).

If illegals are more likely to join unions and pay more dues perhaps unions gain by supporting illegal immigration. But this will not change the fact that the illegals are pressing the wages of poor americans downward. For each dollar they make lowincome americans lose 30-40 cents.

This just emphasizes the inherent conflict of intressts between union members and other poor americans.

Posted by: Teller | Apr 17, 2006 9:12:46 PM

"slight hurt on low-income workers is nothing compared to the massive gain for immigrants (and the increased stability for Mexico through remittances), I'm really just missing your case here."

Why would I want to increase stability for the political and business leaders of a country that has ransacked their own economy to the direct detriment of it's own people?

Remember, we aren't talking about Ethiopia here. Mexico is not a poor country, unless you believe that a country with quite a few millionaire businessmen (light skinned at the general rule) can be considered a peer of countries like Ethiopia.

You seem to think that our filling the needs of the resulting economic refugees is a good thing, since their wiring money to their economically defeated relatives in Mexico maintains the status quo of Mexico's economic sociopaths.

Posted by: Allen | Apr 18, 2006 6:16:45 AM

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