In my latest column in the Pittsburgh Tribune-Review I undertake a risky task: to disagree with Milton Friedman. But Friedman was one of history’s greatest scholars – and great scholars never accept arguments exclusively, or even chiefly, on authority. Specifically, I here challenge Friedman’s argument that the existence of America’s welfare-state makes it unwise to return to the more-open immigration regime that America had until the 1920s.
Anticipating one objection – namely, that immigrants are in fact a drain on the American welfare state – I point here to this article in the Concise Encyclopedia of Economics by George Borjas. Among all serious scholars researching the effects of immigration, Borjas is among those who are most inclined to see today’s immigrants as burdensome. Even Borjas, though, concedes that the data do not show that immigrants are a significant drain on Americans’ wealth. Here are some relevant passages from Borjas’s article:
Although the entry of immigrants reduces the wages of comparable natives, it increases slightly the income of U.S. natives overall.
…
Many people believe that because a large percentage of immigrants go on welfare, the costs to American taxpayers may wipe out the gains from immigration. Increasingly, the evidence tends to indicate that because of these fiscal impacts, immigration is essentially a wash for the U.S. economy….
Borjas goes on to point out that something that is “a wash for the U.S. economy” is hardly the economic boon that many of its proponents make it out to be.
That’s an argument best left for future blog posts. I add here only that the data that Borjas uses are all from a regime in which immigrants’ abilities to find gainful employment (and, hence, to pay taxes for whatever public goods they use) are severely hampered by Uncle Sam.
UPDATE: Here’s a 2006 essay by Shikha Dalmia with some additional numbers.
Share
Podcast RSS Feed
Full EconTalk Text
{ 83 comments }
← Previous Comments
You stay classy Tired…
Please.
Over 1/5th of incarcerated criminals are subject to deportation. Most from the Southwest, and most resulting from federal government failure to enforce extant law.
The economic burden to AZ is somewhere around $17 billion.
AZ was one of the hardest hit by the recession precisely because of non-enforcement:
http://www.bea.gov/newsreleases/regional/gdp_st...
I would also look at peripheral costs (litigation, pending jail, retention costs), smuggling costs (uncapturable over time, due to legal enforcement/border changes)
Again, you do not get to pick and choose which laws you think are right; they can and will be enforced, no matter how idiotic.
Exactly!
My “exactly” was a response to this, by Sam Grove.
More workers flood in than we can employ.
How is this possible?
The solution is simple, remove government constraints on job creation.
So basically you're saying “let's let in anyone who turns up, make them citizens and if they turn to be bad guys then I'd rather let in criminals than restrict the rights of honest immigrants”? Does the U.S. have the right to screen aspiring migrants? Or do you feel this creates a bottleneck and the government is going to let migrants that only suit government purposes? I believe no civilised nation should have a 'semi-citizenshp' whereby a person get some rights but can be booted out if they become 'undesirable'. Once someone becomes a citizen they ought no be subject to any more punishments than a native-born citizen can get.
I presume that the definition of a 'immigrant' is someone who has been 'let in' and given citizenship. Hence such a person who have the same rights and responsibilities of a native-born American citizen. Besides it could be said that Americans can't necessarily do what they like provided it 'doesn't hurt anyone'.
Yes, something like that. The principles that say a justice system should assume innocence also say we shouldn't presume guilt for immigrants. Preemptively restricting the rights of those who wish to come here is no different, at last morally, from preemptively restricting the rights of citizens. That is, unless citizenship confers rights instead of nature.
And no, the US does not have a right to anything. Countries don't have rights. Human beings do. The question is what kind of immigration policy is fitting for a free society. My opinion is that any kind of screening that effectively restricts the right of people to enter the country (e.g. if screening is too time consuming, or results in a bottleneck) then it should not be pursued.
And yes, I agree with you on the last issue. Immigrants should be subject to the same laws as citizens. No more, no less.
What do you mean, “fail to file as such”? Do you mean that the landlords are renting homes to illegal immigrants on land without a title? If not, I don't think you understood what I meant by incidence.
Taxes are levied on homeowners in almost every situation. They are the ones who hand over dollars to the state, but that doesn't mean they are paying for it. The tax incidence, i.e. who is actually footing the bill, are the renters. Rents adjust to reflect the cost of property taxes. I don't think being “off the grid” is really a factor for this.
Also, what does North Dakota have to do with this? North Dakota doesn't experience large scale costs from illegal immigrants… and has very few immigrants. How does this affect the comparison of tax burdens between an illegal family and a legal family living in similar conditions? Your point is what, exactly?
” The question is what kind of immigration policy is fitting for a free society.”
You answered it – none at all.
“Immigrants should be subject to the same laws as citizens.”
I presume an lawful immigrant becomes a citizen therefore such a statement becomes kinda circular. However I s'pose a someone who has a temporary working visa is a slightly different matter.
“If welfare state benefits are so attractive, relative to employment, then the benefits will attract current citizens as much as immigrants.”
Cross reference to the idea of public “service” as an entitlement. My god, what would happen if they all start seeking government jobs? /snark.
It is interesting that Hayek and Friedman disagree with Don here (See the Hayek quote in my post above). Expanding on Hayek, I explain that the expanding Leviathan renders old information on welfare costs inapplicable to this discussion. As L Adams points out, Borjas's stuff is pre 1996, As Greg Ransom points out to Don, “might” isn't “is”. Dr T points out that Friedman was talking about state provision beyond limited definitions of “welfare” including education, hospital, incarceration, etc.; likewise via mesaeconoguy.
Qazmun (above) concludes his post with “Friedman was, and is, correct.” Given all the holes that these and others have been shot clean through Don's assertion that Milton is wrong, it seems more sensible at this point in the debate to side with Friedman and Hayek in this case.
And, BTW, this is afterall “Cafe Hayek”, so one would think some attention should be given to head-to-head discussion of Hayek. Hasn't happened.
“This has opened my eyes. I've always viewed the economic contributions of most immigrant workers to be less than their cost for education, medical assistance, and welfare. It appears this may not be the case after all. “
As always, it depends upon how you measure. The cost for education, as an example, is difficult to measure. There are language issues that have to be addressed, which require specialists. When families resist assimilating into the culture they've moved into, the children tend to segregate themselves and find their own identity — this division creates security problems. All of these costs are absorbed by the educational systems, but not really measured. Sowell's early work clearly showed that it takes three generations for a non-english speaking family to assimilate. There are costs. Is learning to speak the language too high a barrier to entry? I agree that the current immigration policy is broken — but our current policy appears to be some variation of red-light green-light or capture-the-flag. If you can get past the guards, you're home free. Does that make sense?
so, open up the borders? what is your plan?
If we allowed undocumented workers to become legal, many would very quickly rise into the middle class. Perhaps only 25% would do so, but that would probably amount to two million taxpaying households.
Further, if we gave legal status to undocumented workers, they would be free to start businesses and to buy homes. Not all would do so, but enough would that the additional economic growth would be a boon for the nation. The 8 million or 12 million undocumented workers surely includes at least a million and likely more who are unable to reach their full economic potential, simply because of their status as illegals.
I said “even if it were true,” I know immigrants create their own jobs and employers expand their production or services with extra labor too(or capital), but my point was that if those immigrants find no prospects of a job, they can always move.
Greg Ransom: “high schools with below 50% graduation rates”
Are you arguing that children of illegal workers have graduation rates below 50%? Recent research I've seen does not support such a claim. From a 2006 publication by economists Lawrence Mishel and Joydeep Roy:
“Estimates of Hispanic high school graduation rates with a regular diploma range between 61% and 74%, with the NELS showing a 74% rate. This is substantially higher than the frequently alleged 50% rate for Hispanics reported from the school-based enrollment/ diploma data. Further, these data do not account for the additional 9% to 12% of Hispanics who receive a GED, which allows entry into post-secondary education, the military, and other second-chance systems.
Trends in Hispanic graduation rates are difficult to track since it is important to be able to identify recent immigrants who were not enrolled in U.S. schools. This can be done with the data from 1994 and more recent years and the data reveal that the Hispanic completion rate (either by diploma or GED) has grown from 76% to 81.3% from 1994 to 2004. “
America is a product, is it not? It's a place with infrastructure, common language, stable rules and currency; it's a pretty nice in the larger “Mall” called earth in which to participate in commerce.
Now there's another “Mall” south of us, but the landlord doesn't take good care of it. Parking is terrible, lighting poor, people don't abide by common rules and as a result the mall isn't busy.
People know that if they just go to the mall north of them, they will have a more efficient and effective place to sell their goods, i.e. their labor. As a dividend of the better environment of this new mall, they and their family will live longer.
The problem is that no one knows the entry price to joining that other mall, and no one will tell them. Still they are eager to work in that more efficient mall and so they come, and everyone reading this would do precisely the same thing.
We just need some turnstiles like at Disneyland. An “on-boarding” process to assure that our rules are understood and a gradual path of welfare participation, and we're good to go.
There's plenty of room, we don't even have to schooch over.
Tom
What do you mean, “fail to file as such”? Do you mean that the landlords are renting homes to illegal immigrants on land without a title?
There are (were) tax disincentives to report housing as rental property. Many landlords simply carried (rental) properties on the books as non-rental (with title), and their (undocumented, illegal) tenants were perfectly fine with this arrangement, for obvious reasons (even to you).
North Dakota doesn't experience large scale costs from illegal immigrants… and has very few immigrants. How does this affect the comparison of tax burdens between an illegal family and a legal family living in similar conditions?
Exactly.
The federal gov’t cannot hold single states liable (unequal application) for failure to enforce federal law.
You understand perfectly.
BTW, I do completely believe in more immigration, just not unchecked.
The untold story here is that a significant portion of the Southwest Latino community is pissed off at what they perceive to be a bunch of freeloaders trying to take unfair advantage of a broken system, while they busted their asses to get here “the right way.”
I suggest that those who oppose immigration restrictions consider the conceptual experiment of replacing their locked back door access to their kitchen with a turnstile. There is plenty of food in our kitchens, why not allow more open access to others? To insure sustainability, just put an empty coffee can in the kitchen with the word “donations” on it; for those who don't have money, be sure to leave a list of chores you want done. Surely those who come through the turnstile will work for what they take from the kitchen.
That's not what I've seen here in AZ. All of the hispanics I've talked to (and I've talked to many) find the new law here despicable.
Also, most (if not all) of the hispanics I know are either descendants of those who walked across the desert or did so themselves before the 1980s amnesty. In fact, with the exception of my hispanic friends who married Americans and immigrated, I can't think of any who came here “the right way”.
I should add that I did know a couple of Mexican MBA students who came here legally to study, but they came from very wealthy families… one of the prereqs to being able to come here “the right way”.
Which state tax law are you referring to? Even if what you are saying is the case, the incentive applies to immigrants and natives alike. Once again, lets make apples to apples comparisons here.
PS, you might want to keep up on that case you referenced. Arizona won it a year ago, the situation you're referring to doesn't exist. Even if it did, having to pay for illegal's education (which they are paying for with rents) doesn't mean the government is holding Arizona “liable for failure to enforce federal law.” That's nonsense.
Why would immigration make this problem worse that it would otherwise be? Are immigrants more likely to abuse the welfare state than current citizens?
In a socialist system it's possible. If the immigrants belong to a group that is targeted to receive welfare, for instance. In a socialist system procuring anything from a job to certain goods is a matter of who you know. The least connected people are poor immigrants. They may end up with no choice – that's a problem in Europe. Immigrants are locked out of jobs and end up on the dole.
According to the Shikha Dalmia article, illegal immigrants cannot abuse the welfare state to a greater extent than current citizens,
Are we talking about legal or illegal immigrants? The issues surrounding each is slightly different. In an extremely socialist country, I'm inclined to think illegal immigrants are preferable to legal immigrants. On the other hand, if they can abuse the system by more than they produce, we have a net loss.
But then…I'm a lover of underground economies because they are the only truly free markets.
Fundamentally, Sam is right. Employment is not a zero sum game.
I agree.
The problem is when the economy becomes so overwhelmed with entitlement programs, it longer creates meaningful jobs. At that point, new immigrants are a cost because there's no incentive to work and invest and the economy doesn't produce enough jobs to absorb immigrants into productive endeavors. I don't know where that point is, but I think that people probably perceive that the tipping point is closer than it may actually be.
“I'll take a flood of poorly educated, unskilled immigrants any day over the nanny state. “
Whom do you think the poorly educated, unskilled immigrant will be voting for when they obtain citizenship? Do you really think they will vote for the limited government candidate who vows to abolish the nanny state? Do you care to place a bet on that? There is a reason why Hugo Chavez (and other statist tyrants) get elected. Their most reliable voting bloc —- poorly educated, unskilled citizens.
I generally like most of what Don Boudreaux puts out there, but I believe he is missing a very important point.
Whom does he think the unskilled immigrant will be voting for when they obtain citizenship? Does Boudreaux really think they will vote for the limited government candidate who vows to abolish the nanny state? Take a look at the places where unskilled immigrants reside and see who they vote for. My guess is they are not voting Libertarian.
Why do you think Hugo Chavez tried to grant amnesty to 1 million impoverished Columbian immigrants in 2004? There is a reason why Hugo Chavez (and other statist tyrants) get elected. Their most reliable voting bloc —- poorly educated, unskilled citizens.
“My guess is they are not voting Libertarian.”
My guess is you are correct. As the US strays further and further toward democracy (as the “living constitution” doctrine kills the US Constitution) the issue you raise becomes increasing concerns for those who think about the differences between Republic vs. Democracy; for example:
http://www.1215.org/lawnotes/lawnotes/repvsdem.htm
The underlying assumption in my statement is that the constitution actually means something and that government is too limited in scope to be able to redistribute.
There was such a time in the United States.
I agree with everything you are saying. I am adding the point that Libertarians need to realize what type of government the unskilled, uneducated immigrants will be voting for once they get their citizenship. I doubt it will be a limited government Republic.
Look at Mexico and Central America for examples of what type of government is coming our way; should we open up the borders and grant amnesty.
Don, you can't assume linearity.
Maybe “the data do not show that immigrants are a significant drain on Americans’ wealth,” but even a small “drain” can have a very large effect over time. Small price changes can create gigantic market moves. Everyone knows this from obscure, little markets like….the US stock market!
In the same way, even a small “drain” on American’s wealth can create gigantic problems. Small “drains” are a big deal.
It's irritating to see errors like this, over and over and over, when it immigration and outsourcing come up.
TJ,
To throw Milton Friedman under the bus one has to strain credibility; to throw both Friedman and Hayek under the bus flies in the face of reason. For the purveyor of Cafe Hayek to leave Hayekian challenges unchallenged is, at a minimum, derelict.
Unfortunately my travel schedule prevented me from responding to this in a timely fashion.
I don’t have time to explain state and local real estate and tax laws, so that will have to sit for now. The house immediately next door, in a gated, affluent neighborhood, was foreclosed due to the aforementioned scenarios.
The Supreme Court reversed a decision by a rogue judge in a lower federal court to impose unilateral fines on the state for supposed failure to address non-English speaking scholastic (lack of) performance. It did not eliminate or invalidate the original case.
http://www.azcentral.com/news/articles/2009/06/...
The original case still stands and is based on the Equal Education Opportunities Act (1974), and the ability for federal judges to impose state-level action (and therefore impose taxpayer cost) most certainly still exists, as does the root of the problem, continued inflow of low income, low academic achievement immigrants.
You need to be much more careful with your facts. Contending this is nonsense is, well, nonsense.
Unfortunately my travel schedule prevented me from responding to this in a timely fashion.
I don’t have time to explain state and local real estate and tax laws, so that will have to sit for now. The house immediately next door, in a gated, affluent neighborhood, was foreclosed due to the aforementioned scenarios.
The Supreme Court reversed a decision by a rogue judge in a lower federal court to impose unilateral fines on the state for supposed failure to address non-English speaking scholastic (lack of) performance. It did not eliminate or invalidate the original case.
http://www.azcentral.com/news/articles/2009/06/...
The original case still stands and is based on the Equal Education Opportunities Act (1974), and the ability for federal judges to impose state-level action (and therefore impose taxpayer cost) most certainly still exists, as does the root of the problem, continued inflow of low income, low academic achievement immigrants.
You need to be much more careful with your facts. Contending this is nonsense is, well, nonsense.
← Previous Comments
Comments on this entry are closed.