[OPE-L] immigration equation

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Mon Jul 10 2006 - 13:41:49 EDT

July 9, 2006

The Immigration Equation
The day I met George Borjas, cloistered in his office at the John F.
Kennedy School of Government at Harvard while graduate students from
Russia, India, China and maybe Mexico mingled in the school cafe,
sipping coffee and chattering away in all their tongues, the United
States Senate was hotly debating what to do about the country's
immigration policy. Borjas professed to be unfazed by the goings-on
in Washington. A soft-spoken man, he stressed repeatedly that his
concern was not to make policy but to derive the truth. To Borjas, a
Cuban immigrant and the pre-eminent scholar in his field, the truth
is pretty obvious: immigrants hurt the economic prospects of the
Americans they compete with. And now that the biggest contingent of
immigrants are poorly educated Mexicans, they hurt poorer Americans,
especially African-Americans, the most.
Borjas has been making this case - which is based on the familiar
concept of supply and demand - for more than a decade. But the more
elegantly he has made it, it seems, the less his colleagues concur.
''I think I have proved it,'' he eventually told me, admitting his
frustration. ''What I don't understand is why people don't agree with

It turns out that Borjas's seemingly self-evident premise - that more
job seekers from abroad mean fewer opportunities, or lower wages, for
native workers - is one of the most controversial ideas in labor
economics. It lies at the heart of a national debate, which has been
encapsulated (if not articulated) by two very different immigration
bills: one, passed by the House of Representatives, which would
toughen laws against undocumented workers and probably force many of
them to leave the country; and one in the Senate, a measure that
would let most of them stay.
You can find economists to substantiate the position of either
chamber, but the consensus of most is that, on balance, immigration
is good for the country. Immigrants provide scarce labor, which
lowers prices in much the same way global trade does. And overall,
the newcomers modestly raise Americans' per capita income. But the
impact is unevenly distributed; people with means pay less for taxi
rides and household help while the less-affluent command lower wages
and probably pay more for rent.
The debate among economists is whether low-income workers are hurt a
lot or just a little - and over what the answer implies for U.S.
policy. If you believe Borjas, the answer is troubling. A policy
designed with only Americans' economic well-being in mind would admit
far fewer Mexicans, who now account for about 3 in 10 immigrants.
Borjas, who emigrated from Cuba in 1962, when he was 12 (and not long
after soldiers burst into his family's home and ordered them at
gunpoint to stand against a wall), has asserted that the issue,
indeed, is "Whom should the United States let in?"
Such a bald approach carries an overtone of the ethnic selectivity
that was a staple of the immigration debates a century ago. It makes
many of Borjas's colleagues uncomfortable, and it is one reason that
the debate is so charged. Another reason is that many of the scholars
who disagree with Borjas also hail from someplace else - like
gardeners and seamstresses, a surprising number of Ph.D. economists
in the U.S. are foreign-born.
Easily the most influential of Borjas's critics is David Card, a
Canadian who teaches at Berkeley. He has said repeatedly that, from
an economic standpoint, immigration is no big deal and that a lot of
the opposition to it is most likely social or cultural. "If Mexicans
were taller and whiter, it would probably be a lot easier to deal
with," he says pointedly.
Economists in Card's camp tend to frame the issue as a puzzle - a
great economic mystery because of its very success. The puzzle is
this: how is the U.S. able to absorb its immigrants so easily?
After all, 21 million immigrants, about 15 percent of the labor
force, hold jobs in the U.S., but the country has nothing close to
that many unemployed. (The actual number is only seven million.) So
the majority of immigrants can't literally have "taken" jobs; they
must be doing jobs that wouldn't have existed had the immigrants not
been here.
The economists who agree with Card also make an intuitive point,
inevitably colored by their own experience. To the Israeli-born
economist whose father lived through the Holocaust or the Italian who
marvels at America's ability to integrate workers from around the
world, America's diversity - its knack for synthesizing newly arrived
parts into a more vibrant whole - is a secret of its strength. To
which Borjas, who sees a different synthesis at work, replies that,
unlike his colleagues, the people arriving from Oaxaca, Mexico, are
unlikely to ascend to a university faculty. Most of them did not
finish high school. "The trouble with the stories that American
journalists write about immigration," he told me, "is they all start
with a story about a poor mother whose son grows up to become. . . .
" and his voice trailed off as if to suggest that whatever the
particular story - that of a C.E.O., a ballplayer or even a story
like his own - it would not prove anything about immigration. What
economists aim for is to get beneath the anecdotes. Is immigration
still the engine of prosperity that the history textbooks describe?
Or is it a boon to business that is destroying the livelihoods of the
poorest workers - people already disadvantaged by such postmodern
trends as globalization, the decline of unions and the computer?
The Lopsided-Skill-Mix Problem
This spring, while militias on the prowl for illegal immigrants were
converging on the Arizona border and, on the other side of the
political fence, immigrant protesters were taking to the streets, I
sampled the academic literature and spent some time with Borjas and
Card and various of their colleagues. I did not expect concurrence,
but I hoped to isolate what we know about the economic effects of
immigration from what is mere conjecture. The first gleaning from the
Ivory Tower came as a surprise. All things being equal, more
foreigners and indeed more people of any stripe do not mean either
lower wages or higher unemployment. If they did, every time a baby
was born, every time a newly minted graduate entered the work force,
it would be bad news for the labor market. But it isn't. Those babies
eat baby food; those graduates drive automobiles.
As Card likes to say, "The demand curve also shifts out." It's
jargon, but it's profound. New workers add to the supply of labor,
but since they consume products and services, they add to the demand
for it as well. "Just because Los Angeles is bigger than Bakersfield
doesn't mean L.A. has more unemployed than Bakersfield," Card
In theory, if you added 10 percent to the population - or even
doubled it - nothing about the labor market would change. Of course,
it would take a little while for the economy to adjust. People would
have to invest money and start some new businesses to hire all those
newcomers. The point is, they would do it. Somebody would realize
that the immigrants needed to eat and would open a restaurant;
someone else would think to build them housing. Pretty soon there
would be new jobs available in kitchens and on construction sites.
And that has been going on since the first boat docked at Ellis
But there's a catch. Individual native workers are less likely to be
affected if the immigrants resemble the society they are joining -
not physically but in the same mix of skills and educational
backgrounds. For instance, if every immigrant were a doctor, the
theory is, it would be bad for doctors already here. Or as Borjas
asked pointedly of me, what if the U.S. created a special visa just
for magazine writers? All those foreign-born writers would eat more
meals, sure, but (once they mastered English, anyway), they would be
supplying only one type of service - my type. Bye-bye fancy
During the previous immigrant wave, roughly from 1880 to 1921 (it
ended when the U.S. established restrictive quotas based on country
of origin), the immigrants looked pretty much like the America into
which they were assimilating. At the beginning of the 20th century, 9
of 10 American adults did not have high-school diplomas, nor did the
vast majority of immigrants. Those Poles and Greeks and Italians made
the country more populous, but they did not much change the makeup of
the labor market.

This time it's different. The proportion of foreign-born, at 12
percent, remains below the peak of 15 percent recorded in 1890. But
compared with the work force of today, however, the skill mix of
immigrants is lopsided. About the same proportion have college
degrees (though a higher proportion of immigrants are
post-graduates). But many more - including most of the those who have
furtively slipped across the Mexican border - don't have high-school
The latest estimate is that the United States has 11.5 million
undocumented foreigners, and it's those immigrants - the illegal ones
- who have galvanized Congress. The sponsor of the House legislation,
Representative James Sensenbrenner, a Republican from Wisconsin, says
bluntly that illegals are bad for the U.S. economy. His bill would
require employers to verify the status of their workers from a
national database and levy significant penalties on violators. But
H.R. 4437 isn't primarily an economics bill - it's an expression of
outrage over the porousness of America's borders. Among many other
enforcement measures, the bill forces the U.S. to build hundreds of
miles of fencing on its Southern border.
The Senate bill is irreducibly complex (more than 800 pages), but
basically, it seeks to cure the problem of illegals by bringing them
in from the shadows. Those already here would be able to continue
working and get on track toward a more normalized status. In the
future, employers could bring in guest workers - what Senate
draftsmen refer to hopefully as temporary workers - as long as they
paid them the going wage.
This latter bill, the product of an alliance between John McCain and
Edward Kennedy, isn't really an economics bill, either, at least not
the way economists see it. Its premise is that if you legalize
undocumented people and reinforce the borders, then whatever negative
impact immigrants have on the labor market will go away. The theory
is that newly minted green-card holders, no longer having deportation
to fear, will stick up for their rights and for higher wages too.
Interestingly, some big labor unions, like the Service Employees
International Union, are supporters. But economists are skeptical.
For one thing, after the U.S. gave amnesty to the nearly three
million undocumented workers who were in the country in 1986, their
wages didn't budge. Second, economists, as you might expect, say
market forces like supply and demand, not legal status, are what
determine wages.
It baffles some economists that Congress pays so little heed to their
research, but then immigration policy has never been based on
economics. Economic fears played a part in the passage of the
exclusionary acts against Chinese in the late 19th and early 20th
centuries, and in the 1920's of quotas (aimed in particular at people
from southern and eastern Europe), but they were mostly fueled by
xenophobia. They were supplanted in the Civil Rights era by the
Immigration and Nationality Act of 1965, which ended quotas and
established a new priority based on family reunification. That law,
also sponsored by Kennedy, had nothing to do with economics, either.
It made the chief criterion for getting in having a relative who was
already here.
If economists ran the country, they would certainly take in more
immigrants who, like them, have advanced degrees. (The U.S., which is
hugely dependent on foreigners to fill certain skilled occupations
like scientific research and nursing, does admit a relative handful
of immigrants each year on work visas.) Canada and Australia admit
immigrants primarily on the basis of skills, and one thing the
economists agree on is that high earners raise the national income by
more than low earners. They are also less of a burden on the tax
With the exception of a few border states, however, the effect of
immigration on public-sector budgets is small, and the notion that
undocumented workers in particular abuse the system is a canard.
Since many illegals pay into Social Security (using false ID
numbers), they are actually subsidizing the U.S. Treasury. And fewer
than 3 percent of immigrants of any stripe receive food stamps. Also,
and contrary to popular wisdom, undocumented people do support local
school districts, since, indirectly as renters or directly as
homeowners, they pay property taxes. Since they tend to be poor,
however, they contribute less than the average. One estimate is that
immigrants raise state and local taxes for everyone else in the U.S.
by a trivial amount in most states, but by as much as $1,100 per
household per year in California. They are certainly a burden on
hospitals and jails but, it should be noted, poor legal workers,
including those who are native born, are also a burden on the health
care system.
Parsing the Wage Gap
Economists focus on Mexicans not because many are undocumented but
because, relative to the rest of the labor force, Mexicans have far
fewer skills. And Mexicans and other Central Americans (who tend to
have a similar economic background) are arriving and staying in this
country at a rate of more than 500,000 a year. Their average incomes
are vastly lower than those both of native-born men and of other
Native-born workers: $45,400
All immigrants: $37,000
Mexican immigrants: $22,300
The reason Mexicans earn much less than most Americans is their
daunting educational deficit. More than 60 percent of Mexican
immigrants are dropouts; fewer than 10 percent of today's native
workers are.
That stark contrast conveys, to economists, two important facts. One
is that Mexicans are supplying a skill level that is much in demand.
It doesn't just seem that Americans don't want to be hotel
chambermaids, pick lettuce or repair roofs; it's true. Most gringos
are too educated for that kind of work. The added diversity, the
complementariness of skills, that Mexicans bring is good for the
economy as a whole. They perform services that would otherwise be
more expensive and in some cases simply unavailable.
The Americans who are unskilled, however, must compete with a
disproportionate number of immigrants. One of every four high-school
dropouts in the U.S. was born in Mexico, an astonishing ratio given
that the proportion of Mexicans in the overall labor force is only 1
in 25. So it's not magazine writers who see their numbers expanding;
it's Americans who are, or would be, working in construction,
restaurants, household jobs, unskilled manufacturing and so forth.
That's the theory. But economists have had a hard time finding
evidence of actual harm. For starters, they noticed that societies
with lots of immigrants tend, if anything, to be more prosperous, not
less. In the U.S., wages in cities where immigrants have clustered,
like New York, have tended to be higher, not lower. Mississippi, on
the other hand, which has the lowest per-capita income of any state,
has had very few immigrants.
That doesn't necessarily mean that immigrants caused or even
contributed to high wages; it could be they simply go where the
demand is greatest - that their presence is an effect of high wages.
As statisticians are wont to remind us, "Correlation does not imply
causation." (The fact that hospitals are filled with sick people
doesn't mean hospitals make you sick.) Maybe without immigrants,
wages in New York would be even higher.
And certainly, wages of the unskilled have been a source of worry for
years. From 1970 to 1995, wages for high-school dropouts, the group
that has been the most affected by immigrants, plummeted by more than
30 percent, after adjusting for inflation. Look at the following
averages (all for male workers):
College graduates: $73,000
People with some college: $41,000
High-school grads: $32,000
Dropouts: $24,800
These figures demonstrate a serious problem, at least if you care
about wage inequality, and a quick glance at this list and the
previous one shows that native-born dropouts are earning only a shade
more than Mexicans working in this country. But that hardly proves
that cheap Mexican labor is to blame. For one thing, economists
believe that other factors, like the failure of Congress to raise the
minimum wage, globalization (cheap Chinese labor, that is) and the
decline of unions are equally or even more responsible. Another
popular theory is that computer technology has made skilled labor
more valuable and unskilled labor less so.
Also, when economists look closely at wage dispersion, the picture
isn't wholly consistent with the immigrants-as-culprits thesis. Look
again at the numbers: people at the top (college grads) make a lot
more than average but from the middle on down incomes are pretty
compressed. Since only dropouts are being crowded by illegal
immigrants, you would expect them to be falling further behind every
other group. But they aren't; since the mid-90's, dropouts have been
keeping pace with the middle; it's the corporate executives and their
ilk at the top who are pulling away from the pack, a story that would
seem to have little to do with immigration.
This isn't conclusive either, Borjas notes. After all, maybe without
immigrants, dropouts would have done much better than high-school
grads. Economists look for the "counterfactual," or what would have
happened had immigrants not come. It's difficult to tell, because in
the real world, there is always a lot more going on - an oil shock,
say, or a budget deficit - than the thing whose effect you are
studying. To isolate the effect of immigrants alone would require a
sort of lab experiment. The trouble with macroeconomics is you can't
squeeze your subjects into a test tube.
Marielitos in Miami, Doctors in Israel and Other Natural Experiments
The academic study of immigration's economic effects earned little
attention before the subject started to get political traction in the
1980's. Then, in 1990, Borjas, who was on the faculty at the
University of California at Santa Barbara, published a book, "Friends
or Strangers," which was mildly critical of immigration's effects.
That same year, David Card realized that a test tube did exist. Card
decided to study the 1980 Mariel boat lift, in which 125,000 Cubans
were suddenly permitted to emigrate. They arrived in South Florida
with virtually no advance notice, and approximately half remained in
the Miami area, joining an already-sizable Cuban community and
swelling the city's labor force by 7 percent.
To Card, this produced a "natural experiment," one in which cause and
effect were clearly delineated. Nothing about conditions in the Miami
labor market had induced the Marielitos to emigrate; the Cubans
simply left when they could and settled in the city that was closest
and most familiar. So Card compared the aftershocks in Miami with the
labor markets in four cities - Tampa, Atlanta, Houston and Los
Angeles - that hadn't suddenly been injected with immigrants.
That the Marielitos, a small fraction of whom were career criminals,
caused an upsurge in crime, as well as a more generalized anxiety
among natives, is indisputable. It was also commonly assumed that the
Marielitos were taking jobs from blacks.
But Card documented that blacks, and also other workers, in Miami
actually did better than in the control cities. In 1981, the year
after the boat lift, wages for Miami blacks were fractionally higher
than in 1979; in the control cities, wages for blacks were down. The
only negative was that unemployment rose among Cubans (a group that
now included the Marielitos).
Unemployment in all of the cities rose the following year, as the
country entered a recession. But by 1985, the last year of Card's
study, black unemployment in Miami had retreated to below its level
of 1979, while in the control cities it remained much higher. Even
among Miami's Cubans, unemployment returned to pre-Mariel levels,
confirming what seemed visible to the naked eye: the Marielitos were
working. Card concluded, "The Mariel influx appears to have had
virtually no effect on the wages or unemployment rates of
less-skilled workers."
Although Card offered some hypotheses, he couldn't fully explain his
results. The city's absorption of a 7 percent influx, he wrote, was
"remarkably rapid" and - even if he did not quite say it - an utter
surprise. Card's Mariel study hit the cloistered world of labor
economists like a thunderbolt. All of 13 pages, it was an aesthetic
as well as an academic masterpiece that prompted Card's peers to look
for other "natural" immigration experiments. Soon after, Jennifer
Hunt, an Australian-born Ph.D. candidate at Harvard, published a
study on the effects of the return migration of ethnic French from
Algeria to France in 1962, the year of Algerian independence. Similar
in spirit though slightly more negative than the Mariel study, Hunt
found that the French retour had a very mild upward effect on
unemployment and no significant effect on wages.
Rachel Friedberg, an economist at Brown, added an interesting twist
to the approach. Rather than compare the effect of immigration across
cities, she compared it across various occupations. Friedberg's
curiosity had been piqued in childhood; born in Israel, she moved to
the U.S. as an infant and grew up amid refugee grandparents who were
a constant reminder of the immigrant experience.
She focused on an another natural experiment - the exodus of 600,000
Russian Jews to Israel, which increased the population by 14 percent
in the early 1990's. She wanted to see if Israelis who worked in
occupations in which the Russians were heavily represented had lost
ground relative to other Israelis. And in fact, they had. But that
didn't settle the issue. What if, Friedberg wondered, the Russians
had entered less-attractive fields precisely because, as immigrants,
they were at the bottom of the pecking order and hadn't been able to
find better work? And in fact, she concluded that the Russians hadn't
caused wage growth to slacken; they had merely gravitated to
positions that were less attractive. Indeed, Friedberg's conclusion
was counterintuitive: the Russians had, if anything, improved wages
of native Israelis. She hypothesized that the immigrants competed
more with one another than with natives. The Russians became garage
mechanics; Israelis ran the garages.
Measuring the Hit to Wages
By the mid-90's, illegal immigration was heating up as an issue in
the United States, prompting a reaction in California, where schools
and other public services were beginning to feel a strain. But
academics were coalescing around the view that immigration was
essentially benign - that it depressed unskilled native wages by a
little and raised the average native income by a little. In 1997, a
panel of the National Academy of Sciences, which reviewed all of the
literature, estimated that immigration during the previous decade
had, at most, lowered unskilled-native wages by 1 percent to 2
Borjas didn't buy it. In 1999 he published a second, more strident
book, "Heaven's Door." It espoused a "revisionist" view - that
immigration caused real harm to lower-income Americans. Borjas argued
that localized studies like Mariel were flawed, for the simple reason
that labor markets in the U.S. are linked together. Therefore, the
effects of immigration could not be gauged by comparing one city with
Borjas pointed out, as did others, that more native-born Americans
started migrating out of California in the 1970's, just as Mexicans
began arriving in big numbers. Previously California was a
destination for Americans. Borjas reckoned that immigrants were
pushing out native-born Americans, and that the effect of all the new
foreigners was dispersed around the country.
The evidence of a labor surplus seemed everywhere. "If you wanted a
maid," he recalled of California during the 90's, "all you had to do
was tell your gardener, and you had one tomorrow." He felt certain
that Mexicans were depressing unskilled wages but didn't know how to
prove it.
After Borjas moved East, he had an inspiration. It was easy to show
that high-school dropouts had experienced both lower wage growth and
more competition from immigrants, but that didn't settle the point,
because so many other factors could have explained why dropouts did
poorly. The inspiration was that people compete not only against
those with a like education, but also against workers of roughly the
same experience. Someone looking for a first job at a McDonald's
competes against other unskilled entry-level job seekers. A reporter
with 15 years' experience who is vying for a promotion will compete
against other veterans but not against candidates fresh out of
journalism school.
This insight enabled Borjas to break down the Census data in a way
that put his thesis to a more rigorous test. He could represent skill
groups within each age as a point on a graph. There was one point for
dropouts who were 10 years out of school, another for those who were
20 years and 30 years out. Each of these points was repeated for each
decade from 1960 to 2000. And there was a similar set of points for
high-school graduates, college graduates and so forth. The points
were situated on the graph according to two variables: the horizontal
axis measured the change in the share of immigrants within each
"point," the vertical axis measured wage growth.
A result was a smattering of dots that on casual inspection might
have resembled a work of abstract art. But looking closer, the dots
had a direction: they pointed downward. Using a computer, Borjas
measured the slope: it suggested that wages fell by 3 to 4 percent
for each 10 percent increase in the share of immigrants.
With this graph, Borjas could calculate that, during the 80's and
90's, for instance, immigrants caused dropouts to suffer a 5 percent
decline relative to college graduates. In a paper published in 2003,
"The Labor Demand Curve Is Downward Sloping," Borjas termed the
results "negative and significant."
But what about the absolute effect? Assuming businesses did not hire
any of the new immigrants, Borjas's finding would translate to a
hefty 9 percent wage loss for the unskilled over those two decades,
and lesser declines for other groups (which also received some
immigrants). As we know, however, as the population grows, demand
rises and business do hire more workers. When Borjas adjusted for
this hiring, high-school dropouts were still left with a wage loss of
5 percent over those two decades, some $1,200 a year. Other groups,
however, showed a very slight gain. To many economists as well as lay
folk, Borjas's findings confirmed what seemed intuitive all along:
add to the supply of labor, and the price goes down.
To Card, however, what seems "intuitive" is often suspect. He became
a labor economist because the field is full of anomalies. "The
simple-minded theories that they teach you in economics don't work"
for the labor market, he told me. In the 90's, Card won the
prestigious Clark Medal for several studies, including Mariel and
another showing that, contrary to theory, raising the minimum wage in
New Jersey (another natural experiment) did not cause fast-food
outlets to cut back on employment.
In a recent paper, "Is the New Immigration Really So Bad?" Card took
indirect aim at Borjas and, once again, plumbed a labor-market
surprise. Despite the recent onslaught of immigrants, he pointed out,
U.S. cities still have fewer unskilled workers than they had in 1980.
Immigrants may be depriving native dropouts of the scarcity value
they might have enjoyed, but at least in a historical sense,
unskilled labor is not in surplus. America has become so educated
that immigrants merely mitigate some of the decline in the homegrown
unskilled population. Thus, in 1980, 24 percent of the work force in
metropolitan areas were dropouts; in 2000, only 18 percent were.
Card also observed that cities with more immigrants, like those in
the Sun Belt close to the Mexican border, have a far higher
proportion of dropouts. This has led to a weird unbalancing of local
labor markets. For example, 10 percent of the work force in
Pittsburgh and 15 percent in Cleveland are high-school dropouts; in
Houston the figure is 25 percent, in Los Angeles, 30 percent. The
immigrants aren't dispersing, or not very quickly.
So where do all the dropouts work? Los Angeles does have a lot of
apparel manufacturers but not enough of such immigrant-intensive
businesses to account for all of its unskilled workers. Studies also
suggest that immigration is correlated with a slight increase in
unemployment. But again, the effect is small. So the mystery is how
cities absorb so many unskilled. Card's theory is that the same
businesses operate differently when immigrants are present; they
spend less on machines and more on labor. Still, he admitted, "We are
left with the puzzle of explaining the remarkable flexibility of
employment demand."
Card started thinking about this when he moved from Princeton in the
mid-90's. He noticed that everyone in Berkeley seemed to have a
gardener, "even though professors are not rich." In the U.S., which
has more unskilled labor than Europe, more people employ
housecleaners. The African-American women who held those jobs before
the war, like the Salvadorans and Guatemalans of today, weren't
taking jobs; they were creating them. { The Personal Is Economic }
Though Card works on immigration only some of the time, he and Borjas
clearly have become rivals. In a recent paper, Card made a point of
referring to the "revisionist" view as "overly pessimistic." Borjas
told Business Week that Card's ideas were "insane." ("Obviously I
didn't mean he is insane; he is a very bright guy," Borjas clarified
when we talked. "The idea that you can add 15 or 20 million people
and not have any effect seems crazy.") Alan B. Krueger, an economist
who is friendly with each, says, "I fear it might become
acrimonious." Card told me twice that Borjas's calculations were
"disingenuous." "Borjas has a strong view on this topic," Card said,
"almost an emotional position."
Card is more comfortable with anecdote than many scholars, and he
tells a story about his wife, who teaches English to Mexicans. In one
class, she tapped on a wall, asking a student to identify it, and the
guy said, "That's drywall." To Card, it signifies that construction
is one of those fields that soak up a disproportionate number of
Mexicans; it's a little piece of the puzzle. "Even when I was a kid
in Ontario 45 years ago," he notes, "the tobacco pickers were
Jamaicans. They were terrible jobs - backbreaking." Card is a
political liberal with thinning auburn air and a controlled, smirky
smile. His prejudices, if not his emotions, favor immigrants. Raised
by dairy farmers in Guelph, Ontario, he remembers that Canadian
cities were mostly boring while he was growing up. The ones that
attracted immigrants, like Toronto and Vancouver, boomed and became
more cosmopolitan. "
Everyone knows in trade there are winners and losers," Card says.
"For some reason it doesn't stop people from advocating free trade."
He could have said the same of Wal-Mart, which has put plenty of
Mom-and-Pop retailers out of business. In fact, any time a firm
offers better or more efficient service, somebody will suffer. But
the economy grows as a result. "
I honestly think the economic arguments are second order," Card told
me when we discussed immigration. "They are almost irrelevant."
Card's implication is that darker forces - ethnic prejudice, maybe,
or fear of social disruption - is what's really motivating a lot of
anti-immigrant sentiment. Borjas, a Hispanic who has written in blunt
terms about the skill deficits of Mexicans, in particular arouses
resentment. "Mexicans aren't as good as Cubans like him," Douglas S.
Massey, a demographer at Princeton, said in a pointed swipe.
Borjas lives an assimilated life. He has a wife who speaks no
Spanish, three kids, two of whom study his mother tongue as a foreign
language, and a home in Lexington, a tony Boston suburb. Yet his
mind-set often struck me as that of an outsider - an immigrant, if
you will, to his own profession.
When I asked the inevitable question - did his exile experience
influence his choice of career? - he said, "Clearly it predisposed
me." The seeds of the maverick scholar were planted the year before
he left Cuba, a searing time when the revolution was swinging
decisively toward Soviet-style communism. His family had owned a
small factory that manufactured men's pants. The factory was shut
down, and the family made ready to leave the island, but their
departure was delayed by the death of Borjas's father. The son had to
attend a revolutionary school, where the precepts of Marxism-Leninism
were drilled into the future economist with notable lack of success.
One day he marched in the band and drummed the "Internationale" in
front of Fidel Castro and the visiting Yuri Gagarin, the Soviet
cosmonaut. "Since that year I have been incredibly resistant to any
kind of indoctrination," he told me - an attitude that surfaces in
wry references to the liberal Harvard environs as the "People's
Republic of Cambridge" and to American political correctness in
Borjas's family arrived with virtually no money; they got some
clothing from Catholic Charities and a one-time stipend of, as he
recollects, $100. His mother got a factory job in Miami, where they
stayed several years. Then the family moved to New Jersey. He at
tended Saint Peter's College in Jersey City and got his Ph.D. at
I asked him whether the fact that he was Cuban, the most successful
Latin subgroup, had affected his views of other Hispanics. "Look,
I've never been psychoanalyzed," he said with an air of resignation,
as if he were accustomed to hearing such loaded questions. One thing
Borjas shares with Card is a view that others treat immigration
emotionally. But Borjas takes comfort not in anecdote but in
empiricism. As he said to me often, "The data is the data."
Immigrants Can Be Complementary
Economists on Card's side of the debate recognize that they at least
have to deal with Borjas's data - to reconcile why the local studies
and national studies produce different results. Card shrugs it off;
even 5 percent for a dropout, he observes, is only 50 to 60 cents an
hour. Giovanni Peri, an Italian working at the University of
California, Davis, had a more intriguing response. Peri replicated
Borjas's scatter diagram, and also his finding that unskilled natives
suffer a loss relative to, say, graduates. He made different
assumptions, however, about how businesses adjust to the influx of
new workers, and as a result, he found that the absolute harm was
less, or the gain was greater, for all native-born groups. By his
reckoning, native dropouts lost only 1 percent of their income during
the 1990's.
Peri's theory is that most of the wage losses are sustained by
previous immigrants, because immigrants compete most directly with
one another. It's a principle of economics that a surplus in one part
of the production scheme raises the demand for every other one. For
instance, if you have a big influx of chefs, you can use more
waiters, pushing up their wages; if you have a lot of chefs and
waiters, you need more Sub-Zeros, so investment will also rise. The
only ones hurt, in this example, are the homegrown chefs - the people
who are "like" the immigrants.
Indeed, workers who are unlike immigrants see a net gain; more
foreign doctors increases the demand for native hospital
administrators. Borjas assumes that a native dropout (or a native
anything) is interchangeable with an immigrant of the same skill
level. Peri doesn't. If enough Mexicans go into construction, some
native workers may be hurt, but a few will get promotions, because
with more crews working there will be a greater demand for foremen,
who most likely will be natives.
Natives have a different mix of skills - English, for instance, or
knowledge of the landscape. In economists' lingo, foreigners are not
"perfect substitutes." (Friedberg also observed this in Israel.) In
some cases, they will complement rather than compete with native
workers. Vietnamese manicurists in California cater to a lower-price,
less-exclusive market than native-run salons. The particular skills
of an Italian designer - or even an economist - are distinct from an
American's. "My work is autobiographical to a large extent," notes
Peri, who got into the field when the Italian government commissioned
him to study why Italy was losing so many professionals. The
foreigners he sees in California are a boon to the U.S. It astonishes
him how people like Sensenbrenner want to restrict immigration and
apply the letter of the law against those working here.
This is a very romantic view. The issue is not so much Italian
designers as Mexican dropouts. But many Mexicans work jobs that are
unappealing to most Americans; in this sense, they are not exactly
like natives of their skill level either. Mexicans have replenished
some occupations that would have become underpopulated; for instance,
40,000 people who became meat processors immigrated to the U.S.
during the 1990's, shoring up the industry. Without them, some plants
would have raised wages, but others would have closed or, indeed,
relocated to Mexico.
Are All Dropouts the Same?
I talked to half a dozen vintners and a like number of
roofing-company owners, both fields that rely on Mexican labor, and
frequently heard that Americans do not, in sufficient numbers, want
the work. In the case of the vineyards, if Mexicans weren't
available, some of the grapes would be harvested by machine. This is
what economists mean by "capital adjusting." If the human skills are
there, capital will find a way to employ them. Over the short term,
people chase jobs, but over the long term jobs chase people. (That is
why software firms locate in Silicon Valley.)
If you talk to enough employers, you start to gather that they prefer
immigrant labor over unskilled Americans. The former have fewer
problems with tardiness, a better work ethic. Some of this may be
prejudice. But it's possible that Mexican dropouts may be better
workers than our dropouts. In Mexico, not finishing high school is
the norm; it's not associated with an unsuitability for work or even
especially with failure. In the U.S., where the great majority do
graduate, those who don't graduate have high rates of drug use and
problems with the law.
The issue is charged because the group with by far the highest rate
of incarceration is African-American dropouts. Approximately 20
percent of black males without high-school diplomas are in jail.
Indeed, according to Steven Raphael, a colleague of Card's at
Berkeley, the correlation between wages and immigration is a lot
weaker if you control for the fact that so many black men are in
prison. But should you control for it? Borjas says he thinks not.
It's pretty well established that as the reward for legal work
diminishes, some people turn to crime. This is why people sold crack;
the payoff was tremendous. Borjas has developed one of his graphs to
show that the presence of immigrants is correlated with doing time,
especially among African-Americans. Incarceration rates, he notes,
rose sharply in the 70's, just as immigration did. He doesn't pretend
that this is the whole explanation - only that there is a link. Card
retorts: "The idea that the way to help the lot of African-Americans
is to restrict Mexicans is ridiculous." Black leaders have themselves
mostly switched sides. In the 20's, A. Philip Randolph, who led the
Pullman Porters, spoke in favor of immigration quotas, but the civil
rights establishment no longer treats immigration as a big issue;
instead it tends to look at immigrants as potential constituents.
(One person who takes issue with the prevailing view is Anthony W.
Williams, an African-American pastor in Chicago who is running for
Congress against Representative Jesse Jackson Jr. Black leaders have
forsaken their mission, he told me. "Immigration will destroy the
economic base of the African-American community.")
In the spring, as the Senate Judiciary Committee was trying to parse
these issues into a piece of legislation, Borjas and Card were
invited to air their views. Each declined, in part because they don't
think politicians really listen. As if to prove the point, the effort
to write a joint bill has stalled, following Sensenbrenner's
announcement that the House intends to stage a series of public
hearings on immigration around the country over the summer. There
will be a lot said about border control, many heartfelt stories and
probably very little about natural experiments.
The economists do have political opinions, of course. Borjas leans to
a system like Canada's, which would admit immigrants on the basis of
skills. He also says that, to make sure the problem of illegals does
not recur, the U.S. should secure its borders before it adjusts the
status of its present illegals.
Advocates of a more open policy often cite the country's history.
They argue that the racists of bygone eras were not only
discriminatory but also wrong. Card, for instance, mentioned an
article penned by a future U.S. senator, Paul Douglas, titled "Is the
New Immigration More Unskilled Than the Old?" It was written in 1919,
when many people (though not Douglas) held that Jews, Slavs and
Italians were incompatible with the country's Anglo and Teutonic
stock. Nativism has always been part of the American scene, and it
has tended to turn ugly in periods when the country was tired of or
suspicious of foreigners. In 1952, quotas were maintained in a law
sponsored by Senator Pat McCarran, a prominent McCarthyite. There
remains today a palpable strain of xenophobia in the anti-immigrant
movement. Dan Stein, president of the Federation for American
Immigration Reform, remarked to me, rather meanly, "If someone comes
here from China and they go swimming in a dangerous river, a sign in
English is enough, but the Mexicans want it in Spanish." Ninety years
ago, some signs were in German, as were 500 newspapers on American
But U.S. history, as Borjas observes, can be read in two ways. For
sure, earlier waves of immigrants assimilated, but America
essentially closed the gate for 40 years. Antipathy toward Germans
during World War I forced German-Americans to hide all traces of
their origins. The quotas of the 1920's were reinforced by the
Depression and then by World War II. The country had time to let
assimilation occur.
A reverse process seems to be occurring with Mexican-Americans. Very
few Mexicans came north in the decades after 1920, even though they
were relatively free to do so. As recently as 1970, the U.S. had
fewer than one million Mexicans, almost all of them in Texas and
California. The U.S. did bring Mexican braceros to work on farms
during the 1940's, 50's and 60's. The program was terminated in 1964,
and immigration officials immediately noticed a sharp rise in illicit
border crossings. The collapse of the Mexican economy in the 70's
gave migrants a further push. Finally, Mexicans who obtained legal
status were (thanks to the 1965 reform) able to bring in family
The important point is that, ultimately, there was a catalytic effect
- so many Mexicans settled here that it became easier for more
Mexicans to follow. One story has it that in a village in central
Mexico people knew the price of mushrooms in Pennsylvania sooner than
people in the next county over. Even if apocryphal, it illustrates
what economists call a network effect: with 12 million people born in
Mexico now dispersed around the U.S., information about job-market
conditions filters back to Mexico with remarkable speed.
Now that the network is established, the exodus feels rather
permanent; it is not a wave but a continuous flow. This has led to
understandable anxiety, even among economists, about whether Mexicans
will assimilate as rapidly as previous groups. Although
second-generation Mexicans do (overwhelmingly) speak English, and
also graduate from high school at far higher rates than their
parents, Borjas has documented what he calls an ethnic "half-life" of
immigrant groups: with each generation, members of the group retain
half of the income and educational deficit (or advantage) of their
parents. In other words, each group tends toward the mean, but the
process is slow. Last year he wrote that Mexicans in America are
burdened if not doomed by their "ethnic capital," and will be for
several generations. In "Heaven's Door," Borjas even wrote
forgivingly of the quota system enacted in the 20's, observing that
it "was not born out of thin air; it was the political consensus . .
. reached after 30 years of debate." These are distasteful words to
many people. But Borjas does not advocate a return to quotas. His
point is that Americans shouldn't kid themselves: "National origin
and immigrant skills are so intimately related, any attempt to change
one will inevitably change the other."
The Limits of Economics
Economists more in the mainstream generally agree that the U.S.
should take in more skilled immigrants; it's the issue of the
unskilled that is tricky. Many say that unskilled labor is needed and
that the U.S. could better help its native unskilled by other means
(like raising the minimum wage or expanding job training) than by
building a wall. None believe, however, that the U.S. can get by with
no limits. Richard B. Freeman of Harvard floated the idea that the
U.S. simply sell visas at a reasonable price. The fee could be
adjusted according to indicators like the unemployment rate. It is
unlikely that Congress will go for anything so cute, and the
economists' specific prescriptions may be beside the point. As they
acknowledge, immigration policy responds to a host of factors -
cultural, political and social as well as economic. Migrant workers,
sometimes just by crowding an uncustomary allotment of people into a
single dwelling, bring a bit of disorder to our civic life; such
concerns, though beyond the economists' range, are properly part of
the debate.
What the economists can do is frame a subset of the important issues.
They remind us, first, that the legislated goal of U.S. policy is
curiously disconnected from economics. Indeed, the flow of illegals
is the market's signal that the current legal limits are too low.
Immigrants do help the economy; they are fuel for growth cities like
Las Vegas and a salve to older cities that have suffered native
flight. Borjas's research strongly suggests that native unskilled
workers pay a price: in wages, in their ability to find inviting
areas to migrate to and perhaps in employment. But the price is
probably a small one.
The disconnect between Borjas's results and Card's hints that there
is an alchemy that occurs when immigrants land ashore; the economy's
potential for absorbing and also adapting is mysterious but powerful.
Like any form of economic change, immigration causes distress and
disruption to some. But America has always thrived on dynamic
transformations that produce winners as well as losers. Such
transformations stimulate growth. Other societies (like those in
Europe) have opted for more controls, on immigration and on labor
markets generally. They have more stability and more equality, but
less growth and fewer jobs. Economists have highlighted these issues,
but they cannot decide them. Their resolution depends on a question
that Card posed but that the public has not yet come to terms with:
"What is it that immigration policy is supposed to achieve?"
Roger Lowenstein is a contributing writer. He has written cover
articles for the magazine about Social Security and pensions.

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