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September 29, 2011

The REAL Immigration Problem

Immigration remains a hot, controversial topic. Republican politicians compete with each other on who’s “tougher” on immigration.

They have it backwards. The United States doesn’t need tougher immigration restrictions and enforcement. If anything…

We would be better off with MORE immigration!

Indeed, immigration restrictions in wealthy countries are perhaps the single biggest obstacle to greater global prosperity. Economist Michael Clemens of the Center for Global Development discovered that…

 If we somehow wiped away all remaining policy barriers to international goods trade, and eliminated every last barrier to the international flow of capital, world income would rise by somewhere in the range of $3 trillion a year… [However, a] modest increase in emigration out of low-income countries — just 5% of the people now living there — would expand the world economy by several trillion dollars every year. That’s a stunner, so I’ll say it again: Minor reductions in the barriers to labor mobility would add more value than the total, global elimination of all remaining policy barriers to goods trade and all barriers to capital flows, combined.

This creates the greatest single opportunity for global economic prosperity in our age.

He gives one example:

Take a male construction worker in the capital of Ghana. There isn’t much you could do to greatly raise his economic productivity in Ghana; access to better tools or training might make him modestly more productive. But if you let the exact same person emigrate to work at a construction site in any big U.S. city, his economic productivity would rise roughly 700% to 1,000%.

But does this apply to the United States? Aren’t we getting too many immigrants already, whether legally or illegally? Far from it. According to the Cato Institute (.pdf)

  • In the last decade, immigration rates were actually lower than historical levels of the 19th and 20th centuries
  • The percentage of foreign-born residents is lower than the U.S. historical peak of 100 years ago, and is lower than in Australia, Canada, and Switzerland
  • Population growth slowing; 43% of counties lost population in the past ten years
  • In two decades, the growth rate of the workforce will shrink to zero growth if not for immigration

But don’t immigrants, especially illegal immigrants, fill up our prisons and welfare rolls? Again, this isn’t the case…

  • In 20 years, the crime rate fell by a third while immigrant population has doubled
  • Welfare rolls declined since 1996, even as immigration rose

Ironically, as border patrols have been beefed up in the past 25 years, permanent residency of undocumented immigrants in the U.S. has INCREASED. From the mid-60’s to the mid-80’s; 80% of illegal Mexican workers eventually went back to Mexico; today with increased border patrols it’s HARDER to return.

And it is simply untrue that immigrants take jobs from Americans. Let’s first look at unskilled and/or illegal immigrants.

Their main competitors in the U.S. job market are high school drop-outs — that is, people similarly unskilled and uneducated. Fifty years ago, half the workforce were high school dropouts, but today just 7% are. And competition from immigrants has reduced the earnings of drop-outs by just 5%. On the other hand, immigrants fill niche jobs which frees up better-educated Americans to do more productive tasks, and the result is a net GAIN in income for most Americans.

And now let’s look at skilled and legal immigrants…

  • One quarter of tech and engineering startups from 1995 to 2005 were co-founded by immigrants
  • One quarter of U.S. patents had a foreign national as inventor or co-inventor
  • The inclusion of immigrants to S&P 500 companies typically leads to the hiring of five more workers due to innovation and increased production – i.e., they complement, not compete with, U.S. workers
  • Immigrants are essential to the high-tech sector, but the H1-B visas that permit them to come are limited to 65,000 per year

If only immigrants can fill particular jobs, but immigrants aren’t allowed to come, that only encourages outsourcing and offshoring. It means talent will go to other nations, and America’s competitive position will decline.

I don’t dispute that heavy immigration into particular areas can cause some disruptions and could impose some costs, such as overcrowded schools. But think big picture: The real immigration problem is that it is too restrictive. America is losing the productivity of both high-skilled AND low-skilled workers.

Instead of beefing up enforcement and imposing more restrictions, we should instead free up immigration policy AND AT THE SAME TIME reduce regulations and taxes. This would result in MORE jobs and GREATER opportunities for Americans and immigrants alike.

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