Let Them In_ The Case for Open Borders - Jason L. Riley [27]
In fact, Borjas has found that immigration increases GDP by 0.2 percent, or some $22 billion per year. That amount may seem trifling in a multitrillion-dollar U.S. economy, but it’s significant when compounded over time. And as the economist Benjamin Powell has noted, the same conservative restrictionists who downplay that gain would cheer the abolition of hundreds of government regulations that might have significantly smaller economic effects.
But never mind. In a 2003 paper, Borjas concluded that in the years 1980-2000, real wages fell by around 9 percent for unskilled U.S. natives, and this finding has been treated as gospel in anti-immigration circles ever since. To produce that number, however, Borjas had to rig his model. In particular, he assumed that physical capital is fixed—that the number and size of companies in the United States is constant—and that immigrants are perfect substitutes for natives. When you increase labor in an economy where investment doesn’t adjust, wages fall because workers are less productive. This was the methodology he employed to produce the 9 percent result that so delights immigrant foes.
The only problem with trying to determine the impact of immigration over two decades by assuming capital doesn’t change over time is that it bears no resemblance whatsoever to how the U.S. economy actually functions. It’s like trying to ease traffic congestion by assuming flying carpets are an option. The reality is that investors are constantly responding to the inflow of immigrant labor. These additional workers increase the return on capital, spurring more investment. Companies respond by producing more labor-intensive goods. And all of this activity only serves to lighten any adverse impacts on low-skill native workers.
Indeed, in the very same 2003 study, Borjas presents alternate findings that control for increased investment, and that 9 percent wage loss for high school dropouts suddenly falls to 5 percent. Two years later, the National Bureau of Economic Research published a paper co-authored by Borjas and Lawrence Katz on the effects of Mexican immigrants. By realistically allowing capital to adjust, they found even less of a negative effect on wages (4 percent).
Other research has shown little, if any, adverse impact on low-skilled Americans. Back in 1990, David Card of the University of California at Berkeley produced a widely read paper on how the influx of Cuban refugees during the 1980 Mariel Boatlift affected Miami’s labor market. Card found that although Mariel immigrants increased Miami’s workforce overall by 7 percent, and the percentage increase in labor supply to unskilled occupations was even greater, “the Mariel influx appears to have had virtually no effect on the wages or unemployment rates of less-skilled workers. ” A 1995 study by the economists Rachel Friedberg and Jennifer Hunt states flatly, “The popular belief that immigrants have a large adverse impact on the wages and employment opportunities of the native-born population of the receiving country is not supported by the empirical evidence.” The authors add that “even those natives who are the closest substitutes with immigrant labor do not suffer significantly as a result of increased immigration. There is no evidence of economically significant reductions in native employment.”
Pia Orrenius and Madeline Zavodny, a labor economist at Agnes Scott College, found that immigration to the United States in the mid- to late 1990s depressed the wages of manual laborers by about 1 percent. And research by economist Gianmarco Ottaviano and Giovanni Peri found that when you consider (as discussed earlier) that immigrants and natives aren’t necessarily interchangeable but often complement one another in the labor force, the negative impact on low-skill natives is even further