Tuesday, July 12, 2005

Wall Street Journal misleading and wrong on immigration

The WSJ's Stephen Moore has an opinion piece (subscription required) singing peans over the recent influx of immigration. But if ever someone has played with some numbers and omitted others to push a position, this is it. Let's attempt a little debunking.

Moore points out that the current foreign-born population makes up 12% of the people on US soil. Yet his economic growth statistics are taken from 1980-2000. The portion of foreign-born residing in the US in at the end of 2000? Only 9.5% of the US population. In 2003, the most recent Census data I could obtain online, the foreign-born population was 11.7% of the entire population.

In 1980, the foreign-born population was slightly over 14 million, or 6.2% of the 227 million US residents. In 1990, the foreign-born population was 20 million strong, or 8% of the total US population of 250 million. From 1980 to 1990, the foreign-born proportion of the population grew 29% over the ten years (average increase of 2.5% per year). From 1990 to 2000, the foreign-born segment increased 57% to 31.1 million in 2000 over the ten years (average increase of 4.6% per year). That means in the three years beyond Moore's economic stats, the immigration rate increased 23% (over 7% per year)--considerably faster than any time during the two decades from 1980-2000 that Moore so ebulliently parades.

So how has the economy done in the last few years with this truly accelerated immigration growth? US GDP per capita (adjusted for inflation from 2000 using CPI): in 2000 was $33,599, in 2001 was $34,828, in 2002 was $35,115, and in 2003 was $35,230. That works out to a whopping 1.6% per year GDP per capita growth over this three year period. Of course the stock market bubble took its toll, but the go-go growth of the late nineties was fueled by a technological boom is not attributable to waves of immigration anymore than the bubble bursting can be pinned on the immigrant's shoulders.

Looking at macroeconomic growth does little to inform whether immigrants are net assets or net liabilities. We have to look at the immigrants themselves. Moore mentions three past waves of US immigration: the first from Western Europe in the late 18th century, the second in the mid-19th century, and the third at the beginning of the 20th century. This current wave is the fourth. A glaring difference between the first three and the fourth immediately becomes apparent: this most recent wave is not overwhelmingly European as the others have been. In fact, half of this new wave is Hispanic while less than 15% of it is European.

Unfortunately, not all immigrants are created equal. Hispanic median income in 2002 was $33,103 compared to the national average of $42,409. Hispanics are 3.7 times more likely than whites to land in jail, Hispanic students score considerably worse than whites or Asians on NAEP reading and math tests (they are in line with black test scores), and of foreign-born US residents who are college educated only 16% are Hispanic (while they comprise 50% of the total foreign-born pool). In contrast, 44% of these college educated foreign-borns are Asian, even though there are only half as many foreign-born Asians in the US as there are Hispanics.

There are heavy costs incurred from this influx of immigration that Moore does not take into consideration by only looking at income and GDP numbers. A study by Columbia University economists, however, estimate that immigrants are a $68 billion drag on the per capita economy. The "per capita" distinction from overall economic growth is a crucial one to make. If a family of four from Central America comes to the US and the breadwinner brings in $20,000 (and is therefore paying, as a very liberal estimate, $4,000 in taxes) while sending two children to school (at over $7,500 billed to the taxpayer a pop--and considerably more if either requires ESL services), the family is adding to the nation's GDP, but clearly the nation's standard of living is taking a hit as natives have to cough up more money for each of these families than the families contribute to them. They are also incurring other costs that the net taxpayer must pick up such as road wear, social services, police and fire services, medical costs (which have become catastrophic in places like Los Angeles), etc. And this is assuming the family is legal--if they are working under the table (and therefore not paying income taxes), the cost-benefit ratio is skewed further against natives.

Moore glibly points out that the immigrants who have lived in the US for the longest period of time fare better than those more newly arrived. That is certainly true, but further explanation suggests why that is the case (beyond simply earning more over time). Large-scale Latino immigration is a relatively new phenomenon: European and Canadian immigrants are twice as likely to have been in the US for 20 years or more than are Hispanic immigrants and are less likely than Hispanics to have come in just the last five years. Asians, however, have on average only been in the US slightly longer than Hispanics. Moore proclaims, "Immigrants are economic investments with increasing rates of return over time." But the immigrants he is drawing these conclusions from are not synonymous with the bulk of contemporary immigrantion. European immigrants perform similarly to native whites (not surprisingly), but there are striking differences between the performance of Hispanics and whites.

Those hurt the most by this myriad of immigrants are the native underclasses. During the current economic recovery, black unemployment has actually risen even though historically the trend has been for those on the lower end of the economic spectrum to be more elastic than those at the middle and top. In other words, black employment should be rising faster than that of whites, not dropping while white rates are increasing.

Hispanics have suffered a wage decrease over the last two years, although their employment rates have risen modestly. Moore champions the drop in unemployment, but does not mention the decrease in wages. Basic economics explains what he does not: As the labor supply increases, the wage rate will decrease. And the bulk of the new jobs are going to go to the immigrants willing to work for the least. That would be fine if we lived in a Libertarian paradise of no taxes, but removing ourselves from the quixotic, we realize that if company X can hire an immigrant for $5 an hour instead of paying a native $6 an hour, X is going to do it. The native has to go find another job likely paying less (say $5 an hour as well.) Now, we have X who has cut costs, but we also have two US residents making $5 an hour ($10,000 a year) that are costing the taxpayer at least $10,000 over that same time period (and each of these residents is at most contributing $2,000 to the tax pool). We do not benefit from an expanding lower class that undercuts itself for the sake of businesses that derive an enormous direct benefit and only a mild indirect detriment.

Moore nails one point: "One of the most obvious malfunctions of our current immigration policy is that we deny work visas to tens of thousands of highly trained and educated foreign graduate students who have enormous upside economic potential." The risible Visa Lottery system that lets potential immigrants into the US in a completely random way means thugs from Saudi Arabia have as much chance to be granted legality as does a chemical engineer from the Ukraine. Allowing current immigrants to pull family members in does not do the US any good either, as most of those relatives are likely to be economic burdens. A merit system of immigration setting standards in areas such as IQ, means, education, age, and civility would be prudent and would remove any potential for subjective racial or nationality bias.

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