Monday, June 26, 2006

Immigration Econoblog

Gordon Hanson and Philip Martin discuss "Immigration's Costs and Benefits" in today's WSJ Econoblog. I'll highlight two passages by Gordon that I think are very well put. The first deals with the change in scale and possible reasons for immigration from Mexico:
Today, however, the scale is entirely different. Mexican immigrants now account for about 5% of the U.S. labor force (and 35% of the immigrant labor force), up from less than 1% in 1970. What happened?

I would cite two events. Since 1982, Mexico has had several major economic contractions and has been unable to string together more than a few years of solid growth. As a result, per capita income in Mexico has steadily fallen relative to per capita income in the U.S. Why stay in Mexico when incomes are rising faster in the U.S.?

Compounding migration pressures has been the entry of Mexico's baby boom into the labor force. While fertility rates in Mexico have dropped sharply in the last three decades (from five kids per woman in 1970 to three kids per woman in 2000), it wasn't that long ago that the typical Mexican woman had nearly a half dozen children. Mexico's high fertility years produced a demographic bulge, the members of which in the last 20 years have come of age and started to look for work. As luck would have it, Mexico's baby boom entered the labor force during Mexico's two decades of dismal economic performance and decidedly lackluster growth in labor demand. The result has been the surge in Mexican immigration that we have been witnessing.

What makes the current surge in Mexico-to-U.S. migration hard to slow is that today's generation of Mexican young people do not have a memory of good economic times in Mexico. Many may have lost faith in Mexico's ability to provide them with a decent future. Such a change in expectations is a powerful force because it implies that Mexico would have to produce unexpectedly strong economic growth for a sustained period to get Mexican workers to believe in the Mexican economy, again. In the meantime, Mexican labor will keep heading north.

And the next considers some of the problems with a guest-worker program, even relative to the status quo:
A guest-worker program, at least how it is envisioned by Congress, would be a disaster. For as maligned as illegal immigration is, it has some attractive features in terms of economic efficiency. Illegal immigration delivers U.S. business the types of workers they need (low-skilled labor, which is increasingly in short supply), when they need them (during times when the U.S. economy is expanding), and where they need them (in regions where job growth is strong).

A guest-worker program would have none of these properties. Given the snail's pace at which the Department of Homeland Security operates, U.S. employers would likely have to apply for guest workers long in advance of when they actually need them. The flexibility and adaptability of current illegal inflows would be lost. In response, many employers would probably go back to what they are doing now, which is hiring illegal workers.

Successful policy reform would require rethinking both illegal and legal immigration in the U.S. Why not convert most family-sponsored immigration visas into visas awarded on the basis of skill? Why not make the number of immigrants awarded visas conditional on U.S. economic conditions? Why not have the price of a U.S. immigration visa be determined by market conditions? These are questions that in the current debate should be asked but sadly are not.

It's a good discussion of the issues and challenges in this area.


spencer said...

Hanson says: Whether legal or illegal, immigration generates a gain in national income by making U.S. business more productive."

Isn't just the opposite true? If there were no immigration business would be investing to make domestic workers more productive and justify the higher wages.

But because they have a supply of cheap labor business does not invest and continues to use labor intensive methodologies that keep worker productivity from rising.

Take for example picking lettuce or some similiar job. Because of the availability of cheap migrant labor the farmers continue to use stoop labor to pick the lettuce.
But if cheap labor were not available the farmer would invent in and/or develop machinery so that one individual driving a tractor could pick just as much or more lettuce then 20 people doing it by hand.

So while an increase in the supply of cheap labor may lead to an increase in gdp, it may at the same time keep productivity from rising and so retard the growth of gdp per capita.

Dave Schuler said...

I think I'd add a couple of more events to the critical pressures on Mexican immigration to the U. S.: the two revisions (in the 1960's and, again, in the 1980's) in U. S. immigration law.

Question: is weak economic growth in Mexico or strong economic growth in the United States relatively more important in producing the difference between incomes in Mexico and incomes in the United States that draws Mexican workers here?