YOUNG, STRONG, CONTRIBUTING: A REPLY TO GEORGE BORJAS Julian L. Simon As Milton Friedman ruefully remarked about himself, I have been blessed with many critics. And following Friedman's example, I have not replied to most of them. But the article by George Borjas In the December 13, 1993 National Review (pages 40- 43) entitled "Tired, Poor, On Welfare" contains an exceedingly egregious criticism that is based on an demonstrably erroneous calculation, and has had far-reaching ill consequences. Inexplicably, it was written by an economist who is an excellent econometrician. Furthermore, Borjas's faulty assertion about my work has now been picked up by others and reproduced in such places as The New York Times (an illustration of the powerful reach of National Review!) So I must reply. More important than the effect of Borjas's unfounded criticism on me is its effect on immigrants, who are unfairly seen to be takers from the public coffers rather than contributors to it. The truth is that on average immigrants arrive when they are young and strong rather than tired and poor, and on average they contribute more in taxes than they use in welfare services. Let's look at the details. Borjas bluntly says that "Simon is entirely wrong" about the effect of immigrants on the public coffers by way of welfare and taxes. He says of my concluding calculation: Though the calculation is quite simple, it is also quite wrong. A good hint that something is amiss occurs when Simon reports that natives also pay about $1,000 more in taxes than they receive in benefits. But how can this be? Welfare programs, after all, redistribute income from some groups to others. If both immigrants and natives pay more in taxes than they receive in benefits, who is being taxed and who is being subsidized? That is, Borjas addresses my results showing that on average both immigrants and natives put more into the public coffers than they take out in individual public services. He claims that my calculation that immigrants are net contributors to the public purse must therefore be wrong because it cannot be true that (deficits aside) all groups put in more than they take out. And Borjas goes on developing this theme for many paragraphs. But it is not the absolute net contribution of immigrants (whose calculation from micro-data, like that of natives, inevitably leaves out some non-individual governmental expenditures) that is the basis of my analysis and conclusion. Rather, my conclusion rests on the fact that the net contribution of immigrants is relatively high compared to that of natives. Immigrants make greater net contributions than do natives largely because immigrants typically arrive when they are physically fit and just starting their working lives, rather than at ages when people collect old-age benefits. I'll illustrate Borjas's erroneous attribution of error to me with the example he used in the same sort of faulty criticism in a review of my 1989 book The Economic Consequences of Immigration in the technical Journal of Economic Literature: Probably the most influential result in the book is the finding that immigrants contribute more in taxes than the value of public services they receive. Simon then concludes that because immigrants more than pay their way in the United States, they are not a burden to natives... In 1975 the typical household in the 1965-1969 immigrant wave received only $1,941 in social services, but paid $3,552 in taxes...Suppose one conducts the same type of cost/benefit analysis for the typical native family. Simon then finds that the native household receives $2,279 in social services, but pays $3,201 in taxes. It seems that natives, too, are a good investment (although not as good an investment as immigrants)...It is apparent that key entries in the cost/benefit ledger are being left out of the calculations" (p. 39). In the example Professor Borjas adduces above, the yearly contribution calculated for this cohort of immigrants is ($3552 - $1941) - ($3201 - $2279) = $689. It is that $689 (with some adjustment for economies of scale in public goods in some of my alternative calculations ), rather than the ($3552 - $1941 = ) $1611 that Borjas assumes I am working with, that becomes the basis for my analysis of the lifetime effect of a newly-admitted immigrant family. Hence my calculation is correct, rather than flawed as Borjas claims it to be. I am distressed that Professor Borjas could think me capable of such a fundamental blunder. If he again wonders about the validity of my methods, and if he wants to get me it right rather than simply aiming to discredit my work and conclusions, he could make life easier for both of us by checking with me first. To repeat a challenge I have offered to Professor Borjas's follower, Donald Huddle (with whom Borjas expresses agreement in the December 13 NR article): Welfare in connection with immigration is a hot and important topic, but difficult for the layperson to sort out on the basis of brief popular writings. To clarify the matter I therefore invite Professor Borjas to bring his assertions and mine - and all others, too, as appropriate - before a "science court" of distinguished economists chosen by, say, the American Economic Association. The person whose work is found less valid would be bound to pay the court's expenses. page 1/article4 borjasnr/June 14, 1994 There is another important fallacious statement in Professor Borjas's article, an assertion point he has made for many years: "[M]ore recent immigrant waves are relatively less skilled that earlier waves". DATA The same trend is evident in earlier years; the data are in my 1989 book, The Economic Consequences of Immigration, which Professor Borjas knows because he has reviewed the book, and does not challenge those data. He then asserts that my calculation that immigrants are net contributors must therefore be wrong since it cannot be true that all are net contributor. (That is, on average, as much is taken out as is put in, assuming no governmental deficits or other pathology). But it is not the absolute net contribution of immigrants (whose calculation, like that of natives, inevitably leaves out some non-individual governmental services) that is the basis for my calculation, but rather the differential contribution. page 2/article4 borjasnr/June 14, 1994