THE ECONOMIC CONSEQUENCES OF IMMIGRATION INTO THE UNITED STATES Julian L. Simon When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another...a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation. . . The present King of Great Britain...has endeavoured to prevent the population of these States; for that purpose obstructing the Laws of Naturalization of Foreigners; refusing to pass others to encourage their migration hither. The Declaration of Independence July 4, 1776 To be published by Basil Blackwell (Oxford and New York) PREFACE I am grateful that it is my lot in life to write a book about immigration into the United States. People's lives and personalities, their creations and tragedies, can be seen and felt more clearly amidst immigration data and analyses than when writing about most topics in economics. Immigrants' voyages to this land, following upon preparations that required extraordinary effort and often pain, have been among the most exciting and noble of human endeavors. Women and men and children have been strong and brave. They have undertaken their inevitably-frightening transits to a new place for the best of motives: the desire to improve their own lot and that of their families; the urge to leave countries whose governments they could not abide; and the willingness to help build another country where persons can live in freedom and dignity. Our country has often acted with generosity beyond what it conceived to be its national self-interest, even though its self-interest was thereby served better than most citizens imagined. Perhaps most noble of all have been those immigrant families who, while themselves still struggling to keep together body and soul -- a particularly apt description of so many -- drew upon their meager resources to help relatives and friends pay for passage and then become established so that they, too, could share the blessings of liberty and opportunity. I am blessed to have known two cohorts of these people -- my grandparents and their kin who came early in this century, and recent immigrants from Viet Nam and from the Soviet Union. This acquaintance surely has influenced the questions that I ask about immigration, and it may also have influenced the answers at which I arrive. The professional reader may ask which ideas and data in this book are new. My answer: Too much is new. I had begun the book intending mainly to review the existing literature using a standard theoretical framework, including modest amounts of my own research. But as I proceeded I found huge lacunae in the literature that I felt I had to fill with my own work before proceeding further. Therefore, the theoretical frameworks are largely new, with the most important exception being the short- run capital-use theory of Borts-Stein and Berry-Soligo. Perhaps most notable theoretically are the comparison in Chapter 2 between the received theory of the international movement of goods and the movement of people, far less similar than commonly supposed; the analysis in Chapter 8 of the cost of the use of capital by immigrants; and the queuing theory of the effect of immigration upon native unemployment in chapter 12. Perhaps most novel empirically are a) the assessment of the effects of immigrants on the public coffers (chapter 4); b) the across-city estimate of the effect of immigrants upon unemployment (done jointly with Stephen Moore in Chapter 12); and c) the estimate of the cost of the use of demographic capital (part done jointly with A. J. Heins in Chapter 8). The discussion in Chapter 16 of selling admission to the country as an immigration policy is serious intellectually though it is not a plausible suggestion at the moment; our world is not ready for such dispassionate schemes even though they may benefit everyone concerned. The quasi- philosophical analysis in Appendix A of the ethics of a closed border exercised my faculties to the full but arrives at a conclusion that many will find obvious. The simulated overall assessment of the effect upon the standard of living (chapter 10) is original, but simulations tend to excite little intellectual interest even though they may be useful for policy purposes. The writing which I most enjoyed doing -- the collection in Chapters 3 and 4 of a wide range of data on many characteristics of immigration and immigrants in the U. S. and abroad -- will probably strike readers simply as the activity of a crazed pack rat. I wish I could have found more such data, especially for Singapore, Hong Kong, and Argentina. Properly there should be an entire volume of such data, but alas, such an inelegant activity is not a popular art form or work tradition in the academic community today, though it needs saying that my fellow demographers are outstanding in their care for data. Topics are sometimes introduced with a statement by the organizations that lobby1 for reducing immigration into the *****United States, such as FAIR (Federation for American Immigration Reform), The Environmental Fund (TEF), or Zero Population Growth (ZPG). My purpose is to show that there is controversy about the issue in question, and that the discussion is not just an assault upon a straw man, as some of these issues might otherwise seem. In my judgment, inquiry into (and, once in a blue moon, correction of) incorrect popular beliefs is a valuable scientific activity even if it does not also lead to important theoretical discoveries -- though in fact it often does come to be a rich source of theoretical advance. Newspaper accounts are cited from time to time as anecdotal evidence in support of the general argument. I hope that the reader does not conclude from this that the book is not serious scholarship. Such a conclusion may be warranted on other grounds, of course, but in my view the use of such casual material is not a failing. Rather, it seems to me that social scientists should use whatever materials are at hand to advance our knowledge about the subject. Theory, together with samples of data which are sufficiently homogenous that they will support statistical generalizations, does not constitute the only evidence that a reasonable person will admit as having weight. Here I stand with physicist Percy Bridgman who, when asked about the nature of scientific method, answered that "The scientific method, as far as it is a method, is nothing more than doing one's darndest with one's mind, no holds barred" (1945, p. 450). Immigration is a controversial topic that arouses strong emotions. Nevertheless, I hope that the book is a reasonably objective and comprehensive scientific inquiry into the economic consequences of immigration. Most of the research described by this book -- others' work and my own -- is "pure" or "basic" science in the sense that it was done mainly out of curiosity about fundamental economic questions, though of course the economic and political importance of immigration also stimulated the research. If advocacy is understood to be the pointing to a conclusion that seems warranted by fully presented facts and data and analyses, joined with explicitly stated values (necessarily part of any point of view about a social decision), then one may regard this book also as partly advocacy. It is so partly because I conclude from the facts presented here that immigration is in most ways economically beneficial to U.S. natives, and partly because my values and tastes2 favor having more immigrants. I find no contradiction or inconsistency in these two roles. And I do not consider this duality of roles a defect or a frailty, except insofar as a person's inevitable human interest in, and preference for, one cause rather than another necessarily challenges one to be fair. The person who could write about a topic such as immigration without an emotional tinge one way or another would be both rare and peculiar. The most to ask and hope for, I think, is that the writer try to remain aware of his or her own preferences, and to be as honest as possible with the evidence -- which includes adducing all the relevant evidence, even if it does not further the cause that the writer prefers.3 Perhaps I am fooling myself, but such a course of conduct seems easy in the work at hand, because the more widely and deeply I inquire into the facts and the theory, the more evidence I find of the economic benefits of immigration for U. S. natives, and the stronger seems the case in favor of more immigration. This is just the opposite of the view with which I began my study of population economics two decades ago. I hope, however, that the book will not be considered a debating argument, if debate is understood to be a selective marshalling of evidence that is favorable to one's point of view without mention of opposing evidence, and without indicating how one's personal preferences enter into the argument and conclusion. I have struggled to be even-handed and complete.4 When weighing the possible effect of the author's views upon the content of this book, the reader might wish to take into account that (as noted above) I began work on the economics of population in the 1960's with the belief that additional people are economically deleterious for the world and for the United States. It was my reading of the literature and later my own study of the data and theory that influenced and reversed my belief, rather than my original beliefs influencing what I wrote and write. I hope that readers inclined to worry about fairness of presentation will notice that this book introduces, apparently for the first time, a weighty factor which militates against a policy of immediately-opened borders. This is the concept of human capital externalities, which suggests that the effects of immigrants may be different when immigrants make up a large proportion of the population than when they make up a small or moderate proportion of the population. The implication is that if the rate of immigration is to be increased very greatly--that is, by a considerable multiple of the present rate--it would make sense to bring about such a change in several increments rather than all at once, so that there will be time to examine the extent to which there are negative effects upon natives from the interaction between the present population and a large number of persons who come from countries with lower levels of economic activity. It was consideration of this new theoretical element which first persuaded me away from the policy of open borders to which I had previously beeen attracted because there seemed to be no economic theory or evidence against it. (But it should be emphasized that this notion of negative human externalities does not relate to immigration levels of the size that are being considered by any of the sides in the national debate now going on.) Several chapters of this book, especially Chapters 8 and 9, draw heavily from my 1981 book, The Ultimate Resource. That book, and my 1977 book, The Economics of Population Growth, analyze the effects of additional people upon various aspects of the economy. Immigrants are people, inter alia, and therefore the earlier book's analysis applies to them. I hope that the reader does not find the treatment here unnecessarily redundant; the only option would have been frequently to refer readers to the earlier writing, which is to ask for more effort than is reasonable or likely. The book sprawls too much. It might be better to reduce the data for foreign countries, eliminate coverage of some fringe topics, and cut the number of citations from the newspaper and other non-standard sources. But that comprehensiveness helps us understand the subject; I also believe it will assist the next person who tackles the topics. The following excerpts from a letter by a new immigrant (with blemishes in English left intact) may be appropriate here: Your article about the economic impact of immigrant reprinted here on The State Record in Columbia [South Carolina] has encouraged me a lot. [It] has really relieved my doubt about being a burden for this country. I am Vietnamese refugee arriving on 1976. If the American public has a supporting and fair attitude . . . the immigrants would be able to be more productive. A negative and false opinion about our situation really discourage the young generation to stand up with dignity and to contribute to build up our society . . . somehow, the American public expects to hear another kind of message such as: truly the immigrants are burdensome, but the great country of U.S.A. will make sacrifices to help out. It is unhealthy. I think all immigrants should renounce to the idea of charity. Nobody can maximise the potential without being recognized and expected to do so. (C.Le, July 9, 1980) A letter like Mr. Le's encourages me a lot. * * * * * * I hope that you will now share with me the excitement of examining the economic effects of migration to the United States, from countries all over the world, of men, women, and children who come here to improve their material life as well as to enjoy liberty and other spiritual benefits. They struggle for their own sakes and for the sakes of their loved ones, but inevitably they benefit the rest of us, too. Julian L. Simon Thanksgiving Day, 1987 Chevy Chase, Maryland ACKNOWLEDGEMENTS A grant from the Sloan Foundation hastened and eased the preparation of this book. The book would eventually have been written even without the grant, but the work went better and more happily with it. Dah-Nein Tzang, Richard Sullivan, and Stephen Moore were, in that order, diligent and capable research assistants. They wrote and ran the computer programs, and wrestled successfully with refractory tapes. Jeremy Atack wrote the excellent computer program to make the Census Bureau's SIE tape usable for my purposes. David Simon suggested the quotation from the Declaration of Independence which is on the footnotes piece. Helen Demarest typed corrections and did a dozen other secretarial tasks with care and clear-headedness; she works with a diligence and dedication that awes me. Annelise Anderson and Ivy Papps generously read the entire manuscript, and both made many useful suggestions. Helpful comments on one or another chapter were received from Stanley Engerman, Fred Giertz, Thomas Mayer, Richard Lambert, Nathaniel Leff, Charles Kindleberger, Richard McKenzie, Melvin Reder, and Robert Warren. Clarifications, references, and other sorts of help were received from Frank Bean, David A. Bell, Gregory deFreitas, Ray Marshall, Richard Mines, and T. John Samuel Thank you all. I am grateful for your help. Julian L. Simon Thanksgiving Day, 1987 FOOTNOTES 1FAIR disclosed that it hires an expensive Washington lobbying firm (The Wall Street Journal, ). 2Perhaps a word about my tastes will be appropriate. I delight in looking at the variety of faces that I see on the subway when I visit New York, and I mark with pleasure the range of costumes and the languages of the newspapers the people are reading. When I share a cab from the airport to that city with two visiting high school girls from Belfast, Ireland, and I tell them about the Irish in New York -- and about the other groups, too -- I get tears in my eyes, as I again do now in recalling the incident. I remember the contribution that my grandparents made to their new country in which they arrived with little except their hopes and their willingness to work hard and take chances, as I also remember the contribution of opportunity and freedom that their new country gave to them. I find no important difference between then and now that makes the process more difficult for either the immigrants or the country than it was then. 3William James saw it this way: [S]cience would be far less advanced than she is if the passionate desires of individuals to get their own faiths confirmed had been kept out of the game...if you want an absolute duffer in an investigation, you must, after all, take the man who has no interest whatever in its results: he is the warranted incapable, the positive fool. The most useful investigator, because the most sensitive observer, is always he whose eager interest in one side of the question is balanced by an equally keen nervousness lest he become deceived. (1962, p. 52.) The writers on immigration differ, I believe, not in whether they are passionate, but whether they allow the passion to show. I hope that the reader does not correlate the existence of passion with the existence of prejudice, and will not in turn prejudge this work because of a distaste for this aspect of my style. 4Much of the professional literature on immigration seems technical and impartial while actually making an unbalanced and technically-unwarranted argument in favor of an immigration policy preferred by the author or the agency. For example, two of the most prominent writers on the economics of immigration (let them remain unnamed, though the citation may be found below), in an article entitled "Immigration and Employment: A Need for Policy Coordination", arrive at the statement that "30 to 45 percent of the annual growth of the labor force may consist of newly arrived aliens". On these grounds they urge that, with respect to U. S. immigration and labor market policies, "Logic would seem to suggest that there should be a close relationship between these policies." But by their own estimates as of the time of their writing in 1980, legal immigration made up only 15% of the annual growth of the labor force, with the percentage expected to decrease at least through 1985. They arrive at an upper limit of 45% by projecting a drop in native labor force entrants together with the assumption of a high level of illegal immigration. And the writer of the blurb for the article then converts their statement quoted above, which does not pertain for about a decade after the date of publication, into "In coming years, immigrants may constitute as much as 45% percent of U. S. labor-force growth; efforts are needed to ensure that national goals for immigration and employment are complementary". That is, a tenuously projected upper limit is converted into a seeming central-tendency forecast through the use of the weasel words "as much as". And the policy conclusion is stated as fact rather than as speculation or personal preference, even though the connection which underlies the conclusion -- the proposition that immigrants adversely affect native employment -- is simply the authors' "logic" and is unsupported by any evidence. Furthermore, this kind of writing finds publication in the U. S. Department of Labor's MONTHLY LABOR REVIEW (October, 1980, pp. 47-50), an official publication obliged to be factual and impartial. It is relevant that the Department of Labor consistently reflects much of organized labor's view that immigration, and especially legal and illegal immigration from Mexico, should be reduced or eliminated, and it is also relevant that the Department of Labor has been supporting the work of the senior of those writers for many years. So much for the patina of objectivity in supposedly "objective" analyses of immigration. Open and frank advocacy would seem preferable. 86-80 Introl 12/10/87