Last week I debated National Review's Ramesh Ponnuru on immigration at American University. I argued that immigration has been very good economically for America and that we need to strive for a 21st century version of the open borders policy we had for the first 150 years of the country's existence. Ramesh, himself a son of Indian immigrants, made a case for a more selective, high-skilled immigration policy along the lines of Canada's.
Our remarks were followed by a vigorous Q&A with the assembled students and faculty.
Here is a video link of the entire evening. Below is a rough transcript of my speech.
What should U.S. immigration policy be? That is the question for this discussion.
In a country that understands itself as the land of immigrants, and where the Statue of Liberty stands tall at its gate, one would think that the answer to this question would not be difficult: a policy of a wide and warm embrace of immigrants. In fact, it would seem odd that this is even an open question. But the interesting thing it seems is that in every century, there is one president who seem to get the answer "right"—or mostly right. And, spoiler alert, it's not Trump for our century.
In the 19th century, the president who stands out on this issue is Abraham Lincoln. Lincoln was a big proponent of maintaining America's open border immigration policy of the time—and opponent of the Know Nothing nativist movement. Even before he became president, in 1855, he wrote in a letter: "As a nation, we began by declaring that 'all men are created equal.' We now practically read it 'all men are created equal, except negroes.' When the Know-Nothings get control, it will read 'all men are created equal, except negroes, and foreigners, and Catholics.' When it comes to this I should prefer emigrating to some country where they make no pretence of loving liberty—to Russia, for instance, where despotism can be taken pure, and without the base alloy of hypocracy." After he became president, on the Fourth of July, 1864, Lincoln singed into law a bill titled An Act to Encourage Immigration.
How quaint that sounds in Trump's America where deportation squads are doubling down to round up peaceful and productive immigrants with long roots in the country in the name of interior enforcement. Or where Trump demanded a 40 percent cut in legal immigration as a condition for legalizing Dreamers. It is striking that a country that committed the original sin of slavery to forcibly bring foreign labor to America should now be going to such draconian lengths to throw voluntary foreign labor out of America.
In the 20th century, the president who came closest to getting the answer right was Ronald Reagan. Trump thinks he invented the "Make America Great Again" slogan. In fact, Reagan beat him to it. He ran on a "Let's Make America Great Again" campaign, except that he used the phrase to argue not for pulling up the drawbridge to promote an ethnonationalist state, as Trump is doing, but the opposite: He said we should throw open America's "golden gate" to immigrants because the immigrants, in his view, "brought with them courage and the values of family, work, and freedom." In other words, without immigrants America wouldn't have any golden gates to slam.
Which brings me to the economic case for immigration to America.
There is an overwhelming consensus among economists that immigration is a great blessing, a win-win for both immigrants and the host country. Every economist of every persuasion—Adam Smith, Keynes, Ludwig von Mises—believed that allowing labor to move wherever it is most productive would be a great boon for everyone. Curiously, the one prominent exception historically has been Karl Marx. He regarded England's decision to absorb the "surplus" Irishmen being driven out of their country during the Great Famine not as a benefit but a ploy by the English bourgeoisie to "force down wages and lower the material and moral position of the English working class." The popular, modern-day retrictionist canard that immigration from the Third World to rich countries is tantamount to "importing poverty" has its genesis in Marxist thought. So it's interesting that we find conservatives today channeling Marx.
The primary reason that people find this kind of thinking appealing is that the case for immigration is indeed counterintuitive. It is hard to see how in a world of finite resources, allowing more people into a country would enhance its prosperity instead of leading to overcrowding and congestion and unemployment. President Trump perfectly encapsulated this mentality when he declared that "our country is full." But if our country is full, should we also restrict childbirth like China did at the height of the population explosion fear? This is a Malthusian worldview that has been thoroughly refuted.
At the heart of this issue is the question: Are humans a liability who deplete resources or an asset who themselves are a resource—indeed, to use the parlance of the late, great environmental economist Julian Simon, the "ultimate resource"?
It is the ingenuity of human beings that turns fallow land bounteous, dirt into valuable metals, and sand into computer chips. There is no given or fixed set of natural resources out there, Simon pointed out. Useless materials become resources once human creativity finds a way to harnesses them. Oil was just a toxic black liquid in the ground till humans discovered that it could be burnt for light and power. The development of high-yield grains increased the productivity of land exponentially while human population grew only arithmetically—the exact opposite of what Malthus predicted.
The most important factor limiting a country's economic progress, then, isn't insufficient physical resources but insufficient human resources. Hence, contrary to Malthusian—or Trumpian—thinking, population increases through immigration are nothing to fret over when you have institutions able to harness human talent. Immigrants are not only mouths that need to be fed but also minds and hands that grow the economic pie. They certainly consume resources. But they produce far more than they consume over the long run when given an opportunity. To the extent that immigrants, whether high- or low-skilled, have jobs, it's because they produce more wealth or value for their employers than they consume in wages.
Imagine for a moment that there were foreign planes periodically airdropping free goods on American homes. Wouldn't it be colossally stupid to send missiles to shoot them down? Yet why is it not equally foolish to shoo away the real source of this wealth, namely, Mexicans whose sweat makes affordable housing possible for Americans and puts cheap goods in these houses? Or when it turns away Chinese computer engineers whose smarts virtually spin gold from sand?
In the modern world, we seem to think migration is something we've invented through plane travel and fast communication. Actually, large movements of people—even between settled civilizations, not just nomadic cultures—have always been part and parcel of human history. What's relatively new are the political barriers to mobility. And these have become tenacious. About 3 percent of the world's population lived outside its birth country in 1900. And 3 percent does so now. Not a deluge, not a tsunami, but a trickle, despite the canard of "mass immigration" that nativists and restrictionists have weaponized to launch their anti-immigration populist backlash around the world.
Refugee flows, as distinguished from economic migrants, are dominating our political consciousness right now. But these are episodic and brief, because they are the result of turmoil. The vast majority of migration is economic in nature, driven by the differential levels of productivity between developed and developing countries. The lower productivity of the latter means, for example, that Mexicans can earn twice more, Indians over 5 times more, Haitians 10 times more, and Nigerians 15 times more for the same work in the United States.
Trapping immigrants in low-productivity countries results in huge losses not just for them but for global productivity. How huge? The Center for Global Development's Michael Clemens has estimated that if everyone could take a job anywhere they wanted, our $75 trillion global world product would experience an instant boost of 50 to 150 percent annually. Using the lower number would mean adding $37 trillion of wealth to the world. Even if you discount Clemens by 50 percent, we are still talking of $17 trillion, or the size of U.S. economy, added to the world every year, which would end global poverty while enriching First World natives.
Even the meager immigration the U.S. has allowed has made this country immensely richer. Reasonable estimates suggest that the total annual contribution of foreign-born workers to the U.S. economy adds up to roughly $2 trillion, or about 10 percent of annual GDP. Optimistic ones put that number higher. And even an immigration pessimist like Harvard University's George Borjas puts it at $1.6 trillion.
Not too many people outside hardcore nativist circles believe that high-skilled foreigners are anything but an unmitigated economic blessing. Even Ramesh and his colleague Reihan Salam accept that. According to one estimate, 50 percent of productivity growth in the United States between 1950 to 1993 could be attributed to the growth in the number of foreign scientists and engineers. Between 2000 and 2017, immigrants won nearly 40 percent of the American Nobel Prizes. An Indian-American economist won the Nobel just last week. Highly educated immigrants obtain patents at double the rate of highly-educated natives.
Immigrants and their children were responsible for founding 46 percent of all the Fortune 500 companies in America in 2017. A quarter of all startups have been started by immigrants. Fifty-five percent of $1 billion–worth startups had an immigrant founder. Apple was founded by the son of Syrian refugees. It is hardly an exaggeration to suggest that if America's economy has become the innovative hub of the world, dominating virtually every industry in the 21st Century from IT to Media/Entertainment, it is because of immigration.
But does all this success by high-skilled immigrants steal jobs and wealth from native-born Americans? No! The rise in GDP due to immigration has boosted native earnings. What about employment? Do high-skilled workers take away native jobs? No again. One additional young, high-skilled immigrant worker creates 3.1 jobs for U.S.–born workers. And because foreign high-skilled workers also earn a high income, they pay far more in taxes than they consume in welfare.
The real immigration controversy is over low-skilled workers. The fear with respect to them is that they don't create jobs for natives—they compete with them and lower their wages and drain social services.
But there is very little support for these fears in the economics literature.
There are three reasons that low-skilled foreigners don't, on the whole, depress native wages:
1. The vast majority of Americans are not competitors of low-skilled immigrants but their customers. And the real wages of these customers are increased because the prices of goods and services go down, allowing them to buy more with the same income, which is tantamount to getting a raise without doing anything extra. Also, these low-skilled workers boost the productivity of high-skilled natives by freeing them for tasks that generate higher returns, monetary or psychic. Lawyers can spend more time on billable hours rather than ironing if they can take their shirts to the affordable corner Korean drycleaner. Or spend more time on bedtime reading for their kids if they can get Chinese takeout. In fact, even Reihan in his book panning low-skilled immigration admits that these immigrants have allowed him to enjoy the lifestyle of a Rockefeller in New York by putting affordable dog walking, housekeeping, nannying, cleaning, cooking, and transportation services at his beck and call.
2. More low-skilled immigration doesn't mean fewer jobs for the native-born, as restrictionists claim, because jobs are not a zero-sum game. To the extent that the foreign-born offer cheaper labor, they allow more businesses to form. And more businesses means more jobs for Americans.
Restrictionists often argue that with less immigration, the labor market would tighten—compelling American businesses to pay native workers more. That may happen in some cases. But what will also happen is that businesses will be compelled to charge higher prices, thus shrinking demand. Some businesses will go broke or shrink or never get off the ground in the first place, thus diminishing jobs for natives.
3. Immigrant workers are complements of native workers, not their substitutes, at both the high-skilled and low-skilled level. If you look at the distribution of immigrants in the economy, it resembles an hourglass with foreigners occupying the higher-rung of jobs in STEM fields where Americans are available—or lower-rung jobs where Americans are unwilling. Americans are concentrated in the mid-skilled service jobs.
In sum, economists who have examined the issue, even Borjas, have found a positive impact on the wages of every cohort of natives whether high school grads or college grads. The only negative impact that anyone has reported is Borjas on the wages of native high-school dropouts, a vanishing subset of the population. But other economists have reported a positive impact even on that cohort. So even if you accept Borjas' negative assessment, well over 90 percent of American workers experience wage gains, not losses, due to low-skilled immigration.
The economic arguments against shutting America's door to low-skilled immigrants are exceedingly weak. But what about the fiscal argument that they strain the welfare state because they consume more in social services than they pay in taxes?
Even that's kind of weak. For starters, contrary to the right-wing stereotype of Hispanics being welfare queens, the fact is that the rate of welfare use among low-skilled immigrants, even their American-born children who are entitled to all the benefits, is lower than it is for natives in the same socioeconomic bracket. As is the value of benefits they receive.
But the big point is that if you look at the social spending in this country, a small portion of it goes toward means-tested benefits for the poor: about $800 billion. About twice that amount, or $1.5 trillion, is spent on the old in the form of Social Security and Medicare. And over $1 trillion is spent on school and college of the young.
But the vast majority of low-skilled immigrants come in their twenties—just after another society has borne the great cost of educating them and before they become entitled to old-age benefits. This means that we get the benefit from their most productive years, just when they start working and paying taxes. So we get a generational windfall. We would have to spend much, much more as a country if we relied entirely on childbirth by natives to maintain our population levels and labor force.
Given these huge economic upsides of immigration to the immigrants, America, and the world, what should U.S. immigration policy be?
In an ideal world, America would implement the 21st century equivalent of the Ellis Island days prior to 1924, when Congress passed the Johnson-Reed Act and made restrictionism rather than open borders America's default policy. That act limited the number of immigrants allowed entry into the United States through a national origins quota system that was designed to keep out Asians and Eastern Europeans. Prior to that foreigners (with some notable exceptions, like the Chinese) could more or less show up by at America's ports, where they were instantly handed papers if they were able-bodied and not "idiots, lunatics, convicts" or suffering from some contagious disease. And right next to the immigration booth when they walked off the ship were companies waiting to hand them employment papers and put them to work.
The beauty of that system was that our immigration policy wasn't in the hands of bureaucrats in the Swamp trying to centrally plan the labor market for the entire country. Rather, employers and the country's residents were calling the shots. Their needs decided how many and what kind of immigrants came to America—not the arbitrary whims of bureaucrats. The government played a legitimate role in keeping out foreigners who posed a genuine security or public health threat. But beyond that, it did not come between willing employers and willing workers. It didn't matter whether the immigrants were coming to work in farms, factories, or hospitals.
That is a far cry from how our system currently works. The best way to describe our current system is that it effectively imposes a blanket ban on immigration which it then arbitrarily relaxes based on predefined bureaucratic categories or some political whim of the moment—whether it is encouraging family reunification or enhancing ethnic diversity or helping some industry that central planners deem important. For 30 years, until Trump came along, central planners had been looking relatively kindly toward foreign techies and made 85,000 H-1B guest worker visas available to them annually. (The demand is twice or three times as much.) Trump is in the process of gutting even this meager program.
But one positive thing about H-1Bs visas is that they are dual-intent visas that allow their holders not only to work here but to apply for permanent residency or green cards. The H-1B equivalents for agricultural and seasonal low-skilled workers don't allow that. They expire, and the immigrants are required to go home. They are also tangled up in red tape and aren't very usable. This is the great source of our problem with undocumented workers. Restrictionists say these people should obey the rule of law and wait in line for their turn. But there is no line for them to wait in, and the rule of law is a sham.
A 21st century equivalent of Ellis Island is a political impossibility in my lifetime. The next best thing would be to try and get our immigration bureaucracy to approximate that model. Get rid of the high-skilled and low-skilled category or at least raise the quotas in these categories and deregulate them to make them more usable. Make all of them dual-intent, not just H-1Bs so that everyone has an option of staying. To placate concerns of native workers, perhaps charge a hefty fee to issue these visas. Some Central American migrants are paying $10,000 to $20,000 to coyotes to sneak them into the country illegally. Some of that could be captured through fees to offset any fiscal impact or create a compensation fund for the natives affected.
But the single best thing that we could do would be to let states write their own immigration programs and hand out visas based on the needs of their own industry and economy. In effect, create their own guest worker programs. Uncle Sam can continue to control the grant of citizenship. Canada is already doing this through its Provincial Nominee Program. This is the real Canadian model we ought to follow, not Ontario's industrial policy point system that Ramesh, I believe, favors.
If we stay on our current course, not only will we hurt immigrants, but we will cripple our economy and, as this president is showing, erode our humanity.
Comments