Sunday, 17 March 2013

Kuehn on Immigration

The always interesting Daniel Kuehn has a thought-provoking post on immigration:
1. It's a really bad idea to give high skill immigrants a leg up in the immigration process. It's market planning that we would balk at if we did it for foreign investment or foreign trade but for some reason it's palatable for foreign flows in labor. We do not have high skill labor shortages and decades of research has shown that. The high skill immigration programs are often exploitative of workers. Science and engineering market failures are principally on the demand side, not the supply side. Plus it simply goes against our values. If we went all-in for an Australian or Canadian style points system program we might as well just remove the "huddled masses yearning to breathe free" plaque from the Statue of Liberty.
There’s something to this argument if you see immigration through the lens of comparative advantage, as this Bryan Caplan post does. We gain from trade when we trade things we are relatively better at making for things that other people are relatively better than making. But of course certain goods and in particular many services are much harder to trade across borders – that’s one reason why the gains of immigration are so high in the first place. So from this perspective, we don’t want to be letting in people who can produce the things we’re just as good at producing – academics and computer scientists. We want to let in the people who are low-skilled, because their opportunity cost of producing low-wage services is much lower than ours, so there can be huge gains from trade.

That’s fine as far as it goes. But there are a bunch of other good reasons why you’d want to promote high-skilled immigration. For one thing, one of the biggest benefits of freer immigration are agglomeration economies. When people cluster together, they all get a lot more productive. There are reasons to think that these effects are more important for high-skilled workers. If you’re a waiter, your productivity is not really affected that much by the number and quality of the other waiters around you. But if you’re a scientist or an entrepreneur, then you do gain a lot from getting to work with and share ideas with a larger population of other scientists and entrepreneurs. I don’t have any hard evidence to hand, but anecdotally the ‘place premium’ is higher for higher skilled workers, for this reason. Moving a physics PhD from Somalia to California raises their productivity more than it would an unskilled worker’s.

From the perspective of American welfare, which Kuehn thinks is what we should focus on, there are also benefits from high-skilled immigration. An influx of very low skilled immigrants would increase local inequality, with its attendant costs – lower civic trust, worse social cohesion and so on. Higher-skilled immigrants are more likely to assimilate more quickly into American society. Obviously the higher immigrants’ incomes, the larger the fiscal benefits, meaning a lower tax burden on current Americans. And given diminishing marginal utility of income, we should be more worried about wage suppression of low-skilled native workers than the high-skilled.

Of course, there are other reasons to accept the low-skilled in. They themselves are likely to experience a bigger improvement in their living standards than a high-skilled person would. And the costs of filtering out the high-skilled from the low-skilled are probably quite high, leading to an expensive and bureaucratic system that ends up deterring all potential immigrants from applying. So a mixed bag of immigrants is probably more desirable.
2. Illegal immigrants are exactly who we want here and occasional amnesty is not that bad of a policy. Most people insist they love immigrants but want them to be here legally and talk about how illegal immigration is unfair to people who wait in line to be legal immigrants. But being an illegal immigrant reveals important information about the immigrant: these people really want to be here. They want to be here so much they will take personal risks to avoid the wait. They also like American society more than they like Congress or the federal bureaucracy. That doesn't seem like that bad of a perspective to have. People will also sometimes talk about how amnesty is bad because it sends mixed signals and it will indicate that our commitment to immigration enforcement isn't credible. But amnesty legitimates the immigrants who have revealed this important information about themselves in the decision to come over illegally. Of course there are a lot of problems with illegal immigration, even for the immigrant themselves. They obviously don't get to live fulfilling lives while their status is in that kind of limbo. So I'm not necessarily advocating restricting immigration flows just to get a crop of dedicated illegals. What I'm saying is that people need to think about the self-selection implied by illegal immigration and realize that those are exactly the sort of people we want as fellow citizens. How many natives would go to such length to get into the United States?

Again, to some extent I agree with this – self-selection is an important part of why immigrants are so great for the country and the economy. But that’s true of any kind of immigration. The kind of people who are desirable enough employees for companies to subject themselves to the H1-B visa process are going to be the ‘best’ immigrants. The kind of people who would scrimp and save in order to pay an immigration tariff would be the ‘best’ immigrants. Even under completely open borders, the kind of people who would be willing to uproot themselves and their families in search of a better life would be the ‘best’ immigrants.

And illegal immigration is obviously horribly inefficient. Mexican ‘coyotes’ could be doing something much more productive. So could document forgers. The immigrants would be able to do their jobs a lot better if they could work on the books.

More than that, though, the strategy of illegal immigration followed by amnesty as a backdoor way of increasing immigration is counterproductive. It marginalises immigrants, makes voters less empathetic towards them – and if the majority of voters don’t think you’re ‘like me’ then the law is not going to treat you well. A sense that the law is being flouted doesn’t endear people to more immigration. If immigrants were permitted to come legally then they would assimilate much better into society, be more likely to speak English and probably people would feel better about letting them in.

Now, I know Daniel isn’t suggesting that this is a first-best policy, and I agree with him that we could do a lot worse than periodic amnesty for large numbers of illegal immigrants. But that’s hardly a ringing endorsement for the policy.

3. The population that should benefit from immigration policy is a moving target. You hear two different things on this issue. First, the Bryan Caplan types think that we should maximize global welfare. I think this is obviously wrong. When we get together to form a government we do it to satisfy our own needs and internalize our own externalities. The world should have no expectation of free riding on our collective action. That doesn't mean we don't care about the world when we make policy - it's only to say that the social welfare of the world should only enter policymaking to the extent that American citizens value the social welfare of the world. So policy should be made to maximize the welfare of Americans. This is fine for most policy, except immigration. When it comes to immigration the very question of which population has standing in these decisions is a moving target because the whole policy debate is about who is and is not an American! Now it's possible there's a stochastically dominant policy that will be preferred no matter what the population of "Americans" that we decide on is, but that's not guaranteed. The question of whose utility we are maximizing and what immigration policy should be is self-referential. What I draw from that is that we shouldn't stake too much on thinking about a specific population that we're trying to help. We should rely on other decision rules and principles. The Bryan Caplan types should stop talking about what's best for the world and the rest of the country besides the Bryan Caplan types should stop talking about what's best for Americans.
As a Bryan Caplan type, I have a good counterargument to this, which is that the world is not free-riding on our collective action. Freedom of movement is not something we graciously allow, it’s something we gratuitously restrict. When we restrict immigration, we are killing, not letting die. We are chaining Julio to the tree. And it’s pretty obvious that we shouldn’t be allowed to do whatever we want to foreign people if it makes the ‘master race’ better off.

I do think it’s a tough question to think about. If we admit that we’re trying to maximise the welfare of Americans, that naturally leads to the question – which Americans? Do the children of potential immigrants, who would be citizens, count? Schools in the USA are a lot better than in Mexico. How much more weight should we assign to low-income Americans’ wages as opposed to high-income?

So Kuehn decides that we shouldn’t assess the policy on utilitarian grounds at all. But then if we don’t think about policy based on whether it would increase welfare, what do we decide based on? If we see freedom of migration as a natural right, then it would be unjust to restrict immigration even if it did substantially decrease global welfare – but it’s clear that Kuehn doesn’t take this view. So what criteria is he using to evaluate immigration policy?

Ultimately, I think the answer to this has to be a Pareto-efficient immigration policy. Because the benefits of immigration are so large, we could easily design the policy in a way that increased everyone’s welfare. Then we wouldn’t have to care so much about which groups’ welfare we should be thinking about.


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  2. I can only imagine that existing developed countries and economies would get a majority share of this pie and the rest would lose out due to factors and phenomena such as 'brain drain', amongs others.

    Denmark Immigration

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