Raveling the Immigration Narrative.

AuthorPowell, Benjamin
PositionCritical essay

In reading George Borjas's lead essay in this issue of The Independent Review and his recent book, We Wanted Workers: Unraveling the Immigration Narrative (2016), it is impossible to escape the feeling that Borjas himself is part of the problem that he seeks to solve. He writes in his essay, "Much of the academic research, I have long thought, was being censored or filtered to present the evidence in a way that would exaggerate the benefits from immigration and minimize the costs." Borjas's own writing tends to filter things in the opposite direction, exaggerating the costs and minimizing the benefits of immigration.

This brief essay illustrates Borjas's filtering by focusing on three areas: his calculation of the immigration surplus, the fiscal impact ofimmigration, and global gains from open borders.

Immigration Surplus

Borjas's essay replicates his textbook labor-market model estimating the net gain to the native-born population created by immigrants and finds that the net gains are modest--around $50 billion annually. But he cautions that "if one is willing to parade this modest gain in policy discussions, then one must also be willing to parade other, less-welcome implications of the same calculation: immigration is responsible for a huge redistribution of wealth, totaling around half-a-trillion dollars per year, from native workers who compete with immigrants to those natives who use or employ immigrant labor. It is telling that many discussions of the immigration surplus often choose to overlook the substantial distributional cost associated with generating even a $50 billion surplus."

This modest net gain coupled with the larger "redistribution" leads him to conclude that "it may be more useful to think of immigration not in terms of economic efficiency but as simply a redistributive social policy." His framing of these numbers is severely distorted.

The economic efficiency from immigration does not increase by only $50 billion per year. Economic efficiency must count everyone--including immigrants. Borjas's own calculations admit more than a $2 trillion annual gain to the immigrants themselves. Yet he spends only one paragraph of his essay (and similarly only one paragraph in "The Economic Benefits" chapter of We Wanted Workers) briefly mentioning these huge gains. Immigration, like trade in goods, is mainly about increasing efficiency and enlarging the economic pie--not about redistribution.

Though it might be tempting to defend Borjas for downplaying the gains to immigrants in order to focus better on the net welfare of the native born, such a defense would be misguided. The lion's share (approximately 98 percent) of the large economic gains generated by immigration naturally flow to the immigrants, but those gains need not stay with the immigrants. Someone who cares only about the welfare of natives and does not count the welfare of immigrants at all would have to be thoroughly uncreative not to be able to design tax and redistribution programs that could redistribute (in the true sense of the word) some of the $2 trillion in gains away from the immigrants and to the native-born population (perhaps to those who compete with immigrants?).

De-emphasizing the large gains to immigrants doesn't allow Borjas to focus better on whether immigration makes the native born better off. It thoroughly distorts the picture and allows him to make unfounded claims that efficiency gains are small relative to so-called redistribution.

Fiscal Impact

Last year the National Academy of Sciences published a large study (Blau and Mackie 2016) showing that immigration could potentially generate either fiscal drains or fiscal gains. Yet when Borjas presents this evidence, he overemphasizes the methodologically flawed short-run calculations that show drains, and he discounts the long-run estimates that show gains.

Short-run fiscal calculations compare the cost of providing public services to immigrants and their dependent children with the taxes that the immigrants pay on an annual basis. Although this comparison can be relatively precisely calculated, it is conceptually flawed. Any child, immigrant or native born, is necessarily a short-run tax drain. If we are going to count the government services consumed by nonworking children, then we also need to net those costs with the present value of the taxes they will later generate.

This leads us into estimating the long-run fiscal impact of immigration. In his book, Borjas admits that the long-run calculation is "conceptually superior," but then in both his essay and book he dismisses these calculations as "useless" because the estimates are sensitive to assumptions and because we are uncertain about future tax and spending policy. (1) This leads him to claim that "[t]he wide range of conclusions allows for a lot of cherry-picking by advocates" (2016, 175-76).

Borjas himself does some cherry-picking. He admits that some of the long-run calculations show fiscal gains, but he casts doubt on these estimates by saying that they are believable only if immigrants do not increase the cost of public goods and if the...

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