Are We Importing Poverty with Immigrants?

Are We Importing Poverty with Immigrants?

Are We Importing Poverty with Immigrants?

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Mark Krikorian
7:45 a.m.  Monday  8/19/96

Our nation's immigration policy harms the poor.

Although this fact would appear to be beyond reasonable doubt, it doesn't necessarily translate into support for immigration reform. One may argue that immigration is dwarfed by other factors causing wage depression and income inequality; or, that benefits to the entire nation outweigh the harm done specifically to the poor; or, that mass immigration is the labor-market equivalent of school choice, forcing improvement among the slothful.

As plausible as these arguments against immigration reform may sound, they don't hold water upon closer examination. In this first posting, let me examine the first contention, that immigration plays a real, but minor, role in worsening the plight of the poor. It is said that other factors--economic globalization, technological change, the decline in unionization, the entry of women into the workforce--have played a far greater role than immigration in holding down the wages of the poor and in increasing income inequality. Even if this were true, immigration policy is the only one of these factors government can influence. Congress can't legislate a pause in the expansion of human knowledge or instruct women to exit the workforce or stop the Japanese from setting up factories in Malaysia--but it can cut immigration.

What's more, immigration is not merely one of the extras in the drama of falling wages and growing inequality, but rather one of the lead players. My fellow panelist George Borjas has found that immigration accounted for up to one-third of the increase in earnings inequality between high-school dropouts and others between 1980 and 1988. Bureau of Labor Statistics economist David Jaeger has concluded that immigration accounted for as much as one half of the decline in real wages experienced by native-born high-school dropouts in the 50 largest metro areas during the 1980s. Also, Marc Partridge from St. Cloud State University in Minnesota has suggested that California's income inequality has been among the worst in the nation because of immigration, while Augustine Kposowa, now at U.C.-Riverside, has found that immigration causes significant reductions in the family income of minorities.

The economists can, and should, continue to debate the relative importance of immigration in the economic setbacks suffered by the poor. But what's important for policymakers is that the effect is real, it's big, and, unlike any other contributing factor, it can be ameliorated through legislation.

George Borjas
7:56 a.m.  Monday  8/19/96

In 1970, natives and immigrants had roughly the same poverty rate: 13.7 percent of immigrants and 13.3 percent of natives lived in poverty. By 1990, the poverty rate of immigrants had increased to over 18 percent, while that of natives was below 13 percent. The main reason for this disturbing trend is that immigrants, when compared to native workers, are as not as skilled as they used to be. In 1970, immigrant men who had just arrived in the country had .4 fewer years of schooling and earned about 17 percent less than native men. By 1990, the newest immigrants had 1.3 fewer years of schooling and earned 32 percent less than natives.

The relative decline in immigrant skills has significant economic and social consequences. For instance, the entry of large numbers of less-skilled immigrants probably worsened the employment opportunities of less-skilled natives. The 1980s witnessed a sizable increase in wage inequality--the wage gap between the less-skilled and the highly-skilled rose substantially. A number of studies have concluded that immigration was an important contributor to this trend. In particular, the large-scale immigration of less-skilled workers may account for perhaps a third of the wage decline suffered by less-educated workers.

Less-skilled immigrants also have high rates of welfare recipiency. In 1970, immigrants were less likely to receive cash benefits (like AFDC or SSI) than native households. By 1990, 9.1 percent of newly-arrived immigrant households received cash benefits as compared to only 7.4 percent of native households. If we take into account the other programs that make up the safety net (such as Medicaid and Food Stamps), the immigrant-native differential in welfare use grows dramatically: 21 percent of immigrant households receive some type of public assistance, as compared to only 14 percent of native households, and only about 10 percent of non-Hispanic white native households.

The most important consequences of less-skilled immigration may well lie in the future. We cannot predict precisely how the children and grandchildren of the current immigrants will fare in the next century, but we can use the historical experience of prior immigrant waves as a guide. The available evidence suggests that it may take three or four generations for the descendants of immigrants to reach economic parity with natives. Current immigration, therefore, may have set the stage for sizable ethnic differentials in economic outcomes that are likely to play an important social, economic, and political role throughout the next century.

Barry Chiswick
8:26 a.m.  Monday  8/19/96

The economic consequences of immigration have been a driving force in the debate over immigration policy throughout American history. The economic environment in which the debate takes place has changed, and, as a result, policy conclusions may also have changed.

A century ago the United States was experiencing a mass immigration primarily of low-skilled workers from Southern and Eastern Europe. During the five decades 1871 to 1920, the annual rate of immigration was about eight per thousand U.S. population, in contrast to a rate of about three per thousand U.S. population in the last 15 years. The earlier mass immigration was absorbed into the seemingly unlimited opportunities for low-skilled employment in America's expanding factories, mines and farms. Yet, this mass immigration had a depressing effect on wages in the industrial north and retarded the flow of unskilled workers, both white and black, from the rural areas, especially in the south, to the industrializing centers in the north. The result was an impressive expansion of the size of the American economy and an increase in income per capita, but a widening of what would have been the inequality of income if there had been less low-skilled immigration.

Times have changed. For one thing, income distribution issues now play a major role in the formation of public policy. We are concerned with not just the aggregate or per capita level of income, but also with how that income is distributed among the population. Policies that disadvantage significant segments of the population are not viewed favorably, even if they advantage the population as a whole. Indeed, in spite of recent welfare reforms, the United States will continue to offer a set of programs which, when taken as a whole, provides a generous level of financial support for those who have economic difficulty.

Another change has been in the structure of the economy. Rather than a seemingly ever expanding demand for low-skilled labor, in the past two decades the U.S. has experienced a relative decline in demand for their labor. This has been expressed as a relative decline in the wages of low-skilled to high-skilled workers. The wages of low-skilled workers have even declined in real value (i.e., after adjustment for inflation) in the past two decades. Several factors may be responsible for this trend, including the increased internationalization of the world economy, with the resulting greater competition from low-skilled workers world wide. The technological revolution related to computers may have also favored high-skilled workers at the expense of low-skilled workers.

The third change has been in the skills of immigrants. In the first two decades of the post-war period most immigrants had what might be called a moderate level of schooling, say 10 to 12 years of schooling. They did not differ so sharply from the American norm. In recent decades, however, the inequality in the distribution of skills among immigrants has increased. A larger number have high levels of skill, whether as doctors, scientists, engineers, technical workers or other high-level manpower. Yet a larger proportion also have very low levels of education generally obtained in schools of questionable quality. Many of these low-skilled immigrants are illegal aliens. This has arisen from a change in the source countries, from Europe and Canada to primarily South and East Asia, Mexico and other parts of Latin America. The large increase in low-skilled immigrant workers has added to the downward pressure on employment and wages in the low-skilled labor market.

Of the 804,000 immigrants admitted to the U.S. in 1994, only 36 percent reported an occupation at the time of application, 13 percent were "homemakers," 13 percent were retired or unemployed, 33 percent were students or children under the age of 16, while 6 percent did not report their activity. Of those who reported an occupation, 33 percent were in professional, technical, managerial and administrative occupations. There were as many in operative and laborer occupations (67,486) as in professional and technical occupations (67,286). Of the immigrants who were not students or under age 16, only 12 percent were in professional and technical occupations.

The immigration of low-skilled workers has therefore had both a direct and an indirect effect on increasing income inequality and poverty. The direct effect is the low-skilled immigrants themselves. The indirect effect is through their adverse impact on the employment and earnings of low-skilled natives. The public rejection of this outcome is heightened by both the perception and the reality that much of the low-skilled immigration is uninvited. It comes from those who violate both the letter of U.S. law as illegal aliens and its spirit through bogus claims for asylum and amnesty.

Peter Skerry
9:34 a.m.  Monday  8/19/96

The economic consequences of immigration are critical. But for present purposes I would simply assert that the current influx of relatively unskilled immigrants has negatively impacted workers, especially low-skilled workers--blacks in particular.

Still more evident are the substantial fiscal burdens immigrants impose on taxpayers. The most burdensome are education and health costs, which are incurred primarily at the local and state levels.

But before continuing, I would emphasize that such economic and fiscal effects are hardly the only source of public anxiety over immigration. An equally important, indeed overarching, concern is that immigration is straining, even tearing, the social fabric. Americans feel that immigrants are placing excessive, often unprecedented, demands on them--whether bilingual education or ballots, voting rights electoral districts, or affirmative action benefits. Such concerns are exacerbated by what law enforcement and immigration officials tell me is the growing connection between crime and immigration, especially illegal immigration.

If I am correct, the appropriate policy response should focus not so much on numbers of immigrants, but on the terms of their incorporation into American society. While the public does seem to crave a reduction in levels of legal immigration, we ought to avoid searching for a nonexistent magic number.

Again, the real issue is maintaining the social fabric, of orderly and (to the extent feasible) managed change. To my mind, this points to the familiar litany of de-emphasizing family unification and re-emphasizing immigrant skill and education levels. The trick, aside from the difficulty of enacting such proposals, is whether we can implement them--which is far from evident.

We also need to get serious about curtailing illegal immigration. This will necessitate enforceable employer sanctions.

At our borders, our efforts will also need to be redoubled. In this context, it is useful to recall that at the turn of the century, three-fourths of all immigrants to the U.S. went through Ellis Island, which was after all an inspection depot. That kind of ordered process is clearly obviated by modern means of transportation. And having just returned from a field research trip with the border patrol in and around San Diego, I am chastened--all over again--by the obstacles we face.

A good example is the heavy, corrugated metal fence, 44 miles of which have recently been constructed along the Mexican border. The American public believes this fence was built to stop people. But any border patrol agent will report it was built to stop vehicles carrying contraband, especially drugs. This objective helps explain why the fence's corrugated ribs run horizontally, which offer strength against vehicular thrusts, but also make it easier for people to climb over. Stopping vehicles--not foot traffic--also explains why at some places this new fence is only five feet high!

To be sure, the fence is only one component of an overall strategy to stem the tide of illegals. But its present form--and the confusion over it--is a reminder that we have a long way to go when it comes to seriously addressing our immigration problems.

Sanford Ungar
1:17 p.m.  Monday  8/19/96

Today's immigration debate is, in my view, entirely misdirected and misfocused. Much of the public "anger" over immigration, illegal and legal alike, has actually been stimulated by politicians (Pete Wilson and Pat Buchanan among them) who have seen immigrants as convenient scapegoats who can help advance (or salvage) their own careers. This is entirely consistent with the previous history of the public debate over immigration to the United States; nativism has been a frequent response to public unease over other, admittedly profound, issues--like today's widespread feelings of economic insecurity and uncertainty about the future.

The data I have seen, produced by the Urban Institute and others, convince me that non-refugee immigrants are not significantly more dependent on social benefits than native-born Americans. There are significant burdens on some local authorities, such as in Los Angeles County, and federal help may be necessary to relieve those burdens; but overall the country is not more burdened by immigrants today than at most times in the past.

I will develop some of these arguments further as the week goes on, but for now I have these answers to the key questions posed: We should deal with the problem of illegal immigration in part by increasing, not decreasing, the number of legal immigrants admitted, in effect decriminalizing much of what happens on the southern border. The vast, overwhelming majority of the people who enter this country do so because they have received rational economic messages at home that they will find work when they get here--and they do. We should attempt, by some orderly, calm process, to determine more accurately how many people do come here to work every year and adjust our legal limits upward on that basis. Not everyone wants to stay, and so we should revive some of the guest worker programs that Gov. Wilson used to support so enthusiastically when he was a member of the U.S. Senate. Much of today's illegal immigration can be traced to the fact that immigrants believe our rhetoric about catching and deporting them; they think that increased enforcement will be effective, and so they try to get in as quickly as possible (and bring their families along).

The most foolish and misguided aspect of current policy is the effort to federalize Proposition 187, which has not yet gone into effect (and probably never will) in California. Education and health care are not just a favor for those who receive them, but for the country as a whole, which benefits from having healthy and (relatively) educated residents, whether or not they are citizens. That is why every significant police organization opposes Proposition 187 and the like; law enforcement officials know what happens when children do not go to school. Similarly, public health officials understand the consequences when infectious diseases are not treated.

Herb Stein
1:39 p.m.  Monday  8/19/96

Four of our panelists--Mr. Ungar hasn't yet answered the question directly--agree that we are importing poverty with immigrants. Moreover, they seem to agree that the negative effect on the incomes of low-skilled native workers is substantial. Before we proceed to policy questions we might probe this agreement a little further.

How do we know about the effect of immigration on the income of low-skilled native workers? I ask because I have a little impression of studies of what seems to me a related question. Are we importing poverty with the importation of goods and services? Studies of this question seem to result in more disagreement than we find to the similar question about immigration. But what seems to me the preponderance of the evidence is that imports play only a small part in explaining the slow increase, or even decline, in the incomes of low-skilled American workers. Why the difference? Is it a matter of magnitudes? We now import about $1000 billion of goods and services a year. How does that compare with the value of the labor supplied by the immigrants who have arrived in the U.S. in, say, the last 10 years? What is the nature of the studies on which our panelists have reached their agreed conclusion about the effects of immigration?

I would like to learn more about the budgetary effects of immigration. This goes to a point raised by Mr. Ungar. Immigrants who earn income in the United States pay taxes. They also exert a claim on some kinds of government expenditures. For some kinds of government expenditures their claims are probably large relative to the taxes they pay. But for some other kinds of government expenditures their claim is surely small. We don't spend more on defense, or on the interest on the debt, because we have more immigrants in the country. Is it possible that the government makes money on immigrants.

The way I phrased the initial question did not invite the panelists to consider economic consequences other than poverty. But there are other consequences. The residents of Southern California whose gardens are tended by immigrants gain something, and, of course, that is only an obvious but small example. Isn't it likely that Americans who supply capital and high skills gain from the influx of people with low skills? Should we give that any weight when we come to think about policy?