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Excerpt:
Are we making "immigration" a mountain out of a mole hill ... ?
Excerpt:
Another concern among natives has been that immigrants put downward pressure on wages. In theory they should, but empirical studies come to different conclusions. On one side is George Borjas, of Harvard University, whose study in 2006 found that although immigration did not depress overall wages between 1980 and 2000, it did hold down the pay of the low-skilled by 5-10%. On the other side, David Card, of the University of California, Berkeley, concluded that there was no effect. His view was based on a study of the “Mariel boatlift”, an unexpected surge in Cuban migrants to Miami in 1980. Mr Card reckoned that Miami had become accustomed to handling large inflows of unskilled migrants. Mr Borjas has recently looked at Mr Card’s analysis again and claims that high-school dropouts, a subset of the low-skilled native workers in Mr Card’s study, did in fact suffer a material fall in wages.
Until quite recently the academic literature treated migrants as substitutes for native workers. But what if they were complements; if low-skilled migrants helped to boost the productivity of low-skilled natives? Gianmarco Ottaviano, of the University of Bologna, and Giovanni Peri, of the University of California, Davis, find that for workers with at least a high-school qualification, the wage effects of low-skill immigration are positive if you drop the assumption that workers of the same age and education are perfect substitutes and that workers of one skill level, say cooks, do not affect the productivity of workers at other skill levels, say waiters or restaurant managers. The effect on the wages of high-school dropouts is only mildly negative. A paper by Marco Manacorda, Alan Manning and Jonathan Wadsworth, of the London School of Economics, similarly concludes that immigrants to Britain are imperfect substitutes for native-born workers, so they have little impact on natives’ job prospects or wages. New immigrants tend to affect only the pay of recently arrived immigrants.
From these muddy waters, it is possible to draw two tentative conclusions about the broad impact of migration on wages. First, the effect on the bulk of low-skilled native workers has been fairly muted—perhaps because the way work is done changes in response to large-scale migration. However, the pay of some narrow categories of workers (say, farm labourers in Britain or high-school dropouts in America) may still be affected.
To deal with the tension between immigration and the welfare state, three rules suggest themselves. First, make benefits conditional on having paid into the system. Second, tie the funding of local public services to local tax revenues to ensure an automatic response to an influx of migrants. Third, restrict migration to prime-age, skilled workers who are more likely to get jobs and less likely to lose them in a recession.
Are we making "immigration" a mountain out of a mole hill ... ?
