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Monday, August 18, 2008

Low-Skilled Immigration and Its Impact on the United States: the Economic, Social, and Education Spillovers

Today's Bugged-Out Subject

It deals with the prof bug's critical views, set out at length in two extended commentaries posted at the Marginal Revolution, on the standard-model free-market analysis that have stressed the benefits of low-skilled immigrant labor in the US economy . . . such economic studies almost always reducing, observe quickly, to one or two narrow points (themselves contestable):

  1. Such labor from abroad, legal or illegal, keeps costs down in certain industries like certain kinds of agriculture, hotels and restaurants, construction in some regions of the US, and sweat-shop production. 
  2. And, simultaneously, so these narrow cost/benefit studies stress, the large flows of such low-skill immigration since the late 1960s --- more than a million a year on an average since then --- have nothing to do with the sudden, disruptive stagnation and decline of low-skilled native American workers in the same interval.  Since 1979, the average real wage for all American male workers --- not just low-skilled --- has risen 2.0%, no more.  For women, it has about doubled though they still make about 2/3 of male wages, some of which difference is accounted for by more part-time women workers.

One Among Many Worrying Trends

Note something important here.  This discouraging trend in the wages of average labor the last 30-40 years contrasts strikingly with the trends in low-skilled American labor throughout the 19th  century and down to 1914.  Despite the influx of about 40 million poorly educated, low-skilled immigrants from the early 1840s on --- almost all from Ireland and Eastern and Southern Europe --- the wages of American workers of all sorts continued to rise steadily.  By 1914, on the eve of WWI, the US wage level for unskilled labor was about 250% higher than that of the highest wage-labor in Europe, Britain's.  It was the same case in 1939, despite the Great Depression.  And the same until the late 1960s.

Since then, the US economy has undergone a remarkably impressive transformation from a manufacturing-based economy, plus traditional service industries, into a knowledge-based information-rich economy.  In the process, it has rejuvenated itself as it has repeatedly over the last 220 years.  It is now the point-man economy in the world, the only rich industrial country that has fully benefited in productivity advances from the technological revolutions led by the computer, information-and-communications technologies, and of course the Internet. 

A related result: the US lead in per capita income over West Europe and Japan, adjusted for purchasing power across countries, is now about 25-30% higher . . . not a lot different compared to the more prosperous European countries in northern Europe on the eve of WWI, believe it or not.  At over $46,000 per person, the average American is more than twice as high in real dollar terms --- adjusted for inflation --- than it was in the late 1970s, yet average wages  (not just low-skilled wages) have generally stagnated for men.

The Causes? 

 Hardly anything complex in economic, social, or political life is the outcome of a single causal influence.  The stagnation in real wages since the mid- or late-1970s is no different. 

Among the major causes are technological changes that favor high-skilled labor (college-graduates really), growing globalization that reduces the wages of low-skilled workers in standardized import-competing industries, demographic shifts such as the soaring increase in single-parent, mother-headed families in both the Hispanic and African-American communities --- to a noticeably lesser extent, the white communities too --- the influx of women into the job market, but also, it seems to prof bug, the huge influx of low-skilled workers into the US economy from abroad . . . the controversial issue that started the discussion thread at the Marginal Revolution site.

No Matter.

The main point in prof bug's comments left in that thread concerns the lamentable, narrow focus of almost all economic discussions of the wage issue and immigration.  In particular, as you'll see, these tunnel-vision cost/benefit studies ignore the increasingly unfavorable spillovers --- negative externalities in economic jargon --- onto the social and educational systems of our country, as well as matters of personal and family security. 

 As buggy readers might recall, it's the same story of tunnel-vision cost-benefit studies by economists of our dependence --- and that of our EU and Japanese allies --- on international oil markets, dominated by gangster-authoritarian states, many of them domestically unstable.  Economists just aren't trained to consider the foreign policy and security spillovers of such dependence, and the huge military costs entailed by such dependence . . . not to mention how extravagantly high oil prices have fueled the militancy and aggressivity of Russia and Iran as well as the hateful and racist propaganda of Wahhabi profligate zealots in Saudia Arabia.  And relative vs. absolute gains in international exchange?  Forget it must be the motto of economists.  Whoever heard of relative power as a measure of influence in international life?

No Need To Say More

The buggy comments left in that Marginal Revolution thread should be easy to follow, including (as explained in the second of prof bug's posts there) the meaning of the statistical phrase, "the fallacy of partial effects" . . . used in the cost-benefit study touted by Taylor Cowan, the head of that blog, that opened the authors up to prof bug's similar charges that they were as innocent about the social and educational spillovers of low-skilled immigration as their collegues are who write on international exchange when it comes to power-related matters.