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IMMIGRATION:
Good Policy Takes More than Imagination

Hendrik van den Berg
UNL Professor of Economics

Jacques Chirac, Prime Minister of France: If there were fewer immigrants, there would be less unemployment, fewer tensions in certain towns and neighborhoods, and lower social cost.

Reporter: That has never been formally proven.

Chirac: It is easy to imagine, nevertheless. [From an October 30, 1984 interview in the Paris newspaper, Liberation.]

Between May and September of 1980, Fidel Castro temporarily reversed his long-standing policy of prohibiting Cubans from leaving the island nation. Castro announced that Cubans could leave through the small port of Mariel, just west of Havana, so the mass migration came to be known as the Mariel Boatlift. A flotilla of chartered boats paid for mostly by Cuban-Americans carried the immigrants from Mariel to the United States.

About half of the 125,000 immigrants settled in Miami, instantly expanding the city's labor force by seven percent. "There is no way this community can absorb so many people without serious socioeconomic problems," lamented a local school board member in a Business Week article at the time.

To everyone's surprise, however, wages did not plummet, the local unemployment rate barely budged, and there was no rise in crime. How could such a large inflow of foreigners not cause problems?

Studies Reveal Many Consequences

The many studies of the Mariel Boatlift revealed that immigration has benefits as well as costs. A well-known study by the labor economist David Card found that the inflow of immigrants triggered some offsetting outflows of native workers, but it also brought new investment in industrial capacity to take advantage of the expanded labor force. Card also suggests that Miami's large Hispanic population made it easier for Spanish-speaking immigrants to find employment. This phenomenon was not unique to Miami, of course, as immigrants often settle where they have relatives or compatriots to ease the adjustment to a new society. Another study on the Mariel Boatlift found strong positive effects on Miami housing prices.

A study recently published in the international economics journal Labour Economics by my colleagues Orn Bodvarsson and Josh Lewer and myself confirms that the Cuban immigrants effectively demanded their own labor. Immigrants are consumers as well as workers, after all. Some of the Marielitos found employment providing some of the goods and services they demanded. Indirectly, they found work providing goods and services demanded by the providers of goods and services they demanded with their newly acquired Miami incomes. Overall, the Miami economy grew with the Marielitos' arrival. Today, Miami is a dynamic city that has become the U.S. gateway to Latin America.

In short, when it comes to immigration, people's imagination tends to not be a very good guide to the full costs and benefits of immigration. Perhaps we should excuse Jacques Chirac for his limited imagination since France has only recently become a major destination for immigrants. But, here in the U.S., there is no excuse for the narrow views of immigration we often see in the media and in the political arena.

Lessons from U.S. History

If immigration is a heavy burden on a society, then shouldn't the U.S. be one of the poorest countries in the world? To the contrary, the noted economic historian Nathan Rosenberg attributes the rapid economic growth of the United States in the 1800s to "rapid growth in demand and circumstances conducive to a high degree of product standardization." He goes on to explain how the U.S. was able to become the world's industrial leader because its market grew rapidly and, because of the country's large middle class, its market was very uniform. For both reasons, large-scale production -- the driving force behind industrialization -- became viable. What caused this growth of the market?

According to Rosenberg: Immigration.

Some critics of immigration suggest that history does not provide a good lesson for today because those 19th century immigrants were different from today's immigrants. Rep. Bill Archer of Texas, during a House Ways and Means Committee meeting, inferred as much when he stated that the immigrants who arrived in the United States at the end of the 1800s and the early 1900s all "came to this country not with their hands out for welfare checks," but "for freedom and the opportunity to work." However, The Wall Street Journal reports evidence showing that one hundred years ago, in 1909, about half of all public welfare recipients in the U.S. were members of immigrant families -- even though immigrants made up only about 15 percent of the total population. At about the same time, two-thirds of people receiving public assistance in Chicago were foreign- born. Also, nearly three-quarters of all students in New York City's public schools were children of immigrants, and over half of all students in public schools of the 30 largest U.S. cities were children of immigrant families. The so-called "fiscal burden" of immigrants is clearly not a recent phenomenon associated only with today's immigrants.

And, how big a burden are today's immigrants? A study by the Federal Reserve Bank of Dallas shows that recent immigrants do not make settlement decisions based on the availability of welfare and social services; they mostly settle where there are jobs and where they have close family. A 1992 study for the U.S. Department of Health and Human Services determined that the federal government actually enjoyed net gains from increased income tax and Social Security tax revenues because immigrants are, on average, younger than natives. Other studies have suggested that the fiscal burden of immigrants falls more heavily on state and local governments. With time, however, the situation changes at the local government level. The children of immigrants pay more taxes and receive fewer transfers, and their increased incomes make them even greater net contributors to the Social Security fund. According to another recent U.S. Federal Reserve Bank study: "When it's all added up... most long-run calculations show that immigrants make a net positive contribution to public coffers."

But, What About Illegal Immigrants?

The Pew Hispanic Center estimates that just under five percent of the U.S. civilian labor force consists of undocumented immigrant workers. While 83 percent of all adult males in the U.S. are in the active labor force, 94 percent of unauthorized adult male immigrants in the U.S. were working in 2005. According to a detailed 2006 Special Report by the Texas Comptroller of Public Accounts, undocumented immigrants were net contributors to state coffers. Total state expenditures for Texas' 1.4 million undocumented immigrants were estimated to be $1,156 billion. This figure includes law enforcement and criminal justice costs as well as Texas' program to give undocumented high school graduates in-state tuition at Texas universities. The estimate of total state government revenue paid by undocumented immigrants was calculated using a method that arrived at total state revenue under the assumption that immigrants suddenly disappeared. This exercise led to the conclusion that the unauthorized immigrants' presence increased the state's gross economic product by $17.7 billion -- all of which, in turn, increased property taxes, sales taxes, fees for services, and other government revenues by $1.581 billion. In sum, the state government enjoyed a net gain of $425 million from the presence of 1.4 million unauthorized immigrants in Texas.

Economic Growth and Immigration

Discussions of immigration tend to focus on the short term, but many of the contributions of immigrants appear in the long term. Remember, in addition to being workers, consumers, parents and taxpayers, immigrants are also innovators and thinkers. As Simon Kuznets, the noted Nobel Prize laureate once asked: "Why, if it is man who was the architect of economic and social growth in the past and responsible for the vast contributions to knowledge and technological and social power, a larger number of human beings need result in a lower rate of increase in per capita product?" In the case of immigrants, there may be a natural selection process that tends to distinguish exceptionally enterprising and talented people.

For example, an interesting example of how immigration determined technological development and subsequent economic growth involves early clock makers, who played a critical role in developing the technology of precision engineering that was a fundamental cause of the Industrial Revolution. Many early clock makers were French Huguenots, who were interested in various aspects of science as well as the Reformation movement. When France expelled the Huguenots, most French clock makers went to Geneva, Switzerland, at the invitation of John Calvin, the leader of that Swiss city. In short, the renowned Swiss watch industry was founded by the inflow of a handful of French immigrants with precious human skills. This type of story has been repeated over and over throughout the history of the U.S.

A Final Comment

If the net sum of all the direct, indirect, short-term, and long-tern consequences of immigration were negative, the country that has throughout its history received the greatest number of immigrants should be poor. The fact that the U.S. is quite wealthy suggests it is not possible to reach a conclusion about the merits of immigration by looking at only one aspect of this complex phenomenon.

It is in this light that I approach the analysis of our current immigration policies. Over the past several years, there has been a sharp expansion of immigration enforcement, and many politicians have actively called for still tougher measures. Nebraska elected a new Regent for the University of Nebraska who favors eliminating in-state tuition for undocumented Nebraska high school graduates. It looks like anti-immigrant fervor is trampling the human rights of legal immigrants, illegal immigrants and many native- born Americans. About four million U.S. citizens are members of families and households with an undocumented immigrant. In a follow-up article next month, I will describe our current immigration policies, and their effects, in more detail. For now, it is clear that the complexity of immigration makes it likely that our emotional rush to deal with this 'problem' will cause serious damage -- both to our economy and the civil liberties we treasure.