Is Immigration Good for America?

Last April, 2012 the libertarian Cato Institute held a conference on the question “Is Immigration Good for America?”. The conference sessions are available as audio or video podcasts or in the Winter Cato Journal. The conference addressed a number of key questions, including:

  • What are the arguments for immigration restriction?
  • What are the economic benefits and costs of immigration?
  • What are the economic effects of an “amnesty” for unauthorized workers in the U.S.?
  • What is the demographic impact of immigration in an era of declining birthrates?
  • How easy or difficult is it to immigrate legally to the United States?
  • What is the effect of immigration enforcement on the border and in the workplace?
  • Should we retain the doctrine of birthright citizenship as it has been interpreted in the Fourteenth Amendment to the Constitution?
  • Is immigration incompatible with a welfare state?
  • What kind of reforms of current immigration policy would be most beneficial, and can market incentives be utilized to allocate immigration visas?

Dan Griswold wrote the introduction to the Cato Journal special issue on immigration. Dan begins with a concise summary of how immigration benefits the destination country:

The Economic Case for Immigration

Undervalued in today’s discussion is the strong economic case for a more open policy toward immigration. Basic economic analysis and numerous empirical studies have confirmed that immigrants boost the productive capacity of the United States through their labor, their human capital, and their entrepreneurial spirit. Instead of competing head-to-head with American workers, immigrants typically comple- ment native-born workers by filling niches in the labor market.

Lower-skilled immigrants seek low-paying, low-status jobs that an insufficient number of Americans aspire to fill, providing more affordable goods and services to consumers while creating more rewarding employment opportunities for the native-born. Higher- skilled immigrants allow American companies to create new prod- ucts and raise productivity by stimulating innovation. Immigrant workers make capital more productive, boosting investment, output per worker, and government tax receipts.

Today’s immigration levels, while high in nominal terms, are well within the norms of American experience. A century ago, during the Great Migration, both the stock and the annual inflow of immigrants were significantly higher than today as a share of the population. Yet America assimilated those “huddled masses” of millions of immi- grants from eastern and southern Europe, who within a generation or two joined the great American middle class. Public anxiety back then over the “new races” coming to our shores bears a striking resemblance to anxieties over today’s immigrant inflows from Asia and especially Latin America.

(…) 

Trillion-Dollar Bills on the Sidewalk? Yes, those trillions can be collected by global immigration reform. The indirect effects of immigration include the rarely discussed impact of Emigration: Economics and Emigration: Trillion-Dollar Bills on the Sidewalk? [ungated PDF of the AEA paper in Journal of Economic Perspectives—Volume 25, Number 3—Summer 2011.] Clemens is a Senior Fellow at the Center for Global Development – one of the few development NGO’s that we really respect. CGD gets results, not just first class junkets for overpaid staff.

End-note Moving the Jobless to the Jobs: Crucial for Economic Growth. If immigration makes everyone more prosperous, why do cities block immigration with bad housing policy? “Last one in closes the gate”.

Moving the Jobless to the Jobs: Crucial for Economic Growth

We know that external immigration is almost always a winner. Businessweek finds that internal immigration has similar benefits, but in the US seems to slowed almost to a stop because of high housing costs in the high growth cities. The high costs are often caused by local housing policies. But costs nationally are amplified by the home mortgage interest tax deduction. It is past time to end that subsidy.

(…) But more recent analysis by Peter Ganong and Daniel Shoag of Harvard finds that the rate of convergence across U.S. states has slowed dramatically over the past 30 years—. (…)

Ganong and Shoag note that the slowdown in migration has been particularly severe for low-income workers. They suggest that rapidly rising house prices in wealthy areas help account for that. As house prices rise, the benefits of living in productive areas erodes for low-skilled households. And the researchers note that the impact of housing regulation measured through land-use court cases is a big factor behind rising house prices. More regulation leads to higher house prices at a given income level—pricing poor people out of the housing market. Rich areas haven’t needed a passport system to keep poor people out of their communities; they’ve just regulated land use so much that there’s no cheap housing available.

Of course, that’s not necessarily easy for Washington to fix. Most of the regulations involved are made at the state and local level. But one thing Congress could do to help reduce the cost of housing and help deal with the fiscal cliff: Dump the home mortgage interest tax deduction.The $100 billion the U.S. government provides each year in home mortgage interest tax relief makes housing more expensive. Three-quarters of the tax relief on home mortgage interest goes to the top 20 percent of earners, according to the Tax Policy Center—and hardly any people at the other end of the income distribution benefit from the credit. The credit encourages richer Americans to borrow more, bid up prices, and buy bigger houses on bigger plots. All that squeezes out the affordable rental housing that poor migrants need if they are going to get to where the jobs are.

Republican and Democrats agree that we should focus on equality of opportunity. But one of the best opportunities we can give people is to move from areas of little economic potential to areas with jobs and quality education. Getting rid of the home mortgage interest tax deduction is one way both to raise revenue and to help poor people help themselves. Of course, it’s also an idea with no political traction at the moment—but we’ve seen such things change before.