Thread: Immigration Net Loss to US $68 Billion in 2002

http://www.cis.org/articles/2005/back205.html

United States Technological Superiority and the Losses From Migration
February 2005
By Donald R. Davis and David E. Weinstein

--------------------------------------------------------------------------------

This study employs a new approach to examine the impact of immigration on the U.S. economy. Unlike earlier studies, we do not treat the movement of immigrant labor into this country in isolation.
Older studies assumed that abundant resources and demand for labor was the primary reason for immigration, assumptions more appropriate to the 19th century. We start by assuming that the technological superiority of the modern American economy and resulting high standard of living is the primary factor motivating immigration. The study also takes into account the new global economy, including the movement of capital as well as trade. Our findings show that immigration creates a net loss for natives of nearly $70 billion annually.

Among the report’s findings:

In 2002, the net loss to U.S. natives from immigration was $68 billion.

This $68 billion annual loss represents a $14 billion increase just since 1998. As the size of the immigrant population has continued to increase, so has the loss.

The decline in wages is relative to the price of goods and services, so the study takes into account any change in consumer prices brought about by immigration.

The negative effect comes from increases in the supply of labor and not the legal status of immigrants.

While natives lose from immigration, the findings show that immigrants themselves benefit substantially by coming to America.

Those who remain behind in their home countries also benefit from the migration of their countrymen.

The model used in this study can be summarized as follows: High U.S. productivity motivates the entry of foreign workers and capital. As a consequence, the movement of foreign labor and capital into the United States expands U.S. exports and reduces exports by foreign countries who now have fewer workers and less capital. This depresses the prices of U.S. exports while raising the price of its imports, which is bad for U.S. natives. While the addition of immigrant workers makes the overall U.S. economy larger, natives in the United States are worse off because immigrants take not just the increase in income, but other income as well. This is because American workers are now competing with foreign workers who, because they have entered the United States, now have access to superior American technology, which is the primary source of American workers’ competitive advantage in the international economy. In other words, American workers are better off competing with foreigners if the foreign workers stay in their own countries and don’t have access to American technology. By allowing the foreign workers into the United States, Americans face competition with foreigners equipped with American technology.

The Economic Costs of Immigration

America is often described as a nation of immigrants. And so it is. One reason for immigration has been the promise of liberty. However, even from the start, a second very powerful reason has been the opportunity America provides for prosperity. Waves of immigrants have come, particularly from Europe, Asia, and the Americas (especially Mexico) to enjoy the high wages available here and escape the relative penury of their native lands. Through the end of the 19th century and into the 20th century, a prime advantage of America that allowed it to deliver these high wages was its great abundance of land and natural resources. Increasingly, though, in the last half of the 20th century, the principal advantage of America has not been its resources, but rather its leadership of the world in technology or productivity.

Economists have long been interested in the consequences of immigration. A large and highly varied theoretical literature has developed that considers potential sources of gains and losses for a country experiencing immigration. Surprisingly, these theoretical models almost never have a word to say about the role of technological advantage as a motive for migrationâ€â€

http://www.cis.org/articles/2005/back205.html

United States Technological Superiority and the Losses From Migration
February 2005
By Donald R. Davis and David E. Weinstein

--------------------------------------------------------------------------------

This study employs a new approach to examine the impact of immigration on the U.S. economy. Unlike earlier studies, we do not treat the movement of immigrant labor into this country in isolation.
Older studies assumed that abundant resources and demand for labor was the primary reason for immigration, assumptions more appropriate to the 19th century. We start by assuming that the technological superiority of the modern American economy and resulting high standard of living is the primary factor motivating immigration. The study also takes into account the new global economy, including the movement of capital as well as trade. Our findings show that immigration creates a net loss for natives of nearly $70 billion annually.

Among the report’s findings:

In 2002, the net loss to U.S. natives from immigration was $68 billion.

This $68 billion annual loss represents a $14 billion increase just since 1998. As the size of the immigrant population has continued to increase, so has the loss.

The decline in wages is relative to the price of goods and services, so the study takes into account any change in consumer prices brought about by immigration.

The negative effect comes from increases in the supply of labor and not the legal status of immigrants.

While natives lose from immigration, the findings show that immigrants themselves benefit substantially by coming to America.

Those who remain behind in their home countries also benefit from the migration of their countrymen.

The model used in this study can be summarized as follows: High U.S. productivity motivates the entry of foreign workers and capital. As a consequence, the movement of foreign labor and capital into the United States expands U.S. exports and reduces exports by foreign countries who now have fewer workers and less capital. This depresses the prices of U.S. exports while raising the price of its imports, which is bad for U.S. natives. While the addition of immigrant workers makes the overall U.S. economy larger, natives in the United States are worse off because immigrants take not just the increase in income, but other income as well. This is because American workers are now competing with foreign workers who, because they have entered the United States, now have access to superior American technology, which is the primary source of American workers’ competitive advantage in the international economy. In other words, American workers are better off competing with foreigners if the foreign workers stay in their own countries and don’t have access to American technology. By allowing the foreign workers into the United States, Americans face competition with foreigners equipped with American technology.

The Economic Costs of Immigration

America is often described as a nation of immigrants. And so it is. One reason for immigration has been the promise of liberty. However, even from the start, a second very powerful reason has been the opportunity America provides for prosperity. Waves of immigrants have come, particularly from Europe, Asia, and the Americas (especially Mexico) to enjoy the high wages available here and escape the relative penury of their native lands. Through the end of the 19th century and into the 20th century, a prime advantage of America that allowed it to deliver these high wages was its great abundance of land and natural resources. Increasingly, though, in the last half of the 20th century, the principal advantage of America has not been its resources, but rather its leadership of the world in technology or productivity.

Economists have long been interested in the consequences of immigration. A large and highly varied theoretical literature has developed that considers potential sources of gains and losses for a country experiencing immigration. Surprisingly, these theoretical models almost never have a word to say about the role of technological advantage as a motive for migrationâ€â€

Here's the "opposing" side's view.


http://www.mexidata.info/id410.html

MEXIDATA . INFO
Column 022805 Emmond
Monday, February 28, 2005

Study is ammunition for Mexican anti-immigration lobby
By Kenneth Emmond

The enemies of Mexican immigration have a new weapon in their arsenal.

A study emanating from what must be one of the highest ivory towers of academia contends that immigrants in the United States, far from contributing to prosperity, created a net economic loss of US$68 billion in 2002.

The report, entitled United States Technological Superiority and the Losses from Migration, was issued last week by the Center for Immigration Studies, a Washington-based think tank that supports tighter immigration policies.

The authors of this astonishing study are two Columbia University economists, Donald R. Davis and David E. Weinstein.

Davis and Weinstein contend that most previous immigration studies show small but measurable economic gains because they fail to include the effects of superior technology in the United States.

These studies, they argue, are outdated because they assumed that the U.S. had empty land and a labor shortage, which is no longer the case.

Today’s immigrants, they aver, arrive to cash in on higher productivity resulting from technology. In the process, they drive down the market price of goods exported and raise the price of imports.

The inflow of foreign direct investment, also seeking higher returns in the U.S. due to high productivity, has a similar effect.

The authors calculate that labor and capital are attracted in about the same proportion: 14.3 percent of the 2002 labor force was foreign-born, while 16.5 percent of the capital stock came from abroad.

Turning conventional economics on its head, they conclude that adding to America’s stock of these two factors of production, capital and labor, benefits the world economy, nationals of emigrant nations who stay home and the immigrants themselves, while native-born Americans suffer substantial losses.

They estimate the total negative effect of imported labor-plus-capital in 2002 was US$136 billion, or 1.3 percent of gross domestic product. They arrive at the US$68 billion figure for labor by dividing by two.

Well, what’s wrong with this picture?

Let’s start with the assumptions. The authors’ assumption that high technology attracts immigrants needs close scrutiny.

How many Mexicans migrating to the United States rub their hands together in anticipation of the joys of the high technology they are about to encounter?

An opinion survey would best answer that question, but this columnist doubts that technology is front and center.

It’s more realistic to surmise that middle- or upper-class Mexicans go north in response to better opportunities to use their high-level education and skills.

In the U.S., promotion in the workplace is generally based on performance rather than bloodlines or friendship, and this merit-based approach is often conspicuously absent in Mexican family-owned businesses and government.

Lower-class migrants, legal or otherwise, look for higher wages or, since many are unemployed, work of any kind.

Davis and Weinstein assume that the economic landscape provides a zero-sum game, and that all immigrants are employees throughout their lives.

Two separate studies from the 1990s in another high-technology nation of immigrants, Canada, conclude that over time immigrants create more jobs than they occupy.

That’s not surprising, since those who immigrate demonstrate courage, resourcefulness, and risk-taking propensities that set them apart from their countrymen who stay home â€â€

Here's the "opposing" side's view.


http://www.mexidata.info/id410.html

MEXIDATA . INFO
Column 022805 Emmond
Monday, February 28, 2005

Study is ammunition for Mexican anti-immigration lobby
By Kenneth Emmond

The enemies of Mexican immigration have a new weapon in their arsenal.

A study emanating from what must be one of the highest ivory towers of academia contends that immigrants in the United States, far from contributing to prosperity, created a net economic loss of US$68 billion in 2002.

The report, entitled United States Technological Superiority and the Losses from Migration, was issued last week by the Center for Immigration Studies, a Washington-based think tank that supports tighter immigration policies.

The authors of this astonishing study are two Columbia University economists, Donald R. Davis and David E. Weinstein.

Davis and Weinstein contend that most previous immigration studies show small but measurable economic gains because they fail to include the effects of superior technology in the United States.

These studies, they argue, are outdated because they assumed that the U.S. had empty land and a labor shortage, which is no longer the case.

Today’s immigrants, they aver, arrive to cash in on higher productivity resulting from technology. In the process, they drive down the market price of goods exported and raise the price of imports.

The inflow of foreign direct investment, also seeking higher returns in the U.S. due to high productivity, has a similar effect.

The authors calculate that labor and capital are attracted in about the same proportion: 14.3 percent of the 2002 labor force was foreign-born, while 16.5 percent of the capital stock came from abroad.

Turning conventional economics on its head, they conclude that adding to America’s stock of these two factors of production, capital and labor, benefits the world economy, nationals of emigrant nations who stay home and the immigrants themselves, while native-born Americans suffer substantial losses.

They estimate the total negative effect of imported labor-plus-capital in 2002 was US$136 billion, or 1.3 percent of gross domestic product. They arrive at the US$68 billion figure for labor by dividing by two.

Well, what’s wrong with this picture?

Let’s start with the assumptions. The authors’ assumption that high technology attracts immigrants needs close scrutiny.

How many Mexicans migrating to the United States rub their hands together in anticipation of the joys of the high technology they are about to encounter?

An opinion survey would best answer that question, but this columnist doubts that technology is front and center.

It’s more realistic to surmise that middle- or upper-class Mexicans go north in response to better opportunities to use their high-level education and skills.

In the U.S., promotion in the workplace is generally based on performance rather than bloodlines or friendship, and this merit-based approach is often conspicuously absent in Mexican family-owned businesses and government.

Lower-class migrants, legal or otherwise, look for higher wages or, since many are unemployed, work of any kind.

Davis and Weinstein assume that the economic landscape provides a zero-sum game, and that all immigrants are employees throughout their lives.

Two separate studies from the 1990s in another high-technology nation of immigrants, Canada, conclude that over time immigrants create more jobs than they occupy.

That’s not surprising, since those who immigrate demonstrate courage, resourcefulness, and risk-taking propensities that set them apart from their countrymen who stay home â€â€

I wonder how the pro-illegal crowd will spin this?

I wonder how the pro-illegal crowd will spin this?