Thread: Rethinking the Immigration Debate-Businessweek

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JUNE 20, 2006


Sound Money
By Chris Farrell


Rethinking the Immigration Debate
There could soon come a time when the U.S. actually encourages Mexicans to come here—but by then the incentive to do so won't be as great


Right now, immigration is a hot-button issue. But the issue will fade over the next few years. Talk of building a 2,000-mile wall along the border with Mexico will quiet down, and the U.S. will once again proudly put out the welcome mat for foreigners.

One major reason the heated political rhetoric and incendiary charges will cool off is that a cottage industry of sober economic and social research is creating a rich, nuanced portrait of the long-term impact of immigrants—legal and illegal—on the economy. It's largely a positive picture.

MEXICAN PROSPERITY? For example, competition from unskilled foreign-born workers has had relatively little impact on the wages of less-educated American workers. Most immigrants pay taxes—whether they are here legally or not. They contribute to the economy by buying everything from food to homes.

The children of immigrants do well at school and at work, making huge strides in narrowing the educational and earnings gap with native-born Americans. High levels of immigration were a factor behind the drop in crime rates since the 1990s. Immigrants from Taiwan to Mexico to Haiti are assimilating into the mainstream U.S. economy. Taken altogether, immigration has been a net boon to the U.S. economy and society.

Another big factor is that the number of immigrants coming from Mexico will decline, thanks to the improving Mexican economy. That's right, contrary to popular perception, Mexico is doing better. The ranks of its middle class are growing, with an estimated 40% of all Mexican households joining the middle class, up from 30% a few years ago. Home ownership is at record levels, and consumer loans are increasingly available to economic strivers. The government's budget is at its lowest level in nine years, and the country's inflation rate is below America's.

MEXICAN PROSPERITY? Perhaps most striking, Mexico is competing in the global economy with skilled workers. It is educating more engineers than the U.S., with some 451,000 Mexican students enrolled in full-time undergraduate programs vs. 370,000 in the U.S. (see BusinessWeek,com, 5/22/06, "Mexico: Pumping Out Engineers").

The long-term economic story for Mexico is even brighter. Economists at Goldman Sachs GS gained a lot of attention—or notoriety—with a 2003 study on the BRICs: Brazil, Russia, India, and China. The gang of four, which now accounts for less than 15% of the economies of the G6 nations, could collectively be larger than the G6 in 2050, according to Goldman's projections. In a follow-up study published in late 2005, Goldman looked into what other developing nations had BRIC-like potential. At the top of the list were Mexico and Korea. By their calculations, Mexico could become the world's 11th-largest economy by 2025 and the sixth-largest in 2050. That suggests Mexico could have a larger, more dynamic economy than Russia, Germany, and Britain in less than half a century.

What does an improving Mexican economy have to do with emigration to the U.S.? The answer lies with the so-called "Bhagwati J-curve," named after Jagdish Bhagwati, the dean of international economists and a professor at Columbia University. Bhagwati's argument is that emigration of unskilled workers increases as a poor nation gets wealthier. Rising prosperity makes it easier to pay the $1,500 or so that "coyotes" charge Mexicans to cross the border into the U.S. This has been the story of the increase in Mexican immigrants to the U.S. since the 1990s.

INDIA'S EXAMPLE. Yet as Mexico's gross domestic product and incomes expand, the incentive to cross the border will fall and emigration rates decline. "So you get the bell-shaped or u-shaped curve," says Bhagwati. The Bhagwati-J-curve also applies to skilled, legal migration. Take emigrants from India to the U.S. In the 1960s, '70s, and '80s, Indian students with education and money left to go to MIT, Stanford, and other premier schools. They often stayed in the U.S. because the entrepreneurial prospects were few and far between back home.

But since the late 1980s economic conditions have improved dramatically in India. There are more educational and economic opportunities than ever before. Not only has migration from India fallen off, but a number of successful Indians have moved back to their home country. "In short," says Bhagwati, this J-curve "applies to both illegal unskilled and legal skilled migration flows into the rich countries from the poor countries."

To be sure, Mexico has a lot of problems, ranging from an inadequate primary education system to systemic corruption to an inadequate social safety net. The current economic slowdown in the U.S. and higher American interest rates will negatively impact Mexico, too. Nevertheless, it's a safe bet that the numbers of immigrants from Mexico will decline as the Mexican economy gets stronger. Imagine, someday policymakers may even find themselves debating legislation geared toward boosting, not restricting, immigrants from Mexico.



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Farrell is contributing economics editor for BusinessWeek. You can also hear him on Minnesota Public Radio's nationally syndicated finance program, Sound Money, as well as on public radio's business program Marketplace. Follow his Sound Money column, only on BusinessWeek Online
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Where is this guy getting his information? I think he needs a new source.

Don't be too hard on him.

It is pretty dark where his head is stuck.

Originally Posted by dlm1968

Where is this guy getting his information?

A:Crystal ball, Ouija board, Palm reading, etc, etc. -
Certainly not from the reality I know!

Also, notice how he wrote at great lengths about national-level impacts, benefits (?), the supposed contribution of the 'immigrants', etc. - but barely even touched on the subject of the impact on US workers (citizens/legal residents) and those affected by crime, education, health care.

Could we all be wrong, I don't think so! This guy is spewing propaganda left and right - more lies than Jimmy Carter's got peanuts!

There could soon come a time when the U.S. actually encourages Mexicans to come here—but by then the incentive to do so won't be as great.

Where have you been fellow? Corporate Amercia and the United States Government has been encouraging them for years!

Right now, immigration is a hot-button issue. But the issue will fade over the next few years. Talk of building a 2,000-mile wall along the border with Mexico will quiet down, and the U.S. will once again proudly put out the welcome mat for foreigners.

Unfortunately, I see some merit to that comment. That is why we must make ensure our government enforces the laws on the books or creates tougher ones.

One major reason the heated political rhetoric and incendiary charges will cool off is that a cottage industry of sober economic and social research is creating a rich, nuanced portrait of the long-term impact of immigrants—legal and illegal—on the economy. It's largely a positive picture.

Someone needs to open their eyes. Illegal immigration and increased legal immigrants are negatively affecting our middle class wage earners. Furthermore, it's increasing poverty here in the United States. Anyone that doesn't see the negative causes from illegal immigration out weighs the positives is either blind or ignorant.

MEXICAN PROSPERITY? For example, competition from unskilled foreign-born workers has had relatively little impact on the wages of less-educated American workers. Most immigrants pay taxes—whether they are here legally or not. They contribute to the economy by buying everything from food to homes.

Hmmm, that doesn't jive with the studies I've seen. Illegals do take jobs from those in the construction/builder, food service, janitorial, etc. sectors. Plus they work for less than what Americans consider a living wage. As for most immigrants paying taxes, of course they do you idiot - everyone that drives (illegally or not) has to pay a gas tax, everyone has to pay taxes for goods purchased in stores, etc. The question is, how many of them are paying federal and state income tax - some are, but many aren't.

The children of immigrants do well at school and at work, making huge strides in narrowing the educational and earnings gap with native-born Americans. High levels of immigration were a factor behind the drop in crime rates since the 1990s. Immigrants from Taiwan to Mexico to Haiti are assimilating into the mainstream U.S. economy. Taken altogether, immigration has been a net boon to the U.S. economy and society.

Not once did he mention ILLEGAL immigrants in this paragraph. Yes, legal Asian students do well in our schools, but most illegal immigrant children don't fair as well. Sure, there are exceptions here and there, but the vast majority of students do horribly in our schools - on top of that, they're dragging our own kids down to some degree (more resources allocated to illegals means less for our children). Check out the Denver school drop out rate for those suspected of being illegal immigrants - you'd be shocked. I don't down about Haitians and those from Taiwan, but many Mexican nationals refuse to assimilate. Why do you think the pro-illegal groups are all against making English our National language? They know illegals have little to no desire for assimilation into our society.

MEXICAN PROSPERITY? Perhaps most striking, Mexico is competing in the global economy with skilled workers. It is educating more engineers than the U.S., with some 451,000 Mexican students enrolled in full-time undergraduate programs vs. 370,000 in the U.S. (see BusinessWeek,com, 5/22/06, "Mexico: Pumping Out Engineers").

Yeah, well how come we're getting the unskilled labor? I'll tell you why, Mexico doesn't produce quality Engineers. TMexico's graduating requirements and curriculmn aren't as tough as the United States. In other words, Mexico is producing a less proficent Engineer and they can't compete against American Engineering graduates. What good is quanity if you don't have quality?

The long-term economic story for Mexico is even brighter. Economists at Goldman Sachs GS gained a lot of attention—or notoriety—with a 2003 study on the BRICs: Brazil, Russia, India, and China. The gang of four, which now accounts for less than 15% of the economies of the G6 nations, could collectively be larger than the G6 in 2050, according to Goldman's projections. In a follow-up study published in late 2005, Goldman looked into what other developing nations had BRIC-like potential. At the top of the list were Mexico and Korea. By their calculations, Mexico could become the world's 11th-largest economy by 2025 and the sixth-largest in 2050. That suggests Mexico could have a larger, more dynamic economy than Russia, Germany, and Britain in less than half a century.

Won't happen until Mexico get rid of its love for corruption. The money is not filtering down to the general population. Also, Mexico's population will be busting at the seams by 2050 unless they figure out what is causing the lower class to keep pumping babies out like they're puppies. As for Mexico having a larger, more dynamic economy than Russia, Germany, and Britain in less than half a century - I guess that could happen as long as Mexico keeps encouraging their poverty to migrate to the United States. Our outsourcing of industry (jobs) to Mexico may also help, but it will hurt our middle income class dramatically. If things continue down the current path, I see the United States being reduced to mirror what Mexico is today, not Mexico growing to become more like us. The author of this article has probably never even been to Mexico - he's just another corporate America talking head!

Bhagwati's argument is that emigration of unskilled workers increases as a poor nation gets wealthier. Rising prosperity makes it easier to pay the $1,500 or so that "coyotes" charge Mexicans to cross the border into the U.S. This has been the story of the increase in Mexican immigrants to the U.S. since the 1990s.

Have you ever heard such a ridiculous statement in your life? Well, even if there was any truth to such a ludicrous comment, we can stop it by strengthening our borders, prosecuting those whom hire illegals, and removing social support and encouragement.

I'm sorry, but I can't continue responding to such a ridiculous article - think I'll go puke.

That entire piece of trash is a total collection of lies and mis-leading information. My jaw dropped while reading that tripe! What a fool!!