The Borjas Blame Game

October 13, 2006

Immigrants have been accused of debasing our culture, overcrowding our schools and hospitals, and lowering our wages. Now a Harvard professor is blaming them for sending African-Americans to jail.

George Borjas of Harvard University, a Cuban immigrant, writes in his latest National Bureau of Economic Research paper that "As immigrants disproportionately increased the supply of workers in a particular skill group, we find a reduction in the wage of black workers in that group, a reduction in the employment rate, and a corresponding increase in the incarceration rate."

The story goes as follows. Low-skilled immigrants arrive in America and take jobs away from African-Americans. Due to the lack of job opportunities, African-Americans are drawn into illegal activities, get arrested, and are then put in prison.

Let's for the moment ignore the insulting assumption that African-Americans are more likely than others to turn to crime if they cannot find work. The major problem with Mr. Borjas's argument is that young black men began withdrawing from the labor force in the 1960s, when the share of immigrants in the labor force was less than 1%.

The percentage of black men between ages 16 and 24 who were not in school, not working, and not looking for work rose to 18% in 1982 from 9% in 1964. It then reached 23% in 1997. These trends are clearly discussed by American Enterprise Institute scholar Charles Murray in "The Underclass Revisited."

There are many complex factors leading to the incarceration of black men over the period 1980 to 2000. Yet Mr. Borjas only uses as variables information on employment, wages, education, race, incarceration rates, and immigration. Other factors he omits are changes in laws, stricter enforcement policies, longer sentencing guidelines, and changes in welfare regulations. These conceivably have a greater effect on incarceration rates than immigration.

Mr. Borjas, careful as always, hedges his bets by saying that "much of the decline in employment and increase in incarceration observed in the low-skill black population would have taken place even if the immigrant influx had been far smaller." Given this conclusion, it is surprising that Mr. Borjas published this paper at all.

The problem for Mr. Borjas is that the finding that immigrants substantially lower Americans' wages, a central thesis of much of his work, just isn't holding up. Research of mainstream economists, as well as his more recent studies, shows different effects. So linking immigrants to African-American incarceration is the new tactic.

Take Mr. Borjas's own calculations. In 2003 he found that immigrants lowered wages of average American-born workers by 3% and wages of high school dropouts by 9%. A year later, he found that the effect on high school dropouts had moderated to a 7% loss.

By 2006 Mr. Borjas concluded that immigrants actually raised average wages of Americans by 0.1% and only lowered the wages of the low-skilled, those without a high school diploma, by 5%. This means that America has a net gain from immigrants. Since a relatively small percentage of American workers have less than a high school diploma, it's possible for these workers to be compensated through transfer payments, leaving our economy still ahead.

The research findings of more mainstream economists show little effect of immigration on wages of native-born Americans. Senior economist Pia Orrenius of the Federal Reserve Bank of Dallas finds a slight increase in wages for professionals and a slight decline for manual workers from immigration of less than 1%.

David Card of the University of California, Berkeley finds a decrease in wages of no more than 3% among low-skilled workers in high immigrant cities such as Miami and Los Angeles, and smaller effects in other cities and occupational groups.

Giovanni Peri of the University of California, Davis finds that immigrants raised the wages of the 90% of native-born Americans with at least a high school degree by 1% to 3%, and those without a high school diploma lost about 1%.

Why the difference? Mr. Borjas makes two assumptions in his models that mainstream economists do not. First, he assumes that immigrants are substitutes for nativeborn workers. Second, he assumes that capital is fixed and does not respond to changes in wage rates.

Mainstream economists observe that immigrants have different skills and job preferences from native-born Americans, and so make American workers more productive. They assume that immigrants complement rather than substitute for native-born workers and that capital moves to take advantage of available labor. Although immigrants will be substitutes for some primarily low-skilled workers, many of whom are immigrants too, the negative effect on such workers is much smaller than the positive effect for everyone else.

To take a simple example, if a construction firm cannot find plasterers or stucco masons, an occupation overwhelmingly performed by foreign-born workers, it can do fewer jobs than a firm that had these immigrants on the payroll. With fewer jobs, employment of both immigrants and native-born Americans declines.

Of course, some might say that the construction firm just needs to offer more money to plasterers and stucco masons, and then more native-born Americans would take the jobs. But since the price would be higher, fewer projects would be completed. So employment for native-born Americans could decline.

In a speech in the Senate on April 9, 1924, the senator of South Carolina, Ellison Du-Rant Smith, said that "We have population enough today without throwing wide our doors and jeopardizing the interests of this country by pouring into it men who willingly become the slaves of those who employ them in manipulating the forces of nature, and they few reap the enormous benefits that accrue therefrom."

In 1924 Senator Smith did not regard immigrants from Italy and Germany as true Americans, but now they are regarded as ideal immigrants. Just as Italians and Germans assimilated and produced generations of tax-paying Americans and many Nobel prizewinners, so the same will undoubtedly happen with immigrants from other parts of the world.

Blaming immigrants for the incarceration rates of African-Americans is a sign of desperation.Will they next be held responsible for Iraq and Hurricane Katrina?

Ms. Furchtgott-Roth is a senior fellow at the Hudson Institute, where she directs the Center for Employment Policy.From 2003 to 2005 she was chief economist of the U.S. Department of Labor.
IF you are one of the 3% (assuming the statistic is correct), AND your wages are decreasing...then you are injured by illegal immigration. NOTE, this article does NOT mention ILLEGAL immigration...just adds ALL immigrants together. It also does NOT address crime by illegals, such as forged documents or ID theft, so they can work.