George J. Borjas: Costs of Immigration - Economics Roundtable

Introduction

George Borjas, a preeminent expert on immigration economics from Harvard’s Kennedy School of Government, presented a talk titled "Making It Worse: How the US Government Has Tackled the Immigration Problem Wrongly" at the UCSD Economics Round Table. He shared insights into the complexity of immigration policy in the US, emphasizing the need for a systematic approach to determining how many immigrants should be admitted and which specific groups should be prioritized.

Key Questions in Immigration Policy

Borjas introduced two fundamental questions that lie at the heart of immigration policy creation:

  1. How many immigrants should the US admit?

  2. Which immigrants should be prioritized for admission?

These questions, he asserted, need to be addressed in any reasonable immigration policy framework, as they lay the groundwork for effective immigration management.

Historical Context and Policy Changes

Immigration Trends

Borjas highlighted the historical trends in US immigration, showing how the numbers have fluctuated over the past two centuries, with notable low points during the Great Depression. Since then, legal immigration has hit peaks reflective of broader societal changes and legislative adjustments.

Legal Framework from 1875 - Present

  • Pre-1875: No immigration restrictions; entry based largely on physical presence.

  • 1875 - 1924: Increasing restrictions, culminating in the National Origins Quota System of 1924 that imposed limits based on national origin.

  • Post-1965: Shifted from national origin preferences to family reunification policies; this period saw an increase in immigration numbers with around two-thirds of immigrants entering through family preferences.

Economic Impacts of Immigration

Workforce Representation

  • As of Borjas’ presentation, almost 15% of the US workforce is foreign-born, with California seeing as much as 33% of its workforce composed of immigrants. This shift indicates a significant increase since the mid-20th century.

  • The impact of immigration is highly localized, with immigrant-dense areas experiencing different economic dynamics compared to less populated regions.

Wage Differential Trends

Borjas presented a striking wage gap trend:

  • In 1960, immigrant men earned approximately 7-8% more than native men.

  • By 2000, that figure shifted, with immigrants earning about 20% less than their native counterparts, leading to discussions on immigration's adverse effects on wages for less skilled workers.

Employment Opportunities and Effects on Natives

The presentation delved into empirical studies indicating the impact of immigration on native job opportunities and wages, particularly for low-skilled workers. Borjas noted:

  • Immigration has contributed to a wage reduction of about 3% in the short run, with more pronounced effects observed among less educated workers (5-8% wage decline).

  • Over the long term, capital and labor adjustments reduce the negative impact of immigration on wages.

Legal vs. Illegal Immigration

Borjas discussed the complexities surrounding illegal immigration, noting that approximately 10 million undocumented immigrants reside in the US, primarily from Mexico. This demographic adds to the annual increase of nearly two million people through both legal and illegal channels.

Welfare and Immigrants

Welfare Use Trends

  • Welfare restrictions have historically attempted to limit immigrant access to public assistance, yet reform has seen a rebound in immigrant households receiving aids like cash or food stamps.

  • The study mentioned by Borjas from the National Academy indicated that immigrants in California impose a net fiscal burden, averaging about $1,200 annually per native household.

Nationwide Impact

On a national level, Borjas suggested the fiscal impact of immigrants’ welfare usage is around $10-$20 billion, balanced against productivity gains of approximately $20 billion attributable to increased labor market participation.

Policy Recommendations

Systematic Immigration Management

Borjas emphasized the need for a coherent immigration policy that prioritizes skilled over unskilled labor:

  • He pointed towards Canada’s points system as a model for evaluating potential immigrants based on skills, education, and age.

  • He criticized the current US family preference system, which he claimed lacks the economic basis needed to ensure that immigrants contribute positively to the economy.

Addressing Illegal Immigration

On illegal immigration, Borjas advised against blanket amnesty and suggested:

  • Enforcing stricter border controls and employer sanctions to deter illegal entries and reduce the demand for low-skill immigrant labor.

  • A two-step approach that establishes effective border control measures before considering legalizing existing undocumented immigrants.

Conclusion

Borjas concluded that understanding immigration economics requires recognizing the benefits and costs entailed. Ultimately, the dynamics of immigration in the US are complex, with different stakeholders gaining or losing from current practices. For any policy change to be effective, it must incorporate a recognition of these dual aspects and an overhaul of the current system focusing on skills rather than family connections.