To follow this discussion, you need to be familiar with the concepts presented in part I of
The 3rd Güey; if you have not yet read it, please click here:
After reading about the ground breaking research of Dr. George Borjas, it should be abundantly clear that race and national origin should be excluded from the immigration debate and our main focus should be on the human capital (skills, education & experience) of immigrants. As Dr. Borjas shows, human capital is the prime determinant of the economic and social outcome of immigrants and native born Americans alike.
So, the next logical step is to assess how our immigration policies of the last 40 years have effected the social capital of immigrants and native born Americans alike. According to Dr. Borjas, in 1960 the average immigrant living in the United States actually earned 4% more than his native born counterpart. He attributes this to the fact that in 1960 the average immigrant possessed greater human capital than the average American. But, by 1998 immigrant earnings had dropped to 34% below the American mean. Dr. Borjas attributes this to a drop in the relative human capital of immigrants via the United States' changing immigration policies. This is seen in the following figures: in 1998, 9% of the average native born males were high school drop-outs versus 33.6% of immigrant males, rising up to 60% in Mexican and Central American populations. Interestingly, the economic distribution of immigrants has become highly bifurcated; on one side, high skilled, professional immigrants earn more far more than the typical American and on the other side, a mass of uneducated immigrants earn far less. Immigrants from Mexico and El Salvador, on average earn 40% less than than natives, while immigrants from Australia earn 30% - 40% more.
Two additional, interconnected factors contribute to the drop in wages of immigrants. First, a major increase in the supply of labor, especially in fields with a large immigrant presence, such as construction and manufacturing, have depressed wages in those fields. Second, our post-industrial economy increasingly rewards skilled, specialized labor and offers increasingly low returns for unskilled labors. So, populations that on average possess less skills and education will see a decrease in earnings.
Most disturbingly, the factors discussed in the preceding paragraphs have also impeded the rate of economic assimilation of immigrant populations. Immigrants that arrived between 1955 - 1059 started off with a 10% disadvantage in wages. But, 10 years later as they advanced in their mastery of English and in their professional development, they earned 10% more than native workers. Immigrants arriving between 1975 - 1979 started off earning approximately 22% less than native workers, but within 10 years they had narrowed the gap to 12% less. But, immigrants arriving between 1985 - 1989 started off with a 23% wage gap and within 10 years the gap had actually grown by 10% to 33% less than native workers. And as predicted by their education levels, after 10 years German and Indian immigrants earn 24.5% and 17.6% more than native workers.
Dr. Borjas shows that the overall economic effect of our current immigrant policies does not so much involve economic output as it does economic distribution. Specifically, it has resulted in a redistribution of wealth away from workers who compete with immigrants towards employers and consumers who economically benefit from the depressed wages brought on by an increased supply of labor. For example, an increase in the supply of dry-wallers and painters brought down the cost of labor in those fields. This allowed construction firms and (to a lesser extent) consumers to enjoy lower labor costs, but reduced the earnings of native workers as well as established immigrant workers in the said fields.
The most important implication of approaching immigration from the perspective of social capital is the understanding the relatively high rate of social and economic pathology in the Hispanic community does not stem from race or national origin. Rather, it reflects a decrease in the education level of Hispanic immigrants coupled with a large increase in the supply of low skill labor. For example, from 1990 to 2004, the number of Hispanics in poverty rose 52 percent, accounting for 92 percent of the increase of impoverished Americans. The rate of high school drop outs hovers around 30%. And the rate of out of wedlock births for foreign born Hispanics rose from 19% in 1980 to 42% in 2003. So, paradoxically our current immigration policies have been most detrimental to social and economic welfare in Latino communities.
Changing levels of human capital have greatly altered patterns of welfare use among immigrants. In 1970 only 3% of immigrants received cash assistance, a lower level than the 5% of Americans that received assistance. But, by 2000 this trend had reserved, approximately 6.7% of Americans were receiving cash benefits, whereas 8% of immigrants were receiving the said benefits. And 15.4% of Americans were recipients of one or more welfare program, versus 22.4% of immigrants. A more detailed analysis paints a bifurcation use of welfare among immigrant groups. At one end, only 5.4% of Indian immigrants received welfare benefits and at the other end 54% of Dominican and 47.9% of Cambodian immigrants are on welfare. Unfortunately, in the age of growing entitlements, this is a very costly phenomenon. In California alone the net costs on public services is estimated at $10.5 billion or a burden of nearly $1,200 for each tax paying family. Thus, cheap imported labor amounts to a costly, market-distorting subsidy, enjoyed by select businesses, but paid for by the general public.
Dr. Borjas correctly notes that the growth of the welfare state has served as a magnet for immigrants with low human capital. Statistics indicate that in the early 1900's upwards of 38% of immigrants returned to their countries of origin. Without an extensive welfare state, this allowed for a self-selection system in which the most adaptive and productive immigrants would remain and greatly contribute to the economic welfare of the United States. But, by 1993 only 10% of immigrants were returning to their countries of origin, a number that is even smaller in families receiving government assistance. Not only does this allow for unproductive individuals to remain, this actually diminishes incentives for native born and immigrants alike to increase their skill and productivity levels. Milton Friedman best summed up this phenomena in the following sentence: "it's obvious that you can't have free immigration and a welfare state."
Dr. Borjas points out one essential but rarely discussed factor in the debate - differences in levels of human capital brought by immigrants persist for at least three generations. In other words the level of education, skills, earnings and welfare use of immigrants effects that of the 2nd and even 3rd generations. For example, first generation Indian immigrants (that arrived in 1970) earned 27.6% more than the average native workers and the 2nd generation earned 23.1% more, whereas first generation Mexican immigrants earned 27.6% less and their second generation descendant earned 19.7% less. And only 2% of second generation Indians use welfare, whereas 14% of 2nd generation Mexicans utilize welfare. And interestingly, the one social index that deteriorates from the 1st to the 2nd generation is crime. Contrary to popular perception, the crime rate of 1st generation Latino immigrants is actually lower than that of European-Americans, but the incarceration rate of the 2nd and 3rd generations is 3.5 times higher than that of European-Americans. Thus, our current immigration policies have economic and social repercussions that will span several generations.
The more I read Borges clear and compelling research, the more I am convinced that our current immigration policies are entirely based on political factors and beret of clear and rational economic goals, much to the detriment of native and immigrant populations alike. Swelling the ranks of unskilled labor depresses wages of immigrants and imposes economic burdens on tax payers via costly entitlement programs. The only interests that benefit from this transference of wealth are unscrupulous businesses and left leaning politicians seeking to expand their electoral base. And contrary to popular perception, the real anti-immigrants are politicians like Luis Gutierrez and Ted Kennedy who have placed their lust for power above the economic and social welfare of their country and even their immigrant constituencies, because as our current recessions shows, when political aspirations collide with economic realities, immigrants bear the greatest brunt of the impact.
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