Where are the Pakistani Kings? (part II)

In the previous post we discussed the impact of an immigrant group's level of education and training (and not national origin) in determining their economic and social output. The vast majority of research that seeks to ascertain the costs and benefits provided by immigrants, focus on the 1st generation. This is clearly a limited and short sighted approach, because the effect of each individual spans several generations via the economic and social costs and contributions of their offspring to the United States. Conventional wisdom dictated that a multi-generational analysis was not necessary, because the offsprings of immigrants would thoroughly assimilate and economically advance according to their individual merits, as demonstrated by the stellar rise of the children and grandchildren of so many poor immigrants.

In his book "Heaven's Gate," the Harvard economist George Borjas presents strong evidence that "many of the cultural and economic differences that exist among immigrant groups - as well as between immigrants and natives - are transmitted to their children, so that the diversity found among today's immigrants becomes the diversity found among tomorrow's ethnic groups." (pg 126) Or to put it simply "there is a strong positive correlation between the socioeconomic outcomes experiences by ethnic groups in the immigrant generation and the outcomes experienced by their children and grandchildren." (pg 128)

For example, in 1970 a 1st generation worker from Mexico earned -27.6 % less that the average native worker and in 1998 their children earned -19.7 % less. In contrast a 1st generation immigrant from Germany earned 21.9 % more and their children earned 17.6 % more than the average American worker. On average 67% of the wage differences between native and immigrant workers were transmitted to the second generation. So, although we are witnessing a regression towards the means, it's at a much slower rate than previously anticipated.

Borjas also found a surprisingly strong correlation between the literacy rate of the first generation and the number of years of schooling that the third generation achieved. Interestingly, but not surprisingly, the education level of the first generation had a strong bearing on the income level, incarceration rate and use of welfare of the third generation. However, there are many cases that defy predictive logic. For example, only 12% of first generation immigrants from the Dominican Republic utilize welfare, whereas nearly 40% of the second generation does. And (in 1970) the wages of first generation Greek immigrants was -3.9% less than those of native born Americans, however the second generation enjoyed wages 31.8% greater than that of their American counterparts.

It's also worth noting that in the period of 1940 - 1970 the inter-generational correlation in income between the 1st and 2nd generation was 0.45 and between 1970 - 1998 the correlation increased to 0.69; in other words the rate of assimilation has decreased over time. Of course this is the predictable outcome of the shift of governmental and educational elites away from an ideology of assimilation towards one of multiculturalism. And also noteworthy is the fact that the level of assimilation and achievement of immigrants who resided in neighborhoods with lower demographic concentrations of their compatriots were generally superior to those who resided in heavily immigrant neighborhoods.

So, what are the policy implications can we draw from the work of Borjas? The starting point is to embrace intellectual honesty and put facts before feelings and economics before feel good narratives. Next we must acknowledge that the skill and educational level of each immigrant offers benefits or imposes costs for three generations or more. From there we can analyze the success rate of the third generation to determine the relative success or failure of our initial immigration policy. And as stated in part I of this post, the issue is not the race of origin of the immigrant, it's what segment of the population they represent. So, the very high rate of welfare use among second generation immigrants from the Dominican Republic implies that we need to encourage a very different segment of the said nation to immigrate to the United States, particularly individuals with a higher rate of educational and professional achievement. And to facilitate greater assimilation and achievement we should encourage a smaller and more diverse influx of immigrants, rather than a large population with an over-representation of several key nations. But, in this age of political correctness, intellectual honesty is a scarce resource, so don't expect real change anytime soon.

The 3rd Güey Versus Jorge Ramos

Jorge Ramos, Anchorman, reporter,

best selling writer and radio commentator.

One of the things that amazes is the economic illiteracy that I see in even the most luminous journalists of the mainstream media. Very few approach immigration from the perspective of the 3rd Güey (clear, honest economic analysis based on empirical reality). Most based their limited analysis on race, racism and empty platitudes. Nowhere is this more clearly seen than with the 7-time Emmy winner Jorge Ramos, a charismatic, intelligent journalist from Univision. We cannot overestimate the influence that Mr Ramos holds, because an an anchor for Univision, a columnist for several Spanish newspapers, a radio commentator and a best selling author, he is the window into the political world of the United States for millions of Spanish speakers. And this is all the more true with the near absence of alternative media outlets that Spanish speakers in the United States face. This is particularly troubling because Univision is overwhelmingly liberal and pro-Obama.

After skimming through Mr. Ramos's book "The Other Face of America: Chronicles of the Immigrants Shaping Our Future, I conducted some research and came across an article in the Washington Post in which Mr. Ramos answered the questions that various readers presented him. I was very pleasantly surprised by the thoughtfulness and balance of most of the questions. But, I was quite disappointed by Mr. Ramos one-dimensional responses. Nowhere does he analyze and weigh the (social & economic) costs and benefits of immigration and nowhere does he address the legitimate concerns of the participants. And in a one instance he even falls back on unsophisticated fear mongering, which I have highlighted in red. Here are some excerpts; to view the full article scroll to the bottom of the post and click on the link:

Arlington, Va.: Don't you think there is a difference between anti-immigrant and anti-immigration? I am all for welcoming immigrants, treating them warmly and fairly, and helping them become part of our community. But I also want to lower immigration levels, because I'm concerned about the fact that the U.S. is already overcrowded--housing shortages, environmental harm, pollution, and school crowding are all the results of that crowding. But I'm certainly not anti-immigrant, and I'd like to see you make the distinction.

Jorge Ramos: The United Stated do not have too many immigrants. The immigrant population is, right now, 11 percent. In 1870 was 14 % and in 1910 was 14.7% So it is not accurate to say that there are too many immigrants in the US. Especially when they contribute so much to this economy and to the multiracial, multi-ethnic and multicultural nature of this country.

Washington, D.C.: Do you think the United States is overpopulated (as evidence by urban sprawl, the energy crunch, water shortages, traffic congestion etc.)? Middle Census Bureau projections puts the U.S. at around 400 million by 2050. Immigrants and their first-generation descendants are the primary cause of population growth (over 70%). Doesn't this have drastic ramifications on our environment?

Jorge Ramos: Overpopulated? I do not think so. What happens, in reality, is that many people are afraid that this country is going through a process of diversification. On July 1, 2059 every single ethnid group in this country (including non-hispanic whites) will become a minority.

Easton, Md.: Don't we as a people need to ask what the optimum number of people in the U.S. should be. Optimum as opposed to maximum. And then should we not work towards that number?

Jorge Ramos: We have not reached yeat the optimum number of immigrants in this country. Are people willing to pay five dollars for a tomato, 20 dollars for a hamburger, 50 dollars for a steak or pay doble or triple for rent?

Arlington, Va.: To me, amnesty to illegal immigrants is a slap in the face to legal immigrants who went about everything the right way, like my husband. We spent many years apart because neither of us believed in him working here illegally, and so we waited until we were ready to get married. Illegal immigrants are just that, illegal.

Jorge Ramos: I have a problem with the terms "illegals", "illegal immigrants" or "illegal aliens" because many people want to equate this with criminals. Immigrants are not criminals. They are in this country because they are needed in this country. Every one in this country is an accomplice of immigrants. Every one. It is unfair to criticize their presence and at the same time benefit from their work. Who harvested the food that we ate today? Who built hte house where you live? Who is taking care of our children when we go out?

Bethesda, Md.: With few exceptions, the United States is an nation of immigrants, drawn here by economic, political and/or religous opportunities. You have raised the call for adequate political and cultural representation for the Latino population in the country. How can those who are illeagal (i.e. they have broken the law by immigrating illegaly and are criminals) demand political representation? The United States was founded on the rule of law, and stands on it in total, not merely selecting the pieces that are convienent to one's particular situation.

Jorge Ramos: Immigrants work hard in this country, they pay takes, they contribute a lot to the culture and the economy of this country. Their presence highlights the true nature of the United States as a multicultural, multiethinic society. What I found difficult to understand is how an immigrant or a descendant of immigrants want to close the door behind them. To be anti-immigrant is, in fact, to be anti-American

Washington, D.C.: Sir, Are you in favor of allowing immigrants from ALL nations unrestricted access to the United States, people from Asia, Africa, etc. If we did so, we would probably have to lower the number of Latin American immigrants in order to be fair to people of other nations, for example, instead of 10 million from Mexico, we could have 2 million from Nigeria, 2 million from Cambodia, 2 million from Mexico, and so on. Mexican and American culture are not that similar that we should encourage a "merging" of Mexico and the United States, for English speakers, Spanish is not a easy language to learn, and I am sure it is true vice versa.

Jorge Ramos: The georpgraphic and political realities makes if impossible to apply the formula that you are suggesting. The priority should be to legalize, first, those who are already here. And then negotiate with Latin America a workable solution to the immigration dilemma. This is a problem that the United States can not resolve alone.

http://discuss.washingtonpost.com/wp-srv/zforum/02/author_ramos0207.htm

The 3rd Güey (part II)

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:

http://chicago-freedom-forum.blogspot.com/2009/03/3rd-guey.html

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.

http://usgovinfo.about.com/od/immigrationnaturalizatio/a/caillegals.htm

http://www.cis.org/articles/2004/fiscalexec.html

http://www.edweek.org/ew/articles/1998/02/11/22drop.h17.html

The 3rd Güey

Dr. George Borjas, Harvard Economist,

internationally renowned expert on

labor and immigration economics.

A large portion of the immigration debate is dominated by race-ists; that is, ideologues who view social phenomena according to race and not pertinent economic factors.

On one side there are race-ists who are opposed to non-white immigration and are deeply troubled by the ethno-demographic changes that have occurred since 1965. A small segment of this group harbors little more than primitive, reprehensible racism. A larger segment of this group is not truly racist; rather they are simply concerned about the negative social and economic repercussions of immigration. They correctly point out that the rate of welfare use among certain immigrant groups is far higher than among native households (15.4%): Dominicans (54.9%), Cambodians (47.9%) and Mexicans (34.1%). But, as I shall discuss later in this posting, they incorrectly attribute the source of this costly burden to race and ethnicity.

On the other side there are race-ists who mindlessly sing the virtues of diversity and immigration without analyzing the economic costs and benefits of our current immigration policies. Debates on costs and benefits are silenced by empty, emotional platitudes like "we are a nation of immigrants." These race-ists incorrectly attribute all reservations about our current immigration policies to racism and xenophobia.

There is a 3rd, rational güey (Mexican slang for "guy") that transcends race and focuses on real economic issues. The best example of this is the Harvard Economist George Borjas who believes that race and national origin are largely irrelevant factors. Dr. Borjas proves that education and skill level of immigrants and native born Americans alike are the prime factors that determine if they offer net economic benefits or impose a net economic costs on the United States. A highly trained engineer or doctor will contribute more in taxes than they consume in government services, regardless if they are from Maine or Mexico, Texas or Thailand. And a high school dropout with few marketable skills will inevitably be a tax burden regardless if they are from South Carolina or South Korea, Alabama or Albania. Accordingly, the reason why welfare use is nearly 10 times higher in Dominica immigrants (54.9%) than in Indian immigrants (5.6%) is not because Dominicans are inferior; rather it's because our current immigration policy brings in the most educated segments of Indian society and the least educated segments of Dominican society.

The 3rd güey offers a clear, rational, honest, economic approach to immigration bereft of the irrational fear and dogma that dominate our current debates. The 3rd güey seeks to educate Americans about the economic and social impact of our immigration policies, but doesn't mandate a direct course of action because as Dr. Borjas states "facts alone do not have any implications for immigration policy. The country must first decide what it is that the policy should accomplish. Depending on the objectives, the same set of facts can have very different policy implications." Such a rational, empirical and intellectually honest approach to public policy is painfully rare. I am resolute in my belief that the only way to create immigration policies that offer the greatest social and economic benefits to immigrants and native born Americans alike is to purge the debate of irrational race-ism and mindless dogma and instead focus on rational economics, coupled with well defined goals. Unfortunately in a nation in which even the political elites are economically illiterate, the chances of that are slim to none.

http://en.wikipedia.org/wiki/George_Borjas