Yup, you read that correctly. Behold:
Substituting Immigrant Labor for Native Workers: A Mental Experiment
Although the area where I live is not representative of the US in general, it’s exemplary in important respects. What happens here often happens later, elsewhere in the country, in attenuated form. Santa Cruz, California is separated from Silicon Valley by a chain of hills that takes 25 minutes to cross at the right time of a good day, and up to 90 minutes at other times. On my side of the hills is a rich agricultural zone, probably the main vegetable and strawberries garden of America, plus some resort areas and several well-respected schools of higher education. I taught in an MBA program in Silicon Valley, on the other side of the hills, for 25 years. I have been the owner of needy houses in Santa Cruz for just as long, and thus a habitual user of various kinds of labor. On both sides of the hills, high-tech industries and high-margin industrial agriculture powerfully attract immigrants – although, mostly, somewhat different kinds of immigrants.
The claim that immigrants of all kinds take work from citizens is a constant background noise in my area. In general (only in general; it happens) I am skeptical of the notion that immigrants directly take jobs from the native-born, or that they threaten to do so. This is based on my parochial, local, but not insignificant experience. Employers on both sides of my hills have been complaining of a labor shortage for seven or eight years. Booming Silicon Valley employers require more engineers, more software writers, but also more of a little bit of everything, because industrial growth generates demand for all kinds of ancillary services, including dish washing. There was not a sufficient rush of diversely qualified labor while the unemployment rate was fairly high, right after 2008. It’s unlikely to happen now that it’s ultra-low (September 2018).
Big farmers on my side of the hills regularly lament their inability to pick crops in the field in timely fashion because of a perennial dearth of the requisite kind of labor. Many think that the requisite kind of labor has to be cheap. In fact one habitual user of farm labor declares publicly that he pays $26 an hour on average. This would mean, of course, that some of his laborers earn more than three times the federal minimum wage.(This is embarrassing but I cant find the reference for this item. It’s from a recent article – 2018 -. I am 95% certain that it’s from the Wall Street Journal. I looked at the article carefully when I came across it and assessed it as trustworthy.) This figure would add up to about $50,000 annual for a full time farm worker. The Economic Policy Institute only assigns a yearly full time wage of $35,000 in 2015. (“Farm worker wages in California: Large gap between full-time equivalent and actual earnings.” Posted March 21, 2017 by Philip Martin and Daniel Costa.) That’s for the best paid farm workers, those in vegetable growing and picking. Assuming a 5% rise in wages yearly because of labor scarcity, still leave farm workers much below that $50,000 figure. I read locally that the labor shortage is so acute that some farmers switch to crops not especially suited to the climate or to their skill-set but that are less labor-intensive. The lament has not lessened in several years, although there is an abundant supply of potential labor nearby, in the form of college students.
Local housing rents are high; the cost of living is also high; tuition keeps increasing. Most of the farm work that goes begging requires little more than a basic work ethic and good health. Yet the thousands of college students in nearby Santa Cruz and Monterey compete for a handful of low-paying barista positions rather than going for far more lucrative seasonal farm work. (I must say that my perverse heart is waiting for a real-life experiment in which farmers explicitly bid up dormant student picking talent: I would like to find out how high the remunerations offered can go without eliciting a response.) The cliché that there is some work that Americans reared in a soft society won’t do, is not completely absurd, it seems to me. The lack of exposure to hard physical labor of most Americans who have been students in the past ten years may play a role, possibly a preponderant role. And yes, I admit that at $60 an hour, for example, growers would probably find all the local unskilled labor they wanted. Yet, I doubt that this is what commentators mean when they complain about immigrants taking work from the native-born.
And, of course, I have to notice that very high wages paid for the production of ordinary goods corresponds to a pay cut for everyone. Nevertheless I do believe that in agriculture the pay cut would probably amount to little, in most cases. Take local strawberries retailing at $2.00/lb. Suppose field labor accounts for a full ten per cent of this retail cost. If this labor cost goes up by 100% net, the same strawberries will retail at about $2.25, at most. It seems to me that’s probably not enough to affect sales much. Farmers would have to agree among themselves to raise wages and prices which may be illegal or of dubious legality.
The Hidden Cost of Cheap Labor: Missed Mechanization
Somehow, one of the hidden costs of the importation of inexpensive labor seldom comes up in discussions of immigration. Inexpensive labor is often an invisible substitute for mechanization. As discussions amplified in 2017-2018 about a national $15 an hour minimum wage, the media produced numerous examples of employers of inexpensive labor, such as fast food restaurants, quickly increasing their reliance on robots. In those media stories, the causality was seldom well established, but it stands to reason that the relative scarcity or dearness of labor is a spur to mechanization. Conversely, the routine availability of inexpensive labor must prevent decision-makers from adopting new tools of automation, and inhibit inventors from creating others.
This relationship is demonstrated in one kind of farming after another. The European Union is a live laboratory in this respect. As the EU’s heavy fringe benefits, including its high social insurance costs, were imposed on new member countries, cheap labor turned correspondingly expensive, and mechanical ingenuity was quickly unleashed. French grape growers who swore for 200 years that their precious wine grape demands the incomparable dexterity of the human hand found themselves happily riding newly invented vine cultivating machines.
Faced with the same compensation hardships, Greek olive growers relinquished manual picking for crude tree shaking machines designed to drop the fruit onto a tarp spread on the ground. Turns out, there is actually an effective olive tree shaking device that is also deft enough to avoid endangering trees that are sometimes a hundred years old. Mechanical agricultural inventions notably now move from the Old World to the New, a historically rare pattern that tests the notion of labor substitution. As labor becomes quickly more expensive in the European Union, its farmers mechanize, while American farmers slumber in the comfort of an abundance of reasonably priced labor from Latin America. In the eighties, I helped a French fruit-drying entrepreneur sell his trailerable, self-contained, stainless steel, gleaming modern machine to California plum processors still relying on a 19th century, fixed, brick, drying tunnel. It was like standing next to a state of the art sports car while chatting with a hay wagon. As expected, much of the superiority of the French machine resided in its labor efficiency that was several times better than that of the old-fashioned brick tunnels.
A Localized Cost: Schooling Expenditures
As we saw, the first qualification to the thesis that immigration enhances economic growth is that it is simply a form of population growth. It does enhance growth, but this sounds almost trivial (except to draw attention to the fact that the native-born are not taking on the vigorous job of increasing the population). The second qualification is a little more complex. A positive effect of immigration on the overall (national) economy does not exclude negative localized effects. The GDP, a national quantity, rises but some local school districts, for instance, are fiscally overwhelmed by the influx of immigrant children. The economic benefits associated with population growth through immigration may be mostly diffuse, even imperceptible, but the localized costs of immigration are obvious and often dramatically painful. The schooling of immigrant children is a good example of a painful localized cost that gives immigration a bad name.
Internal domestic migrations would also cause local problems, but the effect would usually be of a different magnitude. Today, the bulk of immigrant children often (not always) bring significant special educational needs with them that are rarely found among domestic migrants. First, they may not know English; in fact, most don’t, although there are bright exceptions. Second, foreign immigrants may come from the poorest, most rural parts of poor countries, with inferior schools. (That is certainly the case for Mexican immigrants, the largest group in recent years.) Both conditions, ignorance of English and the family’s low educational status on arrival, require expensive remedial measures, the cost of which is borne largely by local taxing entities.
To make matters worse, the usual academic remedies often just don’t work. The public schools may be so utterly unable to teach immigrant children anything in a foreign language – English – that the standards for all children degrade and local Anglo children fall drastically behind, in reading comprehension, for example. Over several years, the cumulative deficiency can force some Anglo parent to switch their children to private schools. Native-born parents who are college graduates, or even merely high school graduates, often don’t accept with equanimity the news that their children are two or three grades behind in any subject. They frequently become bitter and, why not? If they complain, they are frequently charged with racism. (It happened to my brown-skinned wife.) Those who make the move to private school end up with both high local taxes and the need to pay tuition for their children, all as an indirect but obvious financial burden of immigration. Note again that this burden is borne by local families, with little help from those who make immigration decisions, at the federal level.
There are perhaps two reasons why the poor educational status of some, or many, immigrants is seldom discussed. First, the bulk of the host population may not be clearly aware of the educational backwardness of the immigrants. They may vaguely think of Mexico, for example, as 40 or 50 years behind the US educationally; yet the commonness of illiteracy in remote Mexican villages puts them more than 100 years behind the US in this respect. (Nevertheless, I have much respect – based on personal experience – for Mexican public education as delivered in small and medium-size towns.) When it comes to the many immigrant children from Asia, school authorities appear even more at sea. They don’t know what to make of the fact that a middle-class Chinese boy of 12 may not seem to be able to explain what he can and cannot read.
The second cause of timidity regarding the educational status of new immigrants is, of course, far-reaching political correctness. To say, “Luis can’t read English” passes for racist in many quarters, although it’s obvious that Luis actually can’t read English, or any language (See below). Discussion is further discouraged by the fact that in some areas, such as mine, immigration includes both broad categories of low educational achievers and of exceptionally high achievers, both farm hands and engineers with superior training. The existence of the latter grants verisimilitude to charges of prejudice regarding the former.
Here are anecdotes about the low level of preparedness of some immigrants. On two occasions widely separated in time, I had prolonged interaction with Mexican immigrants I had hired to help me work on my houses. I had opportunities to judge each of them to be intelligent, practical-minded, full of initiative, and flexible–real finds, in other words. Both times, I discovered fortuitously that they were illiterate in Spanish. I left them simple written instructions in that language, and none of the required work was done by the time I checked, although some other necessary work I had not explicitly requested had been performed.
The men were thus not shirking; they just did not know what I wanted done. (No, don’t blame my Spanish. It’s very good. I can read anything in that language except a chemistry textbook. I also write it with ease. After all, it’s just another debased Latin, like my native tongue, French.) Of course, this is a story about a tiny sample, hardly a sample at all. Yet the two episodes took place ten years apart, and I suspect they illustrate a common condition among Mexico-born men in my area. (I refer to immigrants, not to Mexicans in generals. The large and growing Mexican middle class seldom wanders across the border without a solid job and a gringo salary. I also know some of its members.) My illiterate journeymen’s children would be difficult and expensive to educate, even if they, the children, knew English well. There is just not much book learning in their households and it’s not likely to be well respected there.
In my otherwise bookstore-rich and library-rich area, books in Spanish were nearly impossible to find for twenty years. I think there is almost no demand for such articles. What little demand there is appears to be for Spanish translations of American books with television ties. This is more evidence of the low literacy status of Mexican immigrants in the area. (see footnote 4)
It’s also true that immigrants’ children who are truly bilingual may be an asset to the local economy as well as to the national economy. In my observation as a college professor, that’s a tiny number, and their usefulness can only be a long-term proposition. It’s a tiny number because knowing a language well requires reading and, I think, writing. There are few opportunities (few, not none) for native Spanish speakers to learn to read and write, in addition to their normal schooling in English. So called “bilingual education” in public schools does not seem to do the job. I base my judgment on the tiny number of readers and writers of Spanish I encountered in local colleges where you would expect them to congregate.
Few Anglos perceive advanced bilingualism as an asset; I am guessing, (guessing) that it’s because they see it associated with individuals of low socioeconomic status. Nevertheless, it’s useful, obviously, for lowly jobs catering in part to a non-English speaking public. My daughter tells me that it’s impossible to get a job as a medical receptionist in my area if you don’t know English and Spanish. As for well-paid occupations, I have never heard this asset mentioned except, ironically, in connection with the Border Patrol. I don’t doubt that it’s also sometimes put to use in the diplomatic service, and in the armed forces. But bilingual children of immigrants have to compete there with recent immigrants who know English well.
Other Locally Borne Social Costs of Immigration
I have pointed out that schooling, though heavily affected by national immigration policies, is financed locally. Here is a roundup of other largely locally financed services: various social services for the poor, (“welfare,” “public assistance”), health care, jail and prison resources (some of which are funded by the Federal Government). When evaluating the cost of these resources as allocated to immigrants, it seems to me that a reasonable baseline is to assume that immigrants consume such resources in quantities appropriate to their sex, age distribution, economic and educational levels, and marital status. In the US, men commit more crimes than women, especially violent crimes; women are more likely to be in charge of children than men and thus in need of help to maintain them; the poor commit more crime overall than the rich, except perhaps, white collar crime. The semi-literate are also less likely than the better educated to engage in white-collar crime. Married men commit fewer serious crimes than do single men.
Loud voices on the right proclaim that immigrants go on welfare and have dealings with the judicial system more frequently than do the native born.
Adopting the baseline I propose, even if only mentally, slows down the tendency to stigmatize immigrants, including unconsciously. Imagine (made up figures) that the median age of American men is 38 while the median age of a certain group of immigrants is 23. If you observe a crime rate among the latter 25 % above the rate for native-born Americans, you may have discovered nothing about the immigrant group propensity toward crime, just that they are young. The use of such a baseline does not exclude the possibility of making policy inferences from the social costs of various immigrant groups based on their collective economic, age, and marital status characteristics, like this: We don’t need to import young men from Central America who are just about certain to increase the frequency and the gravity of crimes in our country.
4 I allow myself to be a bit of a bully on matters of bilingualism because the bulk of native-born Americans – who remain proudly monolingual – carry a ton of absurd ideas in their minds about the ease of language learning. Listen to me because I am able to do everything I know how to do in two languages, and because I am able to operate very well in a third – Spanish – while I read yet two others. (Most are related languages, of course, different varieties of bad Latin.) Naturally also, like all Frenchmen, I know a little German too, just in case. Just kidding! Read my shocking essay on language learning: “Foreign Languages and Self–Delusion in America.”
This is the right place for a painful digression. It’s painful because it’s about a program related to immigration that is both confusing and calculated, as if by design, to become controversial. Yet, as I argue below, toward the end of this essay, it’s a program with promise.
Many middle-class foreigners with college degrees are in the US on temporary working visas. By numbers, the main category of working visas is the H-1B visa. (This is confusing, but there is currently no such thing as an H-1A visa.) Holders of the H-1B visa must meet specific educational qualifications. They are sponsored by American employers – but also by employers who look much like labor contractors based abroad. They may stay in the US for a period of three years, renewable for an additional three years. That’s except if they work for a university or for a research institute, in which case their visa is pretty much eternal. Although the number of visas allotted each year is capped, by accumulation, the program involves significant numbers of people, about 350,000 in 2016. Some or most H-1B visas are allocated by lottery on an annual basis. (It’s completely separate from the diversity lottery described above [in Part 1], as I said.)
The rationale behind the H-1B visa is to supply workers in specialties that industrial and other organizations cannot find domestically. The program is controversial for two reasons. Continue reading
As many of you may know, there is a proposal to split up California into three parts: north, south and ‘ye olde’ California. This proposal is idiotic on several fronts. For starters the best university in LA, the University of Southern California, would find itself in ye olde California. Meanwhile my university, UC Riverside, would overnight become USC Riverside. Now, I wouldn’t be against the Trojan football team relocating to Riverside, especially since Riverside doesn’t have a team of it’s own. However the proposed split would cut off the Inland Empire and Orange County from Los Angeles county.
This despite the fact that the greater LA area is composed of LA-Ventura-Riverside-San Bernardino-Orange counties. These counties are deeply interwoven with one another, and dividing them is bizarre. Imagine the poor “Los Angeles Angels at Anaheim”. What horrendous name will they have to take on next? The “San Diego Angeles at Anaheim”?
Beyond it’s idiocy the proposal makes a larger point: government borders are, for the most part, arbitrary and plain stupid. The proposal to split up California ignores the regions socio-cultural ties to one another, but there are countless other examples of senseless borders.
For example, who was the bright guy that decided to split up Kansas City between Missouri and Kansas? And let’s not even get started on the absurd borders of the old world.
Thoughts? Disagreements? Post in the comments.
A few days ago, one of my papers was accepted for publication at the Scottish Journal of Political Economy (working paper version here). Co-authored with Vadim Kufenko and Klaus Prettner, this paper makes a simple point which I think should be heeded by economists: household size matter. To be fair, economists are aware of this when they study inequality or poverty. After all, the point is pretty straightforward: larger households command economies of scale so that each dollar goes further than in smaller households. As such, adjustments are necessary to make households comparable.
Yet, economists seem to forget it when times come to consider paths of economic growth and convergence across countries. In the paper, we try to remedy this flaw. We do so because there was a wide heterogeneity of household size throughout history – even within more homogeneous clubs such as the countries composing the OECD. If we admit, as the economists who study poverty and inequality do, that income per person adjusted for household size is preferable to income per person, then we must recognize that our figures of income per capita will misstate the actual differences between countries. In addition, if households grew homogeneously smaller over a long period of time, figures of income per capita will overstate the actual improvements in living standards. As such, we argue there is value in modifying the figures to reflect changing household sizes.
For OECD countries, we find that the adjusted income figures increased a third less than the unadjusted per capita figures (see table below). This suggests a more modest growth trend. In addition, we also find that up to the structural break in variations between countries (NDLR: divergence between OECD countries increased to around 1950) there was more divergence with the adjusted figures than with the unadjusted figures (see figure below). We also find that since the break point, there has been less convergence than previously estimated.
While the paper is presented as a note, the point is simple and suggests that those who study convergence between regions or countries should consider the role of demography more carefully in their work.
The Israeli Defense Force is killing unarmed demonstrators in Gaza. The Defense Force is on one side of the fence, the demonstrators on the other. What happened is that the ruling political party in Gaza, Hamas, sent the demonstrators to try and breach the fence separating Gaza from Israel. The declared purpose was to have Gaza Palestinians exercise their “right of return.” Hamas means the “right” of Palestinians to return where their forebears used to live, or maybe not, or nearby, etc, right inside present-day Israel. Of course, if Israel allowed this, Israelis might just as well start packing. It would be the end of the Jewish state that already has about 1.85 million Muslim and Christian Arab citizens. Both Palestinians and Israeli Arabs reproduce faster than Israeli Jews, by the way. (It’s the Jews’ fault, of course; they should get busy.) Hamas generously would allow Jews of Middle Eastern origin to remain as second-class, tribute-paying dhimmis. All the others, the majority, would have to leave quickly. Ethnic cleansing is the best scenario if Hamas wins, according to Hamas. The worst? Hamas does not say.
The mid-May 2018 demonstration was presented as a way to commemorate what Palestinians call “the disaster “– meaning the creation of Israel and the wholesale defeat the Arabs suffered in the war they had started against the new state. Initially, it had nothing to do with the inauguration of the new American Embassy in Jerusalem. It was mostly the Amerileft media that created a link with such devices as showing the inauguration in Jerusalem on a split screen with the rioting in Gaza. Many Americans, some of whom can’t place the US on a world map, would have believed that Palestinians were dying while the Americans and Israelis were gaily drinking champagne right next door.
The Israelis had warned early on that they would shoot demonstrators who tried to breach the fence separating Israel from Gaza. They did, killing about 70 Palestinians. That’s harsh but no one can call it unfair: They said it clearly: If you touch our fence, we will kill you. Don’t touch the fence, I would say. Little detour: the magazine Commentary pointed out that the Gaza authorities claim that 1600 Gazans were wounded by real bullets. What’s wrong here is the ratio of wounded to killed, 1600/70. It should be something like 1600/500 . It does not add up or else, the Israelis snipers are real bad at their job. Go figure!
Hamas thinks it’s winning because of the large number of unarmed demonstrators, its youths, wounded and killed. It’s been acting like this forever. Just a week ago, Gazans (who may have been Hamas agents or not) deliberately destroyed the valve to the main pipeline supplying Gaza with diesel fuel. The more misery ordinary residents of Gaza suffer, the happier the Hamas government is because Israeli atrocities give it standing among the ill-informed and mindless everywhere. I am tempted to feel sorry for Gazans myself because of the terrible government they live under. I can’t quite do this; below is why.
Hamas was elected in proper well observed elections. Although the Hamas government is well overdue for a new election, I would argue that the initial election makes Hamas one of the most legitimate governments in the Middle East. Hamas is explicitly an Islamist party. It does not think well of freedom of religion. It wants to impose sharia but does not feel strong enough yet. Hamas is in favor of polygamy. Young Gaza Palestinians are dying because of actions encouraged by their government, the Hamas government. Their parents properly elected that government. There has been no rebellion against it. The mass of the population seems loyal.
Hamas is insuring an aggravation of a situation in Gaza that is pretty much intolerable already. Israel left Gaza unilaterally 15 years ago but it maintains a partial blockade of the territory. It provides fuel and electricity and most of the water available, on its terms. It allows certain merchandise in but not others. Cement is limited, for example, I read in a source I can’t quote now but that I found credible at the time that Israeli Customs allow in milk and sugar but not instant coffee – which makes life more enjoyable. There is almost no work in Gaza, except working for the Hamas government. Nevertheless, no one there is starving because the territory is largely on welfare. Gaza has one of the highest educational achievement scores in the world although there is malnutrition there.
Gaza is a welfare non-state. It has no industry and very little else by way of earning its living. (That’s in part because of Israeli control over its borders, of course.) It’s an economic ward of the UN and secondarily of the European Union and of the USA. American Jews are thus among those supporting through their taxes riots where the main demand is “Death to the Jews!” The Leftmedia does not seem to be willing to mention, or it actually does not know, that the Israeli blockade of Gaza would be ineffective, almost useless, if Egypt did not join in. Yes, Egypt is also impeding the movement of goods, funds, and especially of people between itself and Gaza. And the PLO, which rules the West Bank, the other part of Palestine, has its own punitive measures against Gaza. Hamas is everyone’s favorite!
If you too feel revolted by the Israeli killings of Gaza demonstrators, and if you don’t think that righteous indignation is its own reward, I invite you to take two minutes to answer the following simple and sensible question:
Suppose you have a chance to advise the Israeli Prime Minister; suppose further that you have reason to believe that he will pay attention to you; what’s your advice to him regarding the present situation in Gaza (mid-May 2018)?
You can be sure that I have answered the question myself.
PS I am not Jewish, never have been, never will be. I am not a fundamentalist Christian either.
This is going to be a short post to argue that pundits (and some economists) need to stop quoting life expectancy figures to argue for/against a particular health care system. This belief is best exemplified in a recent paper in the Journal of the American Medical Association where Papanicolas et al. (2018) point out that the United States “spent nearly twice as much as 10 high-income countries (…) and performed less well on many population health outcomes”. While the authors make good points about administrative costs, they point out that the US has a low level of life expectancy.
Sure, that is actually true – but Americans tend to die in greater proportions from homicides, drug overdoses and car accidents (Americans drive more than Europeans) than in other rich countries. While these factors of mortality are tragic (except car accidents since Americans seem to prefer the benefits of mobility to the safety of not driving), they are in no way related to the efficiency of health care provision. How much of a deal are these in explaining differences with other industrialized countries? A pretty big deal. For example, these three factors alone account for 64% of the male life expectancy gap between Austria and the United States (see table reproduced below). For women, 26% of the gap between Austria and the United States is explained by these three factors.
The study I cite here only includes three factors. If you add in other factors like drownings among youths (Americans tend to have more drownings than several industrialized countries) which is a result of the fact that Americans are richer and can afford pools (while Europeans tend not to), then you keep explaining away the difference. This is not to say that American health care is great. However, this says that American health care is not as bad as life expectancy outcomes suggest.