The Economics of Immigration

The Economics of Immigration

Benjamin Powell
Show Date
February 27, 2022
Independent InstituteFree Market Institute

Economists almost universally agree that immigration provides net benefits to the countries that allows it, yet the public stubbornly clings to myths about immigrants "taking our jobs," or otherwise reducing natives' welfare. Benjamin Powell compiled the best scholarly economics research on immigration, gathered by multiple experts in the field, to write the conclusive book on the subject: The Economics of Immigration: Market-Based Approaches, Social Science, and Public Policy (2015).

Since then, he collaborated with frequent guest and Cato scholar Alex Nowrasteh in revisiting the subject in the book Wretched Refuse? The Political Economy of Immigration and Institutions.

Both books mix rigorous scientific analysis from the field of economics with clear explanations of how various studies should inform public policy.

Powell joined me to narrow the gap between public perception and economic reality when it comes to the vital issue.

🔦 Highlights

The New Economic Case for Immigration Restrictions

Bob Zadek: Ben, in your book co-authored with Alex Nowrasteh, Wretched Refuse?, were you trying to prove something or were you on a course of discovery ?

Ben Powell: Well, there is no QED at the end of the book. People have all sorts of conflicting ideas about immigration that are at odds with the social science about wages and jobs and economic impacts , but really this book looks at the most serious objection to open immigration - they call it the new economic case for immigration restrictions, which was made by Harvard economist George Borjas, Paul Collier, and some others, but it's really not that new, in a sense. It goes back to our founding fathers, who worried about immigrants coming and destroying our liberty.

The new case basically is, "Well, immigrants bring informal or formal institutions from their origin countries that are responsible for those origin countries being poor in the first place, and those beliefs could change the formal and informal rules that govern a destination country like the United States in a way that would make us less productive. Imagine Cuban immigrants fled socialist Cuba and came to Florida with the pro- socialist ideas that turned Florida socialist. Cubans then would not see the big increase in income from leaving Cuba and going to Florida, and Floridians would all become poor as a result. That is the new case for economic immigration restrictions.

We take it seriously and we address case studies at different things like corruption and freedoms that they could impact and to say, is there very much evidence for this and the preview of the results I'm going to say?

No, and in fact, quite often, the opposite.

Do Immigrants Bring Dysfunctional Values with Them?

Bob Zadek: How could our system - freedom - be so fragile as to be able to be destroyed by immigrants who pretty much gamble, everything to come here?

Is it sensible to assume that large numbers of people will leave poverty, and the absence of freedom to come here only to see to it that our country becomes like the country they just left? I don't even understand the psychology of how one could assume people would think that way.

Ben Powell: Well, let's dial it back a little bit. I'm speaking to you this morning from Texas, and this type of objection is something that people talk about in Texas a lot too that is Texas going to turn purple because of all of the crazy Californians? The answer is no, actually. Non-native born Texans vote for Republican candidates at higher rates than native born Texans.

Are Californians coming to recreate liberal, California in Texas? No, the Californians who move [to Texas] are more likely to be the ones who want to go buy a gun when they get here.

There's a selection bias of who chooses to come here. Texas is kind of a thing. If someone just wants to escape the high cost of living in Texas, they can lower their cost of living by moving north to Oregon or east to Colorado, and still be in crunchy. The ones who come here to Texas like the idea of Texas. I say this as a guy who moved from Boston, Massachusetts to Texas to run a Free Market Institute. When immigrants choose to move here, it's not certainly not with intent to undermine American institutions that make us wealthy and productive, but instead to become part of that.

What Part of Illegal Immigration do You Oppose?

Ben Powell: They'll say "It's just illegal immigration that I object to not legal immigration. My great grandparents came here legally," and I say, "Well, I want to return to the type of migration policy that your great grandparents faced. Ellis Island immigration policy allowed most people in the world to legally come to the United States.

Right now, almost everybody in the world is legally prohibited from migrating to the United States. So we're going to return to law and order immigration. We're just not going to restrict the numbers. This is a better way to build bridges with people.

Bob Zadek: People say, "I am opposed to illegal immigration." And I say, "well, gee, that's a headline. I'm opposed to illegal everything."

But the way to fix it is either to change the behavior or change the law. When you oppose illegal immigration, is it the illegal part you don't like, or the immigration part you don't like, and you dress up your opposition in the illegality of it?

Ben Powell: There are very few things that have a magic wand solution. If your sole objection to illegal immigration is the fact that it's illegal, that's one of the few things where there's a magic wand solution: make immigration legal. But I think that many people who say that are actually having other reservations about what would be legal immigration in greater numbers.

A Market-Based Solution for Immigration Policy

Bob Zadek: What first steps could be made with your encouragement to add some sense of order and benefit to our country in our immigration policy?

Ben Powell: We need to drastically open up paths to legal migration. That's the key. We should be opening it all the way back up to Ellis Island style and that means anybody can have a legal path here who's not a criminal or has a contagious disease at the time. If you're going to have quantitative limitations, we should be using a market to allocate those visas instead of the cumbersome immigration process.

Whatever the number is a visas -3 million, 5 million, 10 million, 1 million - allow employers to bid on them to bring people here and allow people here to bid on them, to give them to a relative to get the right to come here. Hell, allow immigration restrictionists to bid on them so that they could burn the permits.

The only way to get the most efficient mix is to use a market to reconcile the competing demands for those visas. But if we had a truly open Ellis Island system, then the market price would be zero, because anybody could get one by showing up.

Bob Zadek: Is there a danger from erring on the side of overly liberal immigration.

Ben Powell: Yes, there is a limit. No human being knows it. We cannot centrally plan an international labor market any better than the Soviet commissars can centrally plan the market for shoes, televisions, or anything else in the Soviet union.

So how do we handle it between US states? We allow employers to bid for our labor. We bid on apartments and houses, consider cost of living differences and then move or don't move. Nowhere where people are free to move between jurisdictions do you see wage differentials of more than 30%, but yet we see them by orders of magnitude between countries.

We are so far from optimal immigration that we could let this process play out for a long time before we'd be going towards that limit. Market processes would slow it down and stop it. We don't need the government planners.

Bob Zadek: Let them all in. I couldn't agree more.