Introduction & Session Notes. Opening Address. Plenary 1, 2, 3, 4. Panel Discussion 1A, 1B, 1C. Review & Preview. Plenary 5. Panel Discussion 2A. Session Notes, Population Change & Social Services. Panel Discussion 2B, 2C, 2D. Plenary 6. Panel Discussion 3A, 3B, 3C. Closing Address. |
PLENARY 2 - INTERNATIONAL PERSPECTIVE ON ECONOMIC IMPACTS OF IMMIGRATION |
DR JAMES SMITH, Rand Corporation, United States
SESSION NOTES,
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What I'm measuring here is the wage gap between an immigrant (these are newly arriving which means they came in the last five years) and a native-born American. This is how much their wages are lower than native-born Americans. Immigrants in the United States always earned less than native-born Americans when they arrived. That's the history of our immigration, and it's no different here. For example, in 1970 immigrant men earned 17% less. What is different is that the gap is growing enormously. So by 1990, and it's even higher today, immigrants earned 32% less than native-born Americans.
Percent of Recent Immigrants Falling in Bottom 10% of Wages 
Now look at the fraction of immigrants who are in the bottom tenth of the wage distribution. This is the lowest you can go in the wage distribution, the bottom tenth. You can see the trends here as well. Take my city, half of the immigrants who came into Los Angeles are in the bottom tenth of the wage distribution. They're at the bottom of the economic strata in the United States. Why is this? This is a complicated issue, but I'll summarise some of the main findings here. Their skills. This is very different to New Zealand. The skills of immigrants are less than the skills of native-born Americans, and that gap has been growing over time. That growing gap in the skills of immigrants relative to native-born Americans fully accounts for these large wage differences I've just showed you. I'll show you one dimension-education-this is not the only dimension of skill. We all know education is not the only summary of our lives, but it's an important one, and you can see that the education gap between immigrants and Americans has also been growing.
Education Gap Between New-Arrival Immigrants and Native-Born Americans 
This is one way of showing you how different our experience is from yours. This is the education level of immigrants compared to the education level of native-born Americans.
Education Distribution of Immigrants and Natives 
A quarter of all the immigrants, foreign-born people in our country, haven't finished primary school from their own country. Almost half have not graduated from high school. The other way immigrants differ from native-born Americans is a lot of them have post-college degrees, much more so than people born in the United States. But the central difference in the United States is immigrants tend to be very low-skilled people.
These immigrants, who come to the United States, receive low wages relative to the rest of us. The next question we ask after they stay in the United States, ten years, twenty years. What happens to them? Are they able to integrate themselves economically into the American economy? So we follow these groups of immigrants every ten years to see how well they were doing.
Career Wage Growth of New Immigrant Cohorts
(Males)
Let's take these people who arrived in '65-'69. They started out 11% behind native-born Americans. Ten years later they were only 6% behind. Twenty years later they were just a fraction behind. So over people's length of stay in the United States, there is substantial catching up. In fact they do much better than native-born Americans in terms of their wage growth. The difficulty that they face is that the starting point is being moved back, so now instead of starting at 11% behind they're starting at 20% behind, or 30% behind. But the process of economic integration is a characteristic of immigration into United States. Over their careers, they not only do well, they do much better than people born in the United States. The same thing is true for immigrant women.
Career Wage Growth of New Immigrant Cohorts
(Females)
One group of immigrants for which it is not true is for Mexican immigrants. It's not that they do badly over their career, they simply have no convergence. They progress just as well as native-born Americans, no better, no worse. They are singled out as a group that has not been able to integrate as successfully economically as the other immigrants.
Career Wage Growth of New Immigrant
Cohorts from Mexico
(Males)
Career Wage Growth of New Immigrant
Cohorts from Mexico
(Females)
We also looked across the generations. How do the kids of immigrants do? And how do the grandchildren of immigrants do? Do they assimilate economically across generations? Easily-by the third generation you cannot tell, there are no longer any economic differences between the grandchildren of these immigrants and people who came with the Mayflower generation, and that includes the Mexican immigrants. Generational assimilation has been a characteristic of immigration for over a hundred years and it's part of the success story of immigrants.
Now I get my cold-bloodedness back in me and ask not whether immigrants do well by coming to the United States because they do. It's whether native-born Americans do well by letting them come. And I will summarise my conclusions and the conclusions of the panel on this.
Effect on Native-Born Americans (Conclusions) - On net, native-born benefit from immigration
- Net gain because immigrants are different
- Losers as well as winners
- - Principal losers are native-born high school dropouts and prior immigrants
- - Principal losers are native-born high school dropouts and prior immigrants
- Wage effects not local but national-induced net outmigration
- Immigrants dominate some activities
- Native-born gain also in price reductions
There's an old joke that economists can never come to a conclusion, they always say well maybe this and maybe that, it depends on this, and if we make this assumption then maybe the world will change. But on this issue there is no ambiguity. Native-born Americans gain from immigrants coming into the country. We estimate that the gain is $10 billion a year. Immigrants produce about $200 billion more in GNP, most of which they receive themselves in their own incomes, but the rest of us gain $10 billion more from these immigrants. Is $10 billion a small or a large number? Our economy is $7 trillion so relative to the size of our economy, immigration has a modest but positive effect. It is not an engine of growth, it's not going to transform your economy but the effect is positive, not negative.
Second conclusion, why do we gain from immigrants? When I say "we" now I mean everybody. You gain from immigrants because they're different from you. If you bring in people who replicate yourself, have exactly the same skills that you have, you don't gain at all. You just make your economies larger or smaller. You gain because people come in who are different. The very fact that creates all sorts of other tensions about how you integrate people who are different, how you adjust your own population to deal with people who are different, is a source of economic gain in the first place. We gain because they are different. In the United States we gain because immigrants are less skilled.
The next point-not everybody gains from immigration. It's very easy in a heated public policy debate to claim there are only winners or there are only losers. It's not the case. There are winners and there are losers among Americans from immigration. Those people who compete directly with immigrants lose. Their wages are lower. They have lost. Most of the rest of us gain. When we add it all up it's a positive number, but you have to recognise some people lose. The people we identify as losers in the United States are native-born Americans who are high school dropouts. Their wages are about 5% lower because of the immigration that occurred since 1980. The other group who loses are prior-wave immigrants. They're the ones who most directly compete with these new waves. There are losers as well as winners. It's not just a win-win situation.
Our next conclusion. As I told you earlier, most of the immigrants come to certain places-Los Angeles for us, Auckland for you. Are these economic effects that I'm talking about concentrated in only those areas? Is it only people in Los Angeles who have wage reductions because immigrants come in? The answer to that question in the United States is no. Because other people internally who would have come to Los Angeles-less skilled labour-will now not come when they see immigrants there. A lot of native-born Americans have left Los Angeles and moved elsewhere. The implication is that these wage effects have now been transferred all over the United States. It doesn't matter whether you live in Nebraska, Wyoming, or Los Angeles. These are the same effects.
Finally, I want to give some context on what immigrants do in the United States. What are they actually doing, where do you see them, what contribution to they make? So I looked at certain jobs, these are low-skilled jobs. These are men.
Percent of Male Workers in Low-Skilled Occupations Who Are Immigrants
(California)Tailors 92 Textiles - Sewing Machines 91 Dressmakers 87 Solderers 83 Graders and Sorters, Agriculture 83 Nursery Workers 81 Misc Food Preparation 77 Farm Workers 77 Shoe Repairers 71 Cook 70 Pressing Machine Operators 69 Parking Lot Attendants 67 Electrical Equipment 65 Bakers 64 And this is a fraction of people, these are Californian, my state, the fraction of people who work in those jobs, who are immigrants. So 92% of all the tailors in California are foreign born. Seventy-eight percent of all the farm workers, if you ever go out in the fields of California you'll see this, are foreign born. Go to a restaurant in Los Angeles. Wolfgang or Hans will own that restaurant, and there will be Mexican cooks behind those doors. Everyone who cooks meals in Los Angeles and most of California is an immigrant. Get your car parked, you won't understand what they're saying, 70% of them are immigrants. But it's not just low-skilled jobs. Look at the high-skilled jobs in our state.
Percent of Male Workers in High-Skilled Occupations Who Are Immigrants
(California)Dental Assistant 54 Foreign Language Teachers 50 Medical Scientists 50 Dietitians 47 Engineering Teachers 43 Office Machine Operators 43 Dental and Medical Laboratory 42 Physical Teachers 38 Health Aides 32 Education Teachers 30 Sociology Teachers 29 Chemists 28 Purchasing Agents and Buyers 27 Nurses Aides 27 Engineers 26 Forty-three percent of all the men who teach engineering are foreign-born. Male physics teachers, 38% of them are foreign-born. I must tell you the next item on this list if I had made it just a tad longer would have been economists-25% foreign born-but I decided to cut it off right there. Let me just briefly go through women.
Percent of Female Workers in Low-Skilled Occupations Who Are Immigrants
(California)Textile - Sewing Machine Operators 90 Tailors 82 Farmworkers 78 Housekeepers 78 Cutting Machine Operators 78 Private Household Cleaners 75 Graders and Sorters, Agriculture 74 Dressmakers 73 Pressing Machine Operators 70 Laundry and Dry Cleaning Machines 69 Machine Feeders 68 Nursery Workers 66 Packaging 65 Graders and Sorters 65 Maids 65 Farm workers, housekeepers, very heavily into domestic service, 78% of women; private household cleaners, 75%.
- On net, native-born benefit from immigration