Economically Unwise to Curtail Immigration

That was the policy implication of this working paper (pdf) from the Urban Institute.

The discussion above suggests that it would be economically unwise to drastically curtail immigration to the United States. The prices of some important categories of consumer goods would rise significantly while employment shortfalls would be exacerbated in some key sectors.

The problem is that we have set up at least two programs that are going to present some serious fiscal challenges in the not too distant future: Medicare and Social Security. On top of that, as the Baby Boomers start to retire in larger and larger numbers there are going to be a two effects. The first is that a large number of currently employed will be leaving the job market. At the same time, the retirement of the Baby Boomers will mean that there will be a surge in people who are entering that phase of their lives when they will put increasing demand on health care and elderly care.

At the same time, there are problems with illegal immigration. Illegal immigrants are often marginalized and face larger costs in assimilating that legal immigrants. Also, the illegal status of many immigrants puts them in a position where employers can pay them less than the prevailing minimum wage. This practice is bad for at least two reasons. The first is that it means immigrants are going to be pushing natives out of certain labor markets. The second problem is that it forces these immigrants to live in poverty (by U.S. standards) and puts a strain on things like health care and other social services.

To the extent that illegal immigration imposes greater costs on U.S. workers, it might be helpful to curb that component of immigration. But there is no obvious method of doing so. Much stiffer employer sanctions for the hiring of undocumented workers might accomplish this, though its practicality from an enforcement perspective (and also politically) remains unclear. On the other hand, by providing some means for undocumented immigrants to ultimately obtain legal status, we could help “level the playing field” between these immigrants and native-born workers with whom they compete for some jobs.

So the solution appears to be to try and allow for greater legal immigration along with more enforcement of illegal immigraiton laws and stronger measures along the border to deter illegal immigration. This is similar to the idea of how prices in the market control the flow of resources. If the price of beef goes up and the price of substitutes such as chicken and pork stay the same the relative price of chicken and pork has declined. By raising the costs of illegal immigration and lowering the cost of legal immigration, then it seems reasonable to conclude that there will be less illegal immigration which would address many of the above problems.

Many people simply state that they want immigration to stop. The problem is that that isn’t going to happen. The U.S. needs a steady flow of immigrants for the time being. We need it because of policies that are in place and impending demographic shifts that simply cannot be avoided. Maybe there will be a technological miracle that will render the problems of Medicare and Social Security moot, and negate the need for more immigration. However, that strikes me as perhaps the worst policy that could be implemented. It is basically a policy of, “We’ll stick our heads in the sand and hope it all works out.”

FILED UNDER: Borders and Immigration, Economics and Business, ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. floyd says:

    steve ; one thing is certain from the contents of your article, your head is not in the sand.

  2. Bithead says:

    Sand, perhaps not.

    Has anybody bother to look at the political makeup of the “urban institute”? Certainly, they claim nonpartisanship. But even a cursory examination shows them to lean left in the extreme.

    Consider the mentality behind any organization that will take sides on ANY issue, with The Act Now to Stop War & End Racism (ANSWER) coalition, the Free Palestine Alliance, the Partnership for Civil Justice, the Nicaragua Network, the Korea Truth Commission, the Muslim Student Association, the Mexico Solidarity Network and the Party for Socialism and Liberation.

  3. legion says:

    Bithead,
    Just because someone with a political agenda (on either side) says it is doesn’t mean it ain’t true. As steve notes,

    Many people simply state that they want immigration to stop. The problem is that that isnâ??t going to happen.

    And that’s true – the more vocal, anti-immigrant groups have oversimplified the issue to that level, which is really self-defeating. Even if the US in general was xenophobic and economically short-sighted enough to want to do that, it’s not technically possible. The amount of money alone we’d have to dump into airports, seaports, rail traffic, and plain ground-based border patrol would make the expense of Iraq look like chump change.

    Basically, anyone who expects to stop (as opposed to limit, monitor, and regulate) _all_ immigration (even just the illegal portion, IMHO) is part of the problem, not the solution.

  4. Bithead says:

    Is it logical not to ask what the motivation behind these proests are, partiuclarly when looking at the groups involved?