Donald Trump would like you to believe that immigration is largely responsible for the difficult economic conditions the working class has experienced in recent decades. But immigration is not the problem. The real culprits are globalization, technological change, and labor’s dwindling bargaining power in wage negotiations.
Let’s start with immigration. Economists are in wide agreement that in the long-run immigrants do not lower the employment prospects for natives. There may be short-run costs as the economy adjusts to new immigrants, and the adjustment costs fall mainly on people with less than a high school education. But in the long-run, the employment prospects for Americans are enhanced by the extra demand for goods and services that immigrants provide.
Immigrants do not lower average wages. There is some evidence that immigrants lower wages for workers with very low levels of education, though not by a large amount. The biggest effect is on the wages of previous immigrants, the people that newcomers are most likely to compete with for jobs. For everyone else the impact of immigration on wages is positive, and on average wages go up.
One reason for this is that low and high-paying jobs are complements. Having more people available to do the lower paying jobs also increases the demand for workers with more skills, and those jobs tend to go to natives. Overall, it is estimated that immigrants are responsible for raising the incomes of natives “by $37 billion a year.”
A common belief is that immigrants create an undue burden for social programs, but immigrants contribute far more to social programs than they use in benefits. Both documented and undocumented workers, the majority of which are in their prime working years, pay income, Social Security, sales, Medicare taxes, and so on.
Undocumented immigrants are not allowed to participate in Medicaid, food stamps, welfare, CHIP, or SSI programs, and legal permanent residents must contribute to Social Security and Medicare for at least 10 years before they are eligible for benefits (the wait is five years on many other programs).
Children born here are eligible for benefits, and much of the spending is on them, but even so even so, “A National Immigration Forum and Cato Institute report estimated that immigrants paid $162 billion annually in federal, state, and local taxes. A study by the National Research Council concluded that ‘the average immigrant pays nearly $1,800 more in taxes than he or she costs in benefits.’”
In addition, undocumented workers “are paying an estimated $15 billion a year into Social Security with no intention of ever collecting benefits," and "Without the estimated 3.1 million undocumented immigrants paying into the system, Social Security would have entered persistent shortfall of tax revenue to cover payouts starting in 2009.”
It is true, however, that the costs are not equally distributed across US states. The federal government receives most of the tax benefits from immigration, but the states pay most of the costs, particularly states where immigration is the most concentrated. However, this could be offset through federal transfers to regions with high levels of immigration, so this is a matter of how the costs and benefits are distributed – overall immigrants are a net positive.
One fear of immigration is that it increases crime, something Donald Trump has emphasized. However, “communities with high concentrations of immigrants do not suffer from outsized levels of violence. The opposite is the case. A 2014 study examining a hundred and fifty-seven metropolitan areas in the United States found that violent crime tended to decrease when the population of foreign-born residents rose.” Study after study debunks the claim that immigrants commit crimes at a higher rate than natives.
Immigrants also own a larger share of small businesses than natives, are no more likely to be unemployed, are no less likely to assimilate than in the past (no matter their country of origin), and they have contributed greatly to technological development in the US. One study estimates that “25.3 percent of the technology and engineering businesses launched in the United States between 1995 to 2005 had a foreign-born founder. In California, this percentage was 38.8 percent. In Silicon Valley, the center of the high-tech industry, 52.4 percent of the new tech start-ups had a foreign-born owner.”
We cannot, of course, open our doors to anyone and everyone who wants to come here. Immigration must be at levels where newcomers can be absorbed relatively easily into the economy. Levels that are too high could bring significant adjustment costs, particularly for native workers with low levels of education. But immigration at the levels we have seen in recent decades has benefitted the US. That’s not to say there aren’t costs. As noted above, some states with high levels of immigration have experienced costs that may exceed benefits, but the answer is for the federal government to provide more support for those areas instead of closing our doors to people who, overall, contribute much more than they take.
If immigration isn’t the problem, then what is? The real problems faced by workers are globalization, technological change, and lack of bargaining power in wage negotiations, problems for which Donald Trump has no effective solutions. Reducing international trade through tariffs and the trade wars that come with them will make us worse off in the long-run – we will end up with fewer jobs, not more, and there’s no reason to think the average job will be any better. Trump has nothing to offer in the way of providing more support for workers who lose their jobs due to the adoption of digital, robotic, and other technology or to help workers gain a stronger hand when wages are negotiated.
People are demanding change, and we have two choices. We can close our doors to international trade as Trump would have us do, blame immigrants for economic problems they are not responsible for, ignore the impact that technological change has had on worker’s economic security, and do nothing to enhance worker’s ability to claim a fair share of the output they produce.
Alternatively, we can move toward Bernie Sanders type of social insurance and redistribution to ensure that the gains from immigration, trade, and technological change are widely shared. Workers need better protection when businesses make economic decisions to move production and jobs to other countries or when they adopt new technology that leaves people without jobs and diminished opportunities to find new employment.
Policies are also needed to ensure that workers have more bargaining power so that the growth in output is shared rather than flowing to the top of the income distribution and increasing inequality. When national income is growing, it’s not too much for workers to expect that their income will be growing too rather than stagnating as they have in recent decades.
Hillary Clinton does not go as far as I would like in dealing with these problems, but at least she is pushing in the right direction and addressing real problems instead of playing on unfounded fears to gain votes. Donald Trump’s policies will not solve or even make headway on the biggest problems workers face. If anything, things will get worse.
There are, of course, social and cultural fears about immigration that extend beyond the economic costs and benefits, and Trump is playing on those as well. I believe those fears can and should be dismissed as easily as the economic fears, but it is certainly the case that overall we are much better off economically from having our doors open to people from other countries.