It’s time to return to the economics of immigration reform

If you’re like me and scan headlines over breakfast, hoping for mention of immigration reform, you know the past weeks have been rough — that oatmeal just doesn’t shine as it did when bipartisan efforts were under way. And when you remember that time is running out with the upcoming midterm elections and that a desperately needed immigration overhaul lies at the mercy of a Republican civil war, you may have just about lost your appetite.

Breakfast nausea has troubled me since a young age. But the lack of an economically sensible immigration policy has troubled this country for far longer. Our existing immigration policy is complex, costly and contradictory. More than 11 million undocumented workers continue to struggle for access to basic services. Restrictions on high-skilled workers have caused many of the world’s best and brightest to take their talents elsewhere. Instead of lamenting, however, it might be useful to take this time to assess what we know about the economic impacts of immigration.

Economic research has focused on answering the question: Do immigrants cause falling wages or job loss for native workers? Early research, such as UC Berkeley professor David Card’s analysis of the 1980 Mariel Boatlift, in which approximately 125,000 Cuban refugees entered Miami over a five-month period, found almost no impact on the employment or wages of Miamians. The vast majority of studies conducted since then have applied new data, theory and statistical methods and have found the same result — immigration has a very small or no adverse effect on the wages and employment of native workers.

These findings are quite counterintuitive: If you’re looking for a job, it should be much harder if there are 100 competing applicants from abroad. How is it, then, that U.S. labor markets can absorb immigrant inflows with almost no impact on native workers? A key explanation lies in a simple idea that underlies basic economic theories: the concept of difference.

Difference is the key to productive exchange — diverse skills, experiences and abilities allow us to exploit our comparative advantages, resulting in greater productivity. If you can make tequila and I can grow limes, then hey, we have ourselves a party. If you and I only know how to grow limes, then we have ourselves a very sour environment. Professors Giovanni Peri at UC Davis and Chad Sparber at Colgate University discovered that immigrants bring skills that are complementary to those natives possess, and instead of firing natives, labor markets make productive use of these differentiated skills.

Building on this research, recent studies have found that high-skilled immigrants have greatly benefited the U.S. economy, particularly in technological innovation. In research I conducted with Peri and Sparber, we find that highly skilled STEM (science, engineering, technology and mathematics) workers from abroad increased the wages of college natives without harming their employment opportunities. Yet each year, we deny entry to thousands of eager high-skilled workers. This year, U.S. Citizenship and Immigration Services received about 124,000 applications for H-1B visas, temporary work permits for highly skilled workers. The H-1B cap of 65,000 visas was exhausted within a week of the start of the filing period.  We need reform to maximize the benefits of attracting world talent.

Many agree with improving access for the high-skilled but draw the line when it comes to assisting the less-skilled or the undocumented. Research by professors Marianne Bitler at UC Irvine and Hilary Hoynes at UC Berkeley have shown that among lower-income families, immigrants use safety net programs (e.g., UI, cash welfare, food stamps, SSI) at lower rates than natives. Studies of the undocumented population have been precluded by insufficient data, but economists have shown that access to legal safeguards and basic services dramatically improves educational attainment and labor market outcomes of recipients and their children. A path toward citizenship for the more than 11 million undocumented people would foster a healthier, better educated and more productive workforce.

We also must try to reduce the inflow of undocumented people, but the efficacy of border security is unknown. It has been difficult to assess whether increased border security actually lowers illegal immigration because we don’t have a good idea about how many people attempt to immigrate illegally. If border arrests increase by 10 percent but the total number of attempts increased by 100 percent, we would hardly say our borders are more secure. Taxpayer money would more efficiently be spent on employer verification and job training assistance for native-born workers — programs whose effectiveness has been shown and can continue to be measured.

Political stagnation is destroying the possibility of immigration reform. We must refocus attention on the facts. The costs and benefits immigration poses to other measures of society’s welfare, including education, health, crime and poverty, remain unknown, and we should do more to find answers to such questions. Grounding discussions in research and facts, instead of in airtime for rabble-rousers, will ultimately improve our chances at reform in the next rounds — whenever they may be.

Kevin Y. Shih is a doctoral candidate in the Department of Economics at UC Davis.

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