Tuesday, April 18, 2006

Borjas on Immigration

In today's Wall Street Journal, economist George Borjas (professor at Harvard's Kennedy School) has an article that discusses research on how immigration affects wages. His bottom line:

My Harvard colleague Lawrence Katz and I recently examined the impact of the 1980-2000 immigrant influx (and particularly Mexican-origin immigration) for U.S. wages. The results are that, in the short run -- holding all other things equal -- immigration lowered the wage of native workers, particularly of those workers with the least education. The wage fell by 3% for the average worker and by 8% for high school dropouts.

The "all other things equal" assumption is not sensible from a long-run perspective. Over time, employers will certainly make capital investments to take advantage of the cheaper labor. This adjustment implies that, in the long run, the average worker is not affected by immigration, but the wage of high school dropouts still fell by 5%....This does not imply that immigration is a net loss for the economy. After all, the wage losses suffered by workers show up as higher profits to employers and, eventually, as lower prices to consumers. Immigration policy is just another redistribution program. In the short run, it transfers wealth from one group (workers) to another (employers). Whether or not such transfers are desirable is one of the central questions in the immigration debate.


Update: Economist-blogger Arnold Kling objects to the Borjas analysis:

I am angry any time an economist misleadingly describes trade as a "redistribution program." At that point, you forfeit your identity as an economist and instead become a demagogue.