Economics of Immigration

Today's Washington Post has a good article on the economic impact of immigration. Here is how it begins:

Effect of Immigration on Jobs, Wages Is Difficult for Economists to Nail Down

According to the economic models, it's a no-brainer: a surge of low-skilled immigrants should increase the supply of such workers, driving down wages at the expense of working-class Americans.

Sen. Byron L. Dorgan (D-N.D.), explaining why he opposes legislation to allow more legal immigration, said recently: "I don't think you need a professor to understand that when you import substantial cheap labor, it displaces American workers."

But recent research suggests that the economic impact of immigration is not so simple. The effects are difficult to disentangle from other factors that have dampened wage growth for most workers in recent decades, including new technologies, the decline in manufacturing jobs, the drop in unionization, globalization and recessions.

Yes, an influx of immigrants has helped depress the incomes of the lowest-skilled workers in recent decades, many economists agree. But they argue about the magnitude of the effect; some say it's big while others see it as slight.

Meanwhile, increased immigration -- legal and illegal -- helps keep inflation low, boosts rents and housing values, and benefits the average U.S. taxpayer while burdening some state and local governments, other research finds.

"Immigration provides overall economic gains to a country," wrote economist Albert Saiz, summarizing the literature in a 2003 article for the Federal Reserve Bank of Philadelphia. "Indeed, the U.S. experience as an immigrants' country is one of phenomenal economic growth. However, there are winners and losers in the short run."

The parallels between immigration and trade are striking. Let me change the last quotation from the article:

"Free international trade provides overall economic gains to a country. Indeed, the U.S. experience as a free-trade country is one of phenomenal economic growth. However, there are winners and losers in the short run."

The economics of foreign labor and the economics of foreign goods are two sides of the same coin.