Friends or Strangers: The Impact of Immigrants on the U.S. Economy

Washington Monthly, Feb, 1990 by Robert Reich

It has become fashionable of late to view immiration as the answer to America's economic ills. Immigration ... can help provide us with whatever ills we may be lacking |and~ diminish labor shortges that may be coming our way," enthused Ben Wattenberg and Karl Zinmeister at the American Enterprise Institute's policy conference last December. st open the borders and-presto-we have just the workers we need to see us through the tough times ahead.

George Borjas, a professor of economics at the University of California at Santa Barbara, has written short, thoughtful book about immigration that should give the optimists pause. A cure for what ails the economy? It ain't that simple.

Borjas's book is loaded with statistics, inferences, arguments, counter-arguments, qualifications, and stunning conclusions, but let me get right to the heart of the argument. He distinguishes between two categories of immigrants. The first comprises people hose subsequent lifetime earnings in America are less, on average, than lifetime earnings of Americans already here. Most of the people in this category are unskilled, and have fewer years of education than the average American. And a surprisingly large number of them (larger, in proportion to their numbers, than Americans already here) end up on welfare.

The second category of immigrants is people whose subsequent lifetime earnings in the United States are higher than those of Americans already here, who are skilled, have more years of education than the average American, and are very unlikely to end up on welfare. Borjas assumes that we would prefer to attract more of this second category than the first.

New wave

But here's the rub. Since the 1950s, a higher and her percentage of immigrants to the United States have come from the first category-unskilled, unschooled, schooled and more likely to end up on welfare. In 1950, the typical immigrant had .3 more years of schooling than the average American; by the late 1970s, .7 fewer. In the 1980s, some 10 million people legally immigrated to the United States-more than in any previous decade, and well ahead of the huge 1900-1909 wave that brought in 8.2 million people. But a much larger portion of this recent wave was from the first category of immigrants than in any previous wave. In addition, Borjas estimates that 3 to 4 million illegal immigrants entered the United States, most of them also coming well within category one.

Does this mean that most of the people who immigrate to another country these days are less skilled, educated, and productive than the people who immigrated years ago? Not at all. Borjas contrasts the sort of immigrants the United States has been getting with immigrants elsewhere. Besides the United States, the other major destinations for the world's immigrants are Australia and Canada (between 1975 and 1980, the three countries together accounted for about twothirds of where immigrants went). Australia and Canada have been attracting a much larger proportion from the second category than the United States has. In fact, while our proportion of category one has been rising, their proportion of category two's have been rising. Why? Borjas offers two reasons.

Theory of Relativity

The first reason has to do with laws that determine who gets in. In the 1960s and early 1970s, Canada and Australia changed their systems for allocating visas. Previously, visas had been allocated on the basis of national origin, so that if you were a skilled engineer from India you'd have a much harder time entering these nations than if you were a taxi driver from Great Britain. But after the changes, it was just the reverse. Higher skill and educational attainments received a higher priority, regardless of country of origin.

United States immigration policy has also shifted away from national origin. But, in contrast to Australia and Canada, the United States gives priority to the relatives of Americans, regardless of how skilled or unskilled they may be. This is the legacy of the 1965 amendments to the immigration law, which, as Borjas notes, were passed at a time when the American public was still sensitive to the issues of civil and human rights, which made family unification a central objective of immigration policy. Of the total number of visas that are issued every year, approximately 80 percent now go to close relatives of American citizens or residents. The remaining 20 percent are supposed to be allocated on the basis of skill but, as a practical matter, they typically go to more distant relatives.

What's more, you can bypass the quota system entirely and become an American citizen if you are an immediate relative (spouse or child) of someone already here legally. In 1987, more immigrants entered as immediate relatives than entered under all the family reunification provisions combined. Combining these numbers with the number of people allocated restricted-entry visas reveals that only 4 percent of the people who legally immigrated to the United States in 1987 were allowed in because of their skills. The rest-96 percent-came in because they had relations here.