« Margaret Beckett Research and Administration Trust. | Main | Highest Paying Google Keywords. »

March 27, 2006

Paul Krugman: North of the Border

Paul Krugman today on immigration. Just one thing that puzzles me.

First, the net benefits to the U.S. economy from immigration, aside from the large gains to the immigrants themselves, are small.

Realistic estimates suggest that immigration since 1980 has raised the total income of native-born Americans by no more than a fraction of 1 percent.

Second, while immigration may have raised overall income slightly, many of the worst-off native-born Americans are hurt by immigration — especially immigration from Mexico.

Because Mexican immigrants have much less education than the average U.S. worker, they increase the supply of less-skilled labor, driving down the wages of the worst-paid Americans.

I agree with what he’s actually saying but wonder a little about the tone. I generally assume Krugman to be both liberal and internationalist. So why this dismissal of the very large benefits to the immigrants themselves as against the (estimated) 8% reduction in wages for native born American low skill workers?

I thought it was part of the liberal mantra that we should indeed take from the rich to give to the poor? Those low skill workers are indeed poor by American standards and hugely wealthy by world. Why this dividing line at the nation’s borders? What makes that such an important issue? Why shouldn’t there be such redistribution between citizens of different countries?

Think of it this way. Which groups should we support redistribution amongst? The family? I think all support that. The county or State? Whoops, there goes any justification for Federal rebalancing. Limit it only to the nation? Whoops, there goes the justification for foreign or development aid.

If you are going to buy into the idea that there should indeed be income redistribution, what’s so important about the nation?

Update: Interesting, I seem to be in agreement with Brad Delong on at least one of the points:

I think that we should focus on: "the net benefits... from immigration, aside from the large gains to the immigrants themselves, are small." Particularly, we should focus on the "large gains to the immigrants themselves." The net benefits from immigration including the large gains to the immigrants themselves are enormous. We shouldn't forget that.

We should be taking steps to equalize America's income distribution: more progressive tax brackets, more public provision of services, a more generous Earned Income Tax Credit, a higher minimum wage, a greater focus on education. But tight restrictions on immigration are a really lousy anti-poverty policy: one with enormous excess burdens measured in money, and truly mammoth excess burdens measured in utility.


"Give me your tired, your poor, your huddled masses yearning to breathe free," wrote Emma Lazarus, in a poem that still puts a lump in my throat. I'm proud of America's immigrant history, and grateful that the door was open when my grandparents fled Russia.

In other words, I'm instinctively, emotionally pro-immigration. But a review of serious, nonpartisan research reveals some uncomfortable facts about the economics of modern immigration, and immigration from Mexico in particular.

If people like me are going to respond effectively to anti-immigrant demagogues, we have to acknowledge those facts.

First, the net benefits to the U.S. economy from immigration, aside from the large gains to the immigrants themselves, are small.

Realistic estimates suggest that immigration since 1980 has raised the total income of native-born Americans by no more than a fraction of 1 percent.

Second, while immigration may have raised overall income slightly, many of the worst-off native-born Americans are hurt by immigration — especially immigration from Mexico.

Because Mexican immigrants have much less education than the average U.S. worker, they increase the supply of less-skilled labor, driving down the wages of the worst-paid Americans.

The most authoritative recent study of this effect, by George Borjas and Lawrence Katz of Harvard, estimates that U.S. high school dropouts would earn as much as 8 percent more if it weren't for Mexican immigration.

That's why it's intellectually dishonest to say, as President Bush does, that immigrants do "jobs that Americans will not do."

The willingness of Americans to do a job depends on how much that job pays — and the reason some jobs pay too little to attract native-born Americans is competition from poorly paid immigrants.

Finally, modern America is a welfare state, even if our social safety net has more holes in it than it should — and low-skill immigrants threaten to unravel that safety net.

Basic decency requires that we provide immigrants, once they're here, with essential health care, education for their children, and more.

As the Swiss writer Max Frisch wrote about his own country's experience with immigration, "We wanted a labor force, but human beings came." Unfortunately, low-skill immigrants don't pay enough taxes to cover the cost of the benefits they receive.

Worse yet, immigration penalizes governments that act humanely. Immigrants are a much more serious fiscal problem in California than in Texas, which treats the poor and unlucky harshly, regardless of where they were born.

We shouldn't exaggerate these problems. Mexican immigration, says the Borjas-Katz study, has played only a "modest role" in growing U.S. inequality.

And the political threat that low-skill immigration poses to the welfare state is more serious than the fiscal threat: the disastrous Medicare drug bill alone does far more to undermine the finances of our social insurance system than the whole burden of dealing with illegal immigrants.

But modest problems are still real problems, and immigration is becoming a major political issue. What are we going to do about it?

Realistically, we'll need to reduce the inflow of low-skill immigrants. Mainly that means better controls on illegal immigration.

But the harsh anti-immigration legislation passed by the House, which has led to huge protests — legislation that would, among other things, make it a criminal act to provide an illegal immigrant with medical care — is simply immoral.

Meanwhile, Mr. Bush's plan for a "guest worker" program is clearly designed by and for corporate interests, who'd love to have a low-wage work force that couldn't vote.

Not only is it deeply un-American; it does nothing to reduce the adverse effect of immigration on wages. And because guest workers would face the prospect of deportation after a few years, they would have no incentive to become integrated into our society.

What about a guest-worker program that includes a clearer route to citizenship? I'd still be careful.

Whatever the bill's intentions, it could all too easily end up having the same effect as the Bush plan in practice — that is, it could create a permanent underclass of disenfranchised workers.

We need to do something about immigration, and soon. But I'd rather see Congress fail to agree on anything this year than have it rush into ill-considered legislation that betrays our moral and democratic principles.

March 27, 2006 in Economics | Permalink


TrackBack URL for this entry:

Listed below are links to weblogs that reference Paul Krugman: North of the Border:


BTW I think you've made a cut-and-paste error. You're discussing a Krugman column about income redistribution being a bad thing, but you've posted a completely different column about the (minor) economic and (major) political implications of immigration, which doesn't mention income redistribution at all!

Tim adds: Hunh? He specifically states that immigration has kept low skill American’s wages lower than they otherwise would be. That speaks to distribution doesn’t it?

Posted by: ajay | Mar 27, 2006 1:08:12 PM

This reminds of my the arguments I used to have with old Smalltash Arkfield, leaders of the Smogbound Peoples Movement against Lancastrians. At the time Lancastrians were streaming across the border at the rate of one or two a fortnight.

Posted by: The Blind-Winger Jones | Mar 27, 2006 2:06:25 PM

It's only 'distribution' in the sense that anyone getting a job is 'distribution' because money is going from the rich (their employer) to the poor (the employee). You were talking about income redistribution, which means state action taking from the rich and giving to the poor - at least, that's what it's meant every time you've used the phrase before. And Krugman simply isn't talking about that issue at all.
An immigrant getting a job because he will work for less than a native is not 'income redistribution' in any commonly used sense of the word.
And, of course, this falsely-named 'redistribution' isn't happening across national borders, as you suggest, because the immigrant is already in the country. That's, er, why he's an immigrant.

Incidentally, you are also, of course, wrong to say that redistribution is 'the justification for foreign or development aid'. But I thought we'd deal with your larger error first.

Posted by: ajay | Mar 27, 2006 2:12:59 PM

The redistribution is happening across borders.


And I'm all for them.

Posted by: auntymarianne | Mar 27, 2006 2:26:41 PM

I stand with Bush on this, and not with Krugman. America is a nation of immigrants, the small effects Krugman talks about are static effects. Like trade, immigration also has dynamic effects and they are much bigger. America is a more dynamic economy thanks to immigrants and those benefits can be used to pay of the losers, just like with trade. Those protesters in Los Angeles want to pursue the American Dream. Let them.

Posted by: ivan | Mar 27, 2006 3:40:15 PM

I own a truck repair shop outside of Los Angeles. I am at a huge disadvantage because I do not hire illegal aliens (putting aside the moral/legal argument against hiring illegal aliens at below minimum wage and benefit requirements- I also do quite a bit of US Government work that require a higher level of scrutiny on my employees.) Since I do not break the law I am at a disadvantage to my competitors. Is this fair? No. Illegal immigration is loved by business.

Yes, the United States is a land of immigrants- legal immigrants. Their hard work and devotion to the country is the base of our culture.

Current illegal immigration is not a net benefit. The low-cost lettuce and strawberries are more than offset by welfare, Medicare and such (remember, despite European horror at our high rate of citizens with no medical insurance no one goes without treatment.) The illegals take far more than they produce and are literally destroying my state.

Setup a guest worker program (not an hidden-amnesty program as Bush is pushing) that allows legal temporary work, employee based medical coverage and tax withholding to pay for the welfare benefits that are paid out. This will also allow for decent treatment of the guest workers rather than the slave conditions many toil under today. In fact, make years of participation in such a program be credited towards getting a green card.

Posted by: Greg | Mar 27, 2006 5:13:16 PM

See also Brad Delong who for once does not agree with Krugman. The question is who do you focus on? Krugman focuses on the American natives (who many?) who can lose from low_skilled immigration. But America is a rich country that has to potential to compensate the losers. Those immigrants from poor countries for which the benefits are huge are the real victims when Paul Krugman gets his way. But those people stay poor because poor countries can't compensate them. I' really at a loss why Krugman does not defend those people. It's anti-foreign bias, Bryan Caplan would say, and that's really bad for an economist.

Posted by: ivan | Mar 27, 2006 10:02:36 PM


Aunty Marianne, who's in favour of remittances, is a bureaucrat who works for an unelected supranational body, so her income (which, incidentally, comes from taxes forfeited from those whose incomes do stand to be redistributed by mass immigration) is in no immediate danger of redistribution.

Income remittances are a racket estimated by the International Organisation for Migration to have been worth $100 billion in 2003. They are big business.

How many British taxpayers know that the budget of the Department for International Development is three times that of the Foreign Office? Or that it supports a website called 'Send Money Home', designed to help migrants in the UK remit monies back to their countris of origin? Monies which might otherwise have been earned by British people?

It's a bit ironic to see Ivan repeat tropes (I'm surprised he didn't include 'immigrants do the jobs Americans won't do') and praise protestors in Los Angeles who want to live the American dream, as the pictures I have seen of the demonstrations in Chicago and Santa Rosa, Ca., showed protestors draped in Mexican flags.

It is always the low skilled who are harmed the most by mass immigration; the people who don't read the Wall Street Journal, which has called for a constitutional amendment saying 'there shal be open borders'.

But they don't count much in the great scheme of things - not when there's money to be sent home.

The economics of immigration are a simple matter of supply and demand. In 2003, Borjas published 'The Labour Demand Is Downward Sloping', which showed that a 10% increase in the labour pool reduced native wages by 3-4%.

And Ivan might also perhaps focus his energy on considering why the migrants' countries of origin aren't able to compensate them. It might perhaps have something to do with them being badly run dumps.

Posted by: Martin | Mar 28, 2006 12:59:03 AM


It's great if someone sends 1 GBP to say India.

The Indians will then have to buy something in the GBP economy, thus increasing wealth.

Posted by: Rob Read | Mar 28, 2006 6:08:06 PM




Posted by: Martin | Mar 29, 2006 7:10:13 AM