I hope some enterprising Ph.D. candidate takes advantage of what sounds like an opportunity to study the economic impact on jobs, wages, and prices as a natural experiment on the Arizona border. According to the NYT:
Officers who guard the line say the [AZ] border is more secure in most places than they have ever known it. They say they are in a strong position to hold off an illegal surge, and to show why they point to Arizona, once the busiest and most contentious border battlefront. To the east, in Texas, agents are still struggling to stop persistent migrants in hundreds of miles of varying and penetrable terrain. But in Arizona, every available measure shows steep declines in the number of people making it across, figures that border agents say demonstrate what they can accomplish.
Economist David Card has long studied immigration impact using this kind of geographical variation, and his work finds much smaller impacts on domestic workers from immigrant competition than many would expect (economist George Borjas finds larger effects; Heidi Shierholz provides a useful review and somewhat of a reconciliation here).
I don’t mean to ignore the harsh and even fatal aspects of what’s going on in this part of the country. This is not the face of functional immigration reform. But under the very broad and far-fetched assumption that facts matter, it could help inform us of some important things we need to know.
One of the arguments by the folks who want to keep wages low is that the minimum wage is designed for high school students. Other countries recognize the difference between breadwinners and Ipod buyers, and have minimums tiered to age, etc. Australia’s Fair Wage is an example and could easily be adopted here and end the insincere complaint about students’ wages:
http://www.fairwork.gov.au/pay/national-minimum-wage/pages/default.aspx
Jared,
The natural experiment is that Texas has a much lower unemployment rate than Arizona (6.2 vs 7.9) and is know to have a less welcoming attitude towards illegal immigrants. In other words — illegals avoid bad economies and good enforcement. But if they have to choose — everyone is leaving California which has a welcoming attitude and sky-high unemployment.
Illegals suppress wages increases by choosing to go where wages might otherwise rise and they avoid areas where they otherwise would be falling. Because Card can’t account for interregional labor flows (including the destination choices of new immigrants) — his model fails (notice my restrained choices of words?).
Because of labor market arbitrage, the results of these “natural experiments” are at best, estimates of the LOWER bounds of the labor market impact. In other words, if Card says the impact is a 3% reduction of wages, it is no less than 3% and probably substantially more.
Card’s “natural experiment” is like testing Archimedes principle by dropping a brick in one end of the bathtub and deciding if the water is no higher on that side of the tub then Archimedes was wrong.
The jaws of the snake opened (wages and productivity decoupled) when the current wage of immigration began around 1970. That is the great natural experiment: Supply and demand work, Card’s methods don’t.
If you want to play with Cards, discard the joker before you deal.
Oh, snap!! Many good points here though Card claims to deal with the regional flow issues–I’ll write something on this soon as to how he does it and what he finds…it’s worth discussing.
Are you going to keep trying until you find a plausible hypothetical and then try to pass it off as a “fact?”
As Jan Kmenta said about natural experiments, “If we torture Nature long enough — she will confess to anything.”
In 1924, just after my dad washed ashore with the wretched refuse, the first real immigration restrictions went into place. For 40 years, each decennial census from 1940 until 1970 showed the immigrant population declining both in absolute numbers and as a proportion of the population. That explains the post-WWII prosperity.
That suddenly reverse in 1970 and the jobs of the snake open up. Wages for those workers competing against immigrants declined. That is a better and simpler natural experiment.
But the illegals choosing to go to Texas isn’t a bad second and leads to the same conclusion.
As Occam said: “Entia non sunt multiplicanda praeter necessitatem.” In English that means: “Don’t keep dreaming up hypotheticals until you get the answer you want.”
Jared, Time to stop being a progressive and become a New Dealer again!
You need to be careful not to attribute everything bad that’s happen to wage, job, and income trends to supply impacts of immigration. Way too reductionist. The inequality literature, which is pretty vast by now, assign a far smaller role than your comments suggest. Not zero, but it ranks quite low.
Whenever I hear the term “reductionist” — I know that I am about to hear an end run around Occam.
I don’t care about the literature unless the argument makes sense on its own merits.
In fact, I know lots of economists are too intimidated to speak up. Most good economists refuse to discuss immigration when inequality comes up. They know immigration is a major contributing cause. They have too much residual integrity to deny it, but not enough guts to speak truth to power.
I’ve never really heard a good alternative explanation about why so many good blue-collar, middle class jobs have disappeared since 1970.
Good alternative explanation about why so many good blue-collar, middle class jobs have disappeared since 1970:
http://www.nytimes.com/2012/06/05/opinion/nocera-turning-our-backs-on-unions.html
http://www.nytimes.com/1991/08/11/books/a-union-man-from-harvard.html?pagewanted=all&src=pm
http://www.nytimes.com/2012/05/27/books/review/the-great-divergence-by-timothy-noah.html?pagewanted=all
http://en.wikipedia.org/wiki/NAFTA%27s_effect_on_United_States_employment
Additionally, technology means there are less coal miners and longshoremen and more office workers and fast food cashiers. Business labels office workers “exempt” so labor laws don’t apply to them. There’s also a special provision to “exempt” computer programmers, since they’re otherwise so obviously the modern day factory worker.
http://www.nytimes.com/2012/12/05/business/unionizing-at-the-low-end-of-the-pay-scale.html?pagewanted=all
http://www.nytimes.com/2013/02/01/business/labor-union-agrees-to-stop-picketing-walmart.html
It’s location, location, and location.
http://www.bloomberg.com/news/2012-11-14/automakers-boost-investing-on-vehicle-factories-in-mexico.html
http://autos.yahoo.com/blogs/motoramic/u-losing-streak-against-mexico-auto-factories-motoramic-140254754.html
I agree with commenter, Card flawed, noted flawed methodology Feb 16th* Studies and equations on wage effect of immigration are based on wage differentials. Sticky wages http://krugman.blogs.nytimes.com/2013/03/05/why-dont-we-have-deflation render the studies meaningless. Slow internal devaluation even under extreme conditions is killing Europe, 4 1/2 years from start of crisis, still not there http://krugman.blogs.nytimes.com/2012/09/26/euro-update-the-perils-of-pointless-pain/ Card doesn’t capture unobservable forgone wage increases. Moreover, sticky wages demolish the interpretation of observed wages. Even Borjas with larger effects on “Labor Economics” (he wrote the book) underestimates.
Regarding Shierholz, everything is based on not seeing wages fall, and she doesn’t even study employment.
http://www.epi.org/publication/bp255/
“this analysis looks at the effect of immigration on wages, not on employment.”
“…since it takes time for capital to adjust to increases in the labor force, a large unexpected increase in the labor force will likely depress wages temporarily, something not accounted for here.”
“time” is undefined, and “temporarily” depressed wages are “something not accounted for”
* http://jaredbernsteinblog.com/raising-the-minimum-wage-the-debate-begins-again/#comment-522877
‘Imperfect substitution within skills ridiculously based on wages. Hire
A, 3/4 wage of B, not substitute if wage is ¾. But difference result
of stickiness! B doesn’t get ¼ pay cut!’