What’s Holding Back Immigration Reform?

May 23rd, 2014 at 1:18 pm

I participated in a National Journal forum on immigration reform yesterday, led by the great Steve Clemons.

Given the discussion, I’d guess that anyone who didn’t know the issue and happened to stumble into the event would be vigorously scratching their head to figure out why comprehensive reform wasn’t the law of the land.  R’s & D’s alike sung the praises of the policy; economists and policy analysts from both sides of the aisle, including yours truly, emphasized the policy rationales and cited supportive research (and we did not apply thumb to scale to do so; the majority of economic research is, in fact, positive re the impact of immigrant flows—this CBO report is a typical take on the issue).

Even Mark Krikorian, the only overtly critical voice on the panel, counted himself among the 70% who support reform, though he doesn’t endorse the Senate’s approach.

And yet…nothing.  Well, not nothing—as noted, the Senate passed a comprehensive reform bill, one about which I’ve written favorably.  But again, especially given the wide support by elites, the fact that Gov. Romney got merely 27% percent of the Latino vote, and the favorable polling even among Republicans, one might well expect that reform would by now be upon the land.

Perhaps the question of “why not” isn’t very complicated.  Though Republican leadership favors a bill, minority caucuses can easily and with impunity block legislation these days.  There are always members opposing changes of this magnitude and the gridlock here may simply be a function of the unique inability of leadership to hold or discipline their caucus.

But I was struck by something else from the panel: the absence of any voices in this debate of those who at least perceive themselves to compete with immigrants in the labor market.

The economic literature generally shows that most native-born workers do not compete with immigrants: they are complements, not substitutes to immigrant labor.  The groups most likely to compete with new immigrants, especially those from our south, are older immigrants and the dwindling share of native-born high-school dropouts.  And the policy solution to help them is not to block immigrant flows but to provide them with the skills to become complements–to escape substitutability.

But to hear some on the panel talk, it was as if the US labor market is suffering from large and persistent labor shortages, even–especially, according to one speaker–in the low-wage sector!  If you listen between the lines, the view expressed here is implicitly, though very clearly: “people, if we don’t increase immigrant flows, we’re going to see wage pressures!”

Again, let me be very clear: I support comprehensive reform and not just because I think ours should be a welcoming country but also for sound economic reasons, not least of which is the negative impact on growth of our decelerated labor force growth.

But we do not face anything like a labor shortage in the near term, and there’s absolutely no question that the US job market has been extremely slack since the onset of the great recession seven years ago!  The unemployment rate, which is itself biased down due to discouraged exits from the labor force, has been above the full employment jobless rate every quarter since 2008Q1, by as much as five percentage points in late 2009 (that’s 7 million fewer people than should be at work) to about one point now (about 2 million).

In fact, one of the highly laudable aspects of the Senate bill is the new “W-visa” program for low-skilled guest workers, which embodies the recognition of the impact of immigrant flows on labor supply.  These visas are initially capped at 20,000 but they go up over time.  The act creates an oversight function–the Immigration and Labor Market Research Bureau—whose job is to adjust the caps in local labor markets based on worker shortages and surpluses.  (Yes, this implies control of our borders.)

It’s easy to criticize elites as being out of touch but I was struck by the assumption that if only everyone just understood the CBO report and the rest of the policy literature, comprehensive reform would be the law of the land.  Of course, most people’s views on issues like this—and everything else—are formed by their personal experience.  And from what I’ve heard over the years, there are a lot of people who believe immigrant competition has hurt them and there are no wage regressions that will change their mind.

Perhaps if advocates carried a bit more of those voices in our heads, we’d be able to understand at least one dimension of what’s holding back reform.  That realization won’t get it over the goal line either, of course, but it might help us connect some critical missing dots, especially the ones that point toward the importance of much tighter labor markets as a big lever in immigration politics.

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13 comments in reply to "What’s Holding Back Immigration Reform?"

  1. Some guy says:

    I appreciate you addressing critiques of importing more labor. I still think most elites are out of touch with economic realities and how it is in the trenches of the labor market. Things are pretty bad across all levels of skills and education.

    Employers are going to cry ‘skills/talent shortage’ until the cows come home, because they want cheaper labor. The current labor mismatch is largely die to employers putting up unreasonably high barriers to hiring (purple squirrel job descriptions and dysfunctional HR practices, etc), no enployer training , and lowball wage offers.

    What I wish for is the administration and/or other branches of government would taking the side of the workers in this country for once. Just accepting this skills shortage myth and acceding to their demands is ridiculous.

    How about this proposition, at least– if capital is allowed to flow freely (often Un/undertaxed) outside the country and labor is allowed to flow in, how about letting American labor flow to other countries?? I’m skilled and educated and would kill to be able to work in Europe, but don’t have the funds and lawyers to go through the ridiculous process of getting my own EU work permit.

    So, at the low skill level, open the floodgates less than half wide as everyone is saying and speed up those overtime reforms, and add in a few more worker protections (enforce anti union crap companies get away with)

    At the high skilled level, sign us a up for a program that makes it easier for 300,000 -500,000 highly skilled Americans to work in the EU, and I’ll vote for that person who does that.

    Middle skill/middle class jobs., those are dead, so any help there would be nice. How about some infrastructure spending?? (Havent the banks gotten enough free cash?-drop it on the public sector for a change.


    • Fred Donaldson says:


    • Nathan J. Kerr says:

      Totally agree. Do liberal economist not read fellow moderate to liberal economists books such as ‘The Second Machine Age’ to realize that importing even more workers will keep America from ever realizing NAIRU (full employment) which is the only thing that forces wages to rise? Is this not the premise of the book written by Mr. Baker and Mr. Bernstein themselves?

      Why in the world when jobs are being automated and the shortage is real that we would import more workers (illegally and legally) to further saturate a saturated market? In addition, new studies from Rand and the like are showing that we are graduating more STEM graduates than we employ while still allowing H1B visas to go pretty much unchecked.

  2. Richard A. says:

    US STEM workers compete directly with imported foreign STEM workers. Maybe we should warn US students not to major in the STEM fields. During the 70-71 recession when Nixon was President, the MSM went berserk with stories about widespread unemployment among engineers and scientists and implying that too many have been trained in these fields. The household survey (which is where we get our monthly unemployment statistics) gives the unemployment rate by specific occupation going back to 1963. It turns out that engineers have suffered record unemployment rates during the recession under Obama, almost twice as high as under Nixon.

    • Fred Donaldson says:

      But the corporations feed us the lie that the opposite is true. Shame on them!

  3. Dave says:

    I agree with Richard. The major problem here is STEM and the complete disregard for the needs of the nation and for workers. There’s a new movement forming in congress that has recognized that high-tech companies are abusing their power to drive down wages. It is probably difficult for many in congress to comprehend how the relatively high wages in STEM are not enough to encourage more Americans to go into these fields, but this is a real problem.

    STEM is hard! As an engineer, I can tell you the wage stagnation makes other fields more interesting. And the fact is that this is not a real market — high-tech CEOs undercut and undermine the market forces by bringing in guest workers.

    Real immigration is good, but guest workers in general are bad for everyone except the companies that exploit them.

  4. Smith says:

    New and Improved comment, less strident, with 33% less characters, some points open to debate…

    “The economic literature generally shows that most native-born workers do not compete with immigrants: they are complements, not substitutes to immigrant labor.”
    Ironically the paper linked to refers repeatedly to Borjas who generally offers different conclusions on the impact of immigrant labor (finding significant results). The point is the economic literature, woefully inadequate as it is, offers no general agreement. The two most cited authorities, Card and Borjas (who wrote the book on Labor Economics) disagree.

    “The groups most likely to compete with new immigrants, especially those from our south, are older immigrants and the dwindling share of native-born high-school dropouts.”
    The high school dropout rate is 7%. Even though dropouts also drop out of the labor force more frequently, we’re still left with at least 5 million plus who are paid the least and thus most sensitive to wage pressure, their wages have dropped and unemployment rates are the highest of any group. This should be a major concern. In a similar vein, previous immigrants may be a group who can least afford wage pressure.

    Regarding the paper cited
    In the conclusion it says:
    “All in all, one finding seems robust: once imperfect substitutability between natives and immigrants is allowed for, over the period 1990-2006 immigration to the U.S. had at most a modest negative long-run effect on the real wages of the least educated natives. This effect is between −3.1% and − 0.1% depending on the chosen nesting structure, with the result closest to zero coming from the nesting structure preferred by the data.”

    What does imperfect substitutability mean?.

    The caveat and essential qualification is that native and immigrant labor can’t be substituted. They do admit some degree of substitution, hence the term imperfect substitution. How do they judge substitutability? They look at wages. The intuition is if Bob makes $10/hr and Tom makes $25/hr, Bob can’t do Tom’s job. One can then look at the number of workers and wage trends in Bob and Tom’s groups to make estimates of partial substitution. But in a pinch (a recession or tight labor market) Bob may get Tom’s job for less but fortunately Tom and the like (if he still has a job) don’t get a pay cut. Which brings us to the next problem. What is the end effect they seek to measure? The effect on wages. Why doesn’t this work? Downward nominal wage rigidities.

    I favor immigration of free labor, not indentured servants. The so called reform bill is anything but. Scrap it. While it is laudable to end the threat of wholesale deportation that keep millions underpaid thus lowering everyone’s wage, the labor rights of immigrants, present and future, documented and undocumented, low and high skills, are not protected in the proposed bill. The only way to fairly implement immigrant reform is to admit there are no labor shortage anywhere, and thus end the sham of employee sponsorship that leaves immigrant labor less than free. At that point powerful business interests sensing they can’t exploit labor to the same degree might support measures to promote a robust economy instead.

    Note: The separate levels of unemployment that trigger a halt to planned increases in labor inflows for both high and low skills are above current levels. A major innovation of the bill is to dramatically increase high skills employer sponsored immigration which should lower wages just by shear numbers even before consideration of zero bargaining ability.

  5. Robert Buttons says:

    Immigration reform is impossible because the executive plan is just not trustworthy enough to carry out any compromise that comes from congress.

  6. wendy beck says:

    I appreciate this nuanced discussion on immigration, labor and education. Rarely in the MSM do I hear any robust discussion and here in San Francisco, it is almost impossible to have a real debate.

    I am no economist, but my take on why we haven’t reached a point at which we might have some legislation is very cynical. I think both parties would rather have this as fodder for yet another presidential election. (if some other issue doesn’t rear its head and take the lead).

  7. jeff says:

    Much immigrant labor now isn’t low wage but rather H1-B. c My first point – Define “immigration reform”. It means different things to different people.

    The basic view among elites is that Americans are either to dumb or too lazy. You know it to be a common view. So no wonder there isn’t a connection.

    This immigration debate is exactly the same in every country whether rich or poor and has similar dynamics.

    You can go to an extremely poor country and find businesses importing people from rural areas because city dwellers are ‘lazy’.

  8. jeff says:

    One additional note:

    I work in a 100% Mexican neighborhood and the word on the street is things are better in Mexico.

  9. jerseycityjoan says:

    There’s plenty of good reasons not to support the immigration bills that have come out over the past year or so.

    Two of them are right on the first page of the CBO Report: [(1)] “Ascertaining the effects of immigration policies on the economy and the federal budget is complicated and highly uncertain, even in the short run, and that task is even more difficult for longer periods; [(2)] “for that reason, this report addresses the next 20 years but does not attempt to look over a longer horizon.”

    If the CBO has little confidence in its own work here, why should I have more?

    And by limiting the time period to 20 years, we see a surge of additional contributions to Social Security and Medicare from the young and middle aged. We see nothing of the benefits paid to the elderly that will come after 20 years and will of course be far higher than the contributions of the legalized workers and their employers.

    As for “Rethinking the Effect of Immigration on Wages” — How can American workers rely on a study that relies on pre-Great Recession data? Everything’s 2006 or before in this study. The “Rethink” requires a new Rethink. What would a study say that look at the job losses since 2007 and projected additional job losses due to technology; looked at the poor quality of the majority of jobs created; look at the monthly Bureau of Labor statistics that have so often showed that immigrants have done better than native born Americans in our job market? Surely a new Rethink would greatly differ from the one from 2010.

    And yet so many people in business and government want more and more and more immigrants, even though as you point out, we have no overall need for additional workers.

    Americans out here are looking at their shrinking part of the American pie and wondering how they are going to survive, as prices keep rising. The continued pumped-up growth from adding more than 10 million new people to our country every decade — most of whom are average or below average wage earners who on the whole will cost us far more in benefits for them and their descendants than they will ever pay in — does not benefit us. It hurts us.

    We will be inundated with new immigrants after legalization of today’s current illegal immigrants: I am figuring we see 30-40 million of their new family members here by 2030 if not before..

    We have to cut back on future legal immigration. We just have to. We need so-called Immigration Reform bills that reflect reality and put the needs of American citizens before the desires of political parties, businesses and the immigrants themselves and their lobby groups.