DABE September Meeting Denver, CO September 21, 2016 Impact of Immigration: Disruptive or Helpful? Pia Orrenius, Ph.D. Federal Reserve Bank of Dallas Disclaimer: The views expressed herein are those of the presenter; they do not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System.
Recent trends Road map Steady economic growth, tightening labor markets, but slowing immigration Forces of international migration Push and pull factors Economic and fiscal effects of immigration Winners and losers Short run versus long run Implications for policy
Recent Trends ECONOMY S GROWING BUT IMMIGRATION IS SLOWING
Millions, SA 146 144 142 140 138 136 134 132 130 128 U.S. employment well past its pre-recession peak 138.4 144.6 126 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SOURCE: Bureau of Labor Statistics.
7 years into expansion, U.S. GDP Trillions 2015 Dollars, SAAR 19 plods along 18.4 18 17 16.5 16 15 14 13 2003 2004 2005 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SOURCE: Bureau of Economic Analysis.
Percent, SA 11 Hiring has accelerated; unemployment rate near NAIRU 10 10.0 9 8 7 6 5 4.9 4 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SOURCE: Bureau of Labor Statistics.
1 Despite steady growth, immigration Inflows as % of working-age population inflows are falling or flat 0.8 Apprehensions (Southwest border) 0.6 0.4 Temporary worker visas 0.2 0 Legal permanent residents (new arrivals) 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 NOTE: Working age population is 16 to 64. SOURCES: U.S. Department of State, Report of the Visa Office; U.S. Department of Homeland security, Yearbook of Immigration Statistics; U.S. Customs and Border Protection; U.S. Census Bureau.
Unauthorized immigrant population down from peak Millions 13 12 11 12.2 11.1 10 9 8 7 2000 2002 2004 2006 2008 2010 2012 2014 SOURCE: Pew Hispanic Center.
Millions Foreign-born population 42.4 million in 2014 45 40 35 Share of Population 30 25 20 Number 15 10 5 0 1850 1870 1890 1910 1930 1950 1970 '00 '10 '14 SOURCE: U.S. Census Bureau.
Millions 45 Foreign-born population share levels off after 2010 Percent 16 40 35 30 25 20 15 10 5 Number Share of of Population Population 14 12 10 8 6 4 2 0 1850 1870 1890 1910 1930 1950 1970 '00 '10 '14 SOURCE: U.S. Census Bureau. 0
Forces of Migration: Push Factors MIGRANTS GAIN THE MOST FROM MIGRATION
Global inequality at historic highs GDP per capita (1990 $) 35 30 25 20 U.S. UK Germany 15 10 5 0 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 China Mexico India Ghana Haiti SOURCE: The Maddison-Project, http://www.ggdc.net/maddison/maddison-project/home.htm, 2013 version.
Wage gains from migration to U.S. Mexico Ratio: 2 +$9,180 Haiti Ratio: 11 +$18,459 Nigeria Ratio: 12 +$18,068 Egypt Ratio: 9 +$19,788 India Ratio: 4 +$16,827 Source: Clemens, Montenegro and Pritchett (2008) The Place Premium: Wage Differences for Identical Workers across the US Border.
Other factors in world mobility Costs of moving at historic lows Transportation Information Government-imposed barriers are increasing
New sections of border fence Source: Wayne Cornelius (2009) Evaluating US Immigration Control Policy
Forces of Migration: Pull Factors MIGRANTS READILY FIND WORK
Immigrants in the U.S. labor market Immigrants are more likely than natives to move to where the jobs are Immigrants also Complement native workers at high, low ends of skill distribution Fill jobs natives shun Innovate/patent more than natives Start businesses at a higher rate
Foreign born population growth In US, immigrants go where the jobs are 0.4 0.3 0.2 0.1 0-0.1-0.2-0.3 AR NC GA TN KY SC NE DE AL IA MN WA INMS OK MO KS SD VAWY TX WIMD OR FL PA LA NM NJ WV AK ILMA NH CT MI OH HI CA MT NY VT RI ME UT CO ID AZ -0.4-0.15-0.1-0.05 0 0.05 0.1 0.15 0.2 State employment growth NOTE: Coordinates indicate deviation from median foreign born population growth (vertical axis) and from median state nonfarm payroll growth (horizontal axis) from 1990 to 2014. SOURCES: U.S. Census Bureau; 2014 American Community Survey; Bureau of Labor Statistics. ND NV
NOTE: Population change by Hispanic ethnicity from 2000 to 2010. SOURCE: U.S. Census Bureau, Census 2000, 2010 Sometimes they go to where others are leaving from
Immigrants add to high skill labor force, fill low-skill void Bachelor's Degree or Higher 5.0 14.9 Some College or Associate's degree 1.8 4.5 Foreign-born High School Graduate -4.6 2.9 Native-born Less than High School -3.5 2.1 NOTE: Change from 1996 to 2015. SOURCE: Bureau of Labor Statistics. -8-4 0 4 8 12 16 Millions
Percent 60 Immigrant workers overrepresented at extremes of the education distribution 50 40 30 20 Foreign born share of labor force 10 0 Less than high school graduate High school graduate, some college Bachelor's degree Master's degree Professional degree Doctoral degree NOTE: Percent of foreign workers age 25 and over in the U.S. labor force by education. SOURCE: 2014 American Community Survey
Foreign students drive the rise in PhDs awarded since 2000 Thousands of PhDs 60 50 Total 40 Citizen or perm resident 30 20 Temporary resident 10 0 1966 1972 1978 1984 1990 1996 2002 2008 2014 SOURCE: National Science Foundation.
STEM, health care occupations rely on high-skilled foreign workers Medical scientists Computer software developers Chemists Physicians Mathematicians Computer systems analysts and Chemical engineers Dentists High school and college instructors Mechanical engineers Pharmacists Registered nurses Biological technicians Biological scientists Architects Accountants and auditors Managers and administrators Financial managers Economists, market researchers, survey Sales Related Chief executives and public administrators Actors, directors, producers Veterinarians Lawyers/Judges Foreign-born as a percentage of college graduate labor force 16.7 0 10 20 30 40 50 NOTE: Percent of workers age 25 and over, with bachelor's degree or higher who are foreign born for selected occupations. SOURCE: 2014 American Community Survey.
Economic Impact of Immigration IMMIGRATION CREATES WINNERS AND LOSERS
Economic impact of immigration Labor force grows, GDP rises Immigrants account for nearly one-half labor force growth since 1996 Some of the GDP increase accrues to natives; the Immigration surplus But the immigration surplus is not shared equally Wages fall; Return to capital, land rises
Immigration s labor market impact in short run
Immigration s labor market impact in long run
Simulated wage impact of 1990-2010 immigrant influx on the preexisting workforce Percent supply shift Percent wage effects HS dropouts HS graduates Some college College graduates Postcollege All workers 25.9 8.4 6.1 10.9 15.0 10.6 Short run -6.2-2.7-2.3-3.2-4.1-3.2 Long run -3.1 0.4 0.9-0.1-0.9 0.0 SOURCE: Immigration Economics, George Borjas, table 5.2, page 114.
Simulated long-run wage impact of 1990-2010 immigrant influx, allowing for withingroup complementarities Percent wage effects HS dropouts HS graduates Some college College graduates Postcollege All workers Native-born -1.7 0.9 1.2 0.5-0.1 0.6 Foreign-born -5.3-3.4-2.7-4.9-5.3-4.4 All workers -3.1 0.4 0.9-0.1-0.9 0.0 SOURCE: Immigration Economics, George Borjas, table 5.4, page 120.
Two remaining questions How long is the long run? How long will it take capital to adjust? What about other costs of immigration? Fiscal impact: what you contribute in taxes minus what you consume in publicly provided goods and services Low-skilled immigrants have a negative fiscal impact Fiscal impact negative at state and local level, positive at federal level
Implications for Policy WHO SHOULD COME?
Summary & policy implications Net economic benefits to immigration So we should have immigration But immigration appears to be slowing Need better immigration policy Some natives lose from immigration in short run Get to the long run faster by speeding adjustment; making immigration predictable
Summary & policy implications -2- Migrants are the biggest winners Policy doesn t need to confer additional benefits Low-skilled immigration has negative fiscal impact Transfer funds from federal to state & local Admit more high-skilled immigrants Consider temporary worker program Bottom line Immigration is disruptive AND helpful
Low-skilled: H-2B visa applications Thousands 400 outstrip number available 350 300 Applications 250 200 150 Available visas 100 50 0 2000 2002 2004 2006 2008 2010 2012 2014 SOURCE: Office of Foreign Labor Certification, Annual Reports for various years.
Unauthorized population almost as large as permanent resident population Unauthorized immigrants Naturalized citizens Temporary legal residents Legal permanent residents SOURCE: Pew Research Center estimates for 2012 based on augmented American Community Survey data from IPUMS.
High-Skilled: Not enough temporary visas, H-1B cap reached before year-end since 2004 Number of days until cap reached 350 300 250 200 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SOURCE: U.S. Citizenship and Immigration Services.
In the U.S., green cards go to family, not work-based immigrants Refugees and asylees 14% Diversity 5% Others 2% Employment 14% Family 65% NOTE: Averages for years 2010-2014. SOURCE: U.S. Department of Homeland Security, Yearbook of Immigration Statistics.
In Canada, two-thirds of permanent immigrants are skill-based Refugees 9% Other 2% Family 26% Economic 63% SOURCE: Facts and Figures 2014 Immigration overview: Permanent residents, Canadian Department of Citizenship and Immigration.
U.S. an outlier in small share of permanent work-based immigration Percent 60 50 40 30 20 10 0 Switzer. Spain UK Italy Germany Australia France U.S. Korea NOTE: Half of free movements are estimated to be employment related for EU countries. Exceptions, where data are available, are Sweden (52%), Denmark (65%), Switzerland (66%) and Norway (66%). SOURCE: International Migration Outlook 2015, OECD.
Problems with current U.S. policy Priority is family, not work or skills No alternative for unauthorized immigration Work-based visa quotas insufficient, fixed; temporary inconsistent with permanent Skilled workers face long queues if want to stay permanently Country quotas penalize populous nations Visa allocation nonsensical: first come, first served or a lottery