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rlp
But commentators on both sides seem to miss the point
WHAT effect do immigrants have on native wages? It s perhaps one of the most
important questions of labour economics. It's also one that is largely
unanswerable. The problem is that it's almost impossible to separate cause and
effect. If a country with high rates of immigration also sees strong wage
growth, we can t assume that immigrants are boosting wages it may well be the
case that the migrants are choosing to move to places with stronger economies.
One approach to getting around this problem is to find a natural experiment in
which either the supply of or demand for labour changes exogenously. Perhaps
the most famous example of such an event in labour economics is the Mariel
Boatlift. In 1980, Fidel Castro, then president of Cuba, eased emmigration
restrictions. Some 125,000 Cubans moved to the United States that year. Almost
instantaneously, the labour supply of Miami increased by 55,000.
The Mariel migrants were overwhelmingly low-skilled workers less than half had
high-school degrees. In 1990, David Card, now an economist at the University of
California, Berkeley, wrote a highly regarded paper examining the effects of
the Mariel supply shock on American-born Miamian s wages, and found no evidence
of any adverse effect. The debate surrounding Mariel seemed largely settled
until last year, when George Borjas of Harvard published his own study on the
topic (a working version of which was circulated in 2015). As we noted last
May, Mr Borjas study found that wages for low-skilled, native-born Miamians
fell noticeably following the Mariel boatlift.
Mr Borjas work has sparked plenty of controversy his blog notes at least three
challenges to his work, see here, here and here. After a few months of relative
tranquility, Mariel has once again come into the limelight thanks to a new
paper by Michael Clemens of the Centre for Global Development, a think-tank,
and Jennifer Hunt of Rutgers University. Mr Borjas has since responded to this
critique; their correspondence appears to have proceeded ad infinitum. (A
working-paper response to Mr Clemens and Ms Hunts' critique can be found here.)
While the Mariel studies are of great political interest, the fact that they ve
shown such different results have come down to fairly boring technical
decisions by the papers respective authors. Mr Borjas results differed from
Mr Card s in part because he chose a different definition of low-skilled
worker, and in part because he chose a different set of cities to compare Miami
with. Mr Clemens and Ms Hunt argue that much of the statistical power behind Mr
Borjas findings is an accident of a methodological change in the survey behind
the Mariel studies. In some years, Mr Borjas paper feature sample sizes as
small as around 20 people.
By economics 101 reasoning, the short-run, partial-equilibrium effects of a
large influx of migrants are clear. Given a downward-sloping labour demand
curve, a sudden increase in supply should be expected to lead to lower wages.
It shouldn't be surprising or indeed controversial, that a study like Mr
Borjas' should find that evidence of a wage decrease. But even if large-scale
migration hurts native workers in the short run, it should have little bearing
on public policy.
Far more relevant to lawmakers are the long-run effects of immigration on
wages. In theory these depend on how immigrants change the skill composition of
the workforce. If lots of unskilled workers arrive in a country, unskilled
workers' wages should fall relative to everyone else's. But economists usually
have to squint hard to find a negative effect of immigration on wages for any
native workers. In the long-run, immigrants tend to reduce the wages only of
past generations of immigrants (whose skills presumably overlap strongly with
those of the newcomers). One study found that while immigration between 1990
and 2006 had little effect on wages of native-born Americans, it lowered the
wages of previous immigrants by 6.7%. American-born workers, perhaps because of
their language skills, were better prepared to move on to different jobs.
I suspect that few who have participated in the Mariel debate actually care
about the true short-run wage effects were it instead serves as a proxy war for
the broader immigration debate. It seems that proponents of immigration feel
compelled to respond to Mr Borjas not because they believe Mariel boatlift was
important, but because they are afraid of ceding any ground to immigration
hawks. The problem is that Mariel isn't nearly meaningful enough to warrant
such attention. Suppose Mr Borjas' findings are entirely correct. Then what?