Immigration Policy: The Deal We Need

By Alfredo R. M. Rosete

The immigration debate in the United States has gotten stuck on the issue of more or less law enforcement. The immigrant-welcoming side calls for an end to family separation, a path to citizenship, and, sometimes, the abolition of Immigration and Customs Enforcement (ICE). The immigrant-fearing side accepts family separation as a deterrent, calls for a border wall, and for the mass deportation of undocumented immigrants. The wall-building, immigrant-deterring rhetoric is a far cry from the founders who counted, among their many grievances against the British crown that “He has endeavoured to prevent the population of these states; for that purpose obstructing the laws for naturalization of foreigners” (from the Declaration of Independence).

The founders have a point, and the economics of immigration is largely on their side. Economists who study immigration have reached an unusual degree of consensus, and their findings explain why policies that espouse enforcement and exclusion can end up hurting immigrants and citizens alike rather than helping either group. Instead of exclusionary policies, progressive social policies can help in generating win-win solutions for both immigrants and citizens.

Current Economic Research

It is no secret that mainstream economics is not always friendly to progressive policies. However, there is considerable synergy between progressive politics and the mainstream economics of immigration. The idea is that immigrants do not simply take a share of a pie that has a fixed size. By locating in the US, they innovate, work, and consume, making the pie larger for everyone. In other words, our country is not “full,” as Trump has quipped, since immigration can help our country grow.

The first avenue through which immigrants make the pie larger is through the skills they bring. Current economic research is often preoccupied by the “skill-mix” of immigrant populations-the proportion of immigrants who are “skilled” and “unskilled”. Skilled immigrants have an education that enables them to produce marketable and lucrative goods or services. These include software engineering, healthcare, or financial services. Unskilled immigrants are those who do not have this type of education and are therefore relegated to lower paying occupations such as farming, construction, and janitorial services. (Note that while the term “unskilled” sounds rather derogatory, it does not mean that construction, farming, and janitorial services are occupations without skill. Instead, it has more to do with whether the skills were learned in formal schooling or on the job. Unfortunately, this term is sticky.)

Early in the Trump administration, there was a proposal to create a point system that accounts for various educational and professional accomplishments of a visa applicant. This is essentially an effort to ensure that immigrant populations have a skill-mix favoring those in the skilled category. This is appealing for three reasons. First, if they qualify for high paying jobs, then, they are less likely to need welfare payments or social assistance. Secondly, adding more qualified people to the population means that there is a greater chance that they will be more creative, innovative, and entrepreneurial. That is, they not only qualify for existing jobs but can also create new jobs. Finally, qualifying for high paying jobs also means that they would have money to spend, generating opportunities for economic growth. However, such a policy would miss the potential gains from admitting even unskilled immigrants.

There is evidence that even if the skill-mix in the immigrant population skews toward the “unskilled”, there are still gains in admitting them. A 2012 study by UC Davis Economist Giovanni Peri, for example, shows that the arrival of unskilled immigrants allows firms to re-arrange production so that workers of different types can specialize in a number of tasks. This allows workers, native or immigrant, skilled or unskilled, to become more effective in their work. Moreover, numerous studies by economists and sociologists also suggest that even unskilled immigrants contribute to economic growth and economic activity through entrepreneurship.

There is also evidence which suggests that the sheer growth of a population due to immigration can also raise economic growth. One of the most popular studies on immigration is the Mariel Boat lift. This is when an influx of Cuban refugees arrived in Miami in 1980. MIT economist David Card (1990) found that despite the large influx of “unskilled” labor in Miami, the wage effects were almost negligible. Following Card’s study, a 2008 paper found evidence that wages did not fall after the Mariel boat-lift because immigrants create an aggregate demand effect. That is, immigrants eat, buy housing,and need clothes. Thus, producers who have to meet this demand must also hire labor. This raises the demand for labor which can offset the possible fall in wages due to an increase of the labor force. A 2013 study also finds that rural counties in the United States that absorbed more Hispanic immigrants grew faster than those counties that did not. Though the authors did not specify the cause behind this correlation, it is quite unlikely that a large influx of “skilled” Hispanic labor is responsible for growth in rural counties since “skilled” labor more often locates in cities What is more intuitive is that with a rise in the Hispanic population comes a rise in entrepreneurship, demand for housing, and consumer goods.

The lesson here is that the common inclination to attract the best and the brightest does not necessarily preclude also taking in the tired, the poor, the huddled masses yearning to be free. While it is intuitive to suggest that a receiving country like the US should select the best and brightest immigrants, the evidence points out that there are gains from immigration that are not attributable to skill alone. The first is that the immigrants add to the pool of consumers that in turn, spur the growth of businesses. Secondly, immigrants do not just add to the pool of possible workers. They also add to the pool of possible entrepreneurs that employ themselves and others.

Politics vs. Economics:

Given the economics of immigration, then, why is enforcement and exclusion such a politically powerful policy principle in the United States? The first is racism. It is no secret that, in the United States, pigmentation is often taken as an indicator of inability to adapt to Western culture and customs or to obtain financially lucrative skills. As there is no good justification for a belief that melanin causes ineptitude it would be unfortunate to set policy according to such poor reasoning.

A more rational reason is that businesses and innovations take off only after a period of time. Firms need to adjust management strategies so that they can take advantage of the changing skill mix in the labor pool. Immigrants who establish businesses will not immediately hire. Thus, voters who express anti-immigrant sentiment may be worried about the scarcity they will face today and not the possible abundance of the future. They may not be willing to wait for gains from immigrants’ consumption, talent, and entrepreneurship. The resistance to immigration can be especially fierce for citizens who are currently in states or counties which have suffered from factory closures and de-populated towns. A fresh episode of layoffs and abandoned houses can cause fears that opportunities and communities are shrinking. The prospect of having more people seeking jobs when you or someone you know has just been laid off can heighten the fear of scarcity and instability.

However, if this fear is used to inform policy, then results may actually prevent the realization of gains from immigration. These policies include measures that surveil the immigrant population, making life in general more difficult.

One of the policies that certain US states and locales have adopted is allowing local law enforcement to act as immigration enforcers. This can create problems for members of racial and ethnic groups that law enforcement perceives as having a higher proportion of unauthorized immigrants. That is, if I am a programmer or small business entrepreneur of Hispanic descent and I live in a place where law enforcement can, de-facto, enforce immigration, there is a probability that I will get harassed. I will then prefer to locate in a place where the likelihood of harassment is minimal. The exclusionary policy, then, creates a deterrent for “high-skilled” immigrants. Further, this may also deter less skilled immigrants who could use their talents in rural areas but instead, crowd in urban centers. In short, policies that enable law enforcers to harass immigrants creates an unpleasant environment, preventing certain areas from benefiting from the growth potential immigrants could have brought.

Another possible consequence of making life difficult for immigrants is that the fear of harassment and deportation has adverse effects on immigrants’ ability to study or obtain social services for which they qualify. There is some evidence to suggest that the threat of their parents’ deportation contributes to lowering academic achievement for the children of immigrants. Further, even if their children are citizens, immigrant parents are hesitant to bring their children to public health centers for fear of harassment and deportation. All in all, these measures simply reproduce a vulnerable population who need to put time and energy into avoiding law enforcement and government agencies.

From the perspective of Labor, a perpetually vulnerable population of people is not good for working class Americans. Vulnerable populations do not have many alternatives and are less likely to create an uproar about wages or working conditions. This makes them cheaper and more compliant for capitalists. If so, then, they will always be used as a threat against workers who have the political power to bargain for better wages. To protect themselves against wage cuts, American workers would do better by ensuring that immigrants have legal rights.

Finally, the marginalization of immigrants can also cause what can be called their “enclave-ization”. That is, if immigrants are unable to transact with a majority of society out of fear, then, their economic and social activities may remain in their neighborhoods. This limits their opportunities, reinforcing the perception that immigrants are incapable of upward mobility and assimilation. In effect, measures that maintain the vulnerability of immigrants actually create the conditions for which they are perceived as ‘other’ and burdens-to-society.

Doing Immigration Better

The economics of immigration demonstrates that immigrants can actually spur economic growth through skill, entrepreneurship, and simply working. However, the policies that stem from racism, fear, and a pervasive idea of scarcity prevent them from maximizing their potential contributions to society. Even Bernie Sanders, a staunch progressive, says that we cannot have a policy of open borders since we cannot accommodate the potentially massive influx of the world’s poor. As the economics literature suggests, a reasonably sized influx can be a source of growth. To ensure this, progressive policies need to be put in place.

The first is to ensure that immigrants have legal rights as workers and as human beings living in the United States. They should be able to join unions, obtain driver’s licenses and should be protected from harassment by law enforcement. Such measures would alleviate some of the vulnerabilities that they face, enabling them to bargain on similar terms as citizen workers. Further, the addition of a non-vulnerable labor pool can add to the strength of labor movements, especially if immigrants come from diverse experiences of labor action and resistance. While there are moral and political reasons to support the legal rights of immigrants, not doing so weakens labor’s bargaining position against capital, enabling capitalists to pay lower wages.

Ensuring immigrants’ legal rights also eases the process of acquiring new skills since they will be less afraid of applying to schools for fear that their status might be discovered. There is evidence to suggest that skill, training, and education uptake by immigrants rises at a higher rate than US citizens after legalization. While this can enhance the workforce through skill acquisition, it can also raise the demand for education, generating employment for teachers.

Second, instead of hiring more immigration enforcers, the government can invest in its infrastructure development and rehabilitation. It is no secret that the United States’ roads and bridges can use some repair. An infrastructure program can spur economic growth through government and private investment. Further, it can generate employment for citizens, alleviating some of the job competition from immigrant populations.

These policy measures do not entail any redistribution of resources from citizens to immigrants. All that is needed is an improvement in the legal rights of immigrants. Any resources that are reallocated away from enforcement would benefit all inhabitants of the United States regardless of their origin. If all that is needed to unleash the growth potential of immigrants is ensuring that they are not harassed or threatened, then, doesn’t this sound like a great deal?

Alfredo R. M. Rosete is a professor of economics at Warren Wilson College.

Sources: Peri, G. (2012). The effect of immigration on productivity: Evidence from US states. Review of Economics and Statistics, 94(1), 348-358; Bodvarsson, Orn, Joshua Lewer, and Hendrik Van den Berg (2008), “Measuring Immigration’s Effects on Labor Demand: A Reexamination of the Mariel Boatlift,” Labour Economics 15(4):560-574; Coates, D., & Gindling, T. H. (2013). Is Hispanic population dispersion into rural counties contributing to local economic growth?. Contemporary Economic Policy, 31(4), 649-668; Chaudry, A., Capps, R., Pedroza, J. M., Castaneda, R. M., Santos, R., & Scott, M. M. (2010). Facing Our Future: Children in the Aftermath of Immigration Enforcement. Urban Institute (NJ1); Watson, T. (2014). Inside the refrigerator: immigration enforcement and chilling effects in Medicaid participation. American Economic Journal: Economic Policy, 6(3), 313-38; Méndez, F., Sepúlveda, F., & Valdés, N. (2016). Legalization and human capital accumulation. Journal of Population Economics, 29(3), 721-756.




About the Big Win for Stop & Shop Workers

By Amanda Page-Hoongrajok

On April 11th, 2019, 31,000 workers at Stop & Shop, a regional grocery store chain with more than 240 locations spread across Connecticut, Massachusetts, and Rhode Island, went on strike. The striking workers were protesting Stop & Shop’s relentless attempts to cut their retirement benefits, increase the cost of healthcare, and decrease overtime pay. Store closings and community support for the workers pressured Stop & Shop to establish a tentative agreement with the union representing the workers, United Food and Commercial Workers (UFCW), which ended the strike on Sunday, April 21st.

The main areas of dispute that triggered the strike were cuts to overtime pay and healthcare costs. During contract negotiations, Stop & Shop wanted to increase employee-paid healthcare premiums, reduce retirement benefits for part-time and newly hired workers, and eliminate overtime pay on Sundays and holidays for new part-time workers (Johnston, 2019b). According to the New York Times, the increase in healthcare costs alone would set full-time workers back $300 a year and part-time workers $200 a year. Lisa Juliano, a striking worker that was interviewed by the Times said, “The extra Sunday pay makes up what I live on day to day. If not for the extra I get on Sundays, I wouldn’t have gas to come to work for the rest of the week.”

Stop & Shop sought these cuts despite healthy levels of revenue and profit. According to a petition sponsored by Jobs with Justice, Stop & Shop hauled in $1.45 billion worth of revenue in the first three quarters of 2018. This represents a 19% increase in revenue from the first three quarters of 2017. Jacobin further reported that Alhold Delhaize, the parent company of Stop & Shop, reported more than $2 billion in profit for 2018 and engaged in $880 million worth of stock buybacks, which effectively enrich the owners of the company’s stock.

Once the strike began, the effects were immediate. The Boston Globe reported that dozens of stores were closed due to the strike, and the stores that remained open experienced limited hours and service:

“The Stop & Shop on Newport Avenue in Quincy was eerily quiet Tuesday morning, the hum of refrigeration and chattering of product ads over the intercom among the only signs of life in the largely empty store. The deli and meat departments were dark, their counters mostly bare, and the produce display for bananas was barren.”

The Boston Globe further reported that within the first few days of the strike, visits to Stop & Shop declined by 75%. Stop & Shop competitors like Market Basket and Trader Joe’s, on the other hand, saw a spike in visits to their stores.

The clear costs of the strike prompted Stop & Shop to concede the majority of their desired cuts. The tentative agreement that was reached protects employee overtime pay and does not increase healthcare costs. According to a direct statement from the UFCW, “The agreement preserves health-care and retirement benefits, provides wage increases, and maintains time and a half pay on Sunday for current members.” The members will vote to accept or reject the new contract but have returned to work at stores.

In a time of historically low union membership, this strike contributes to the displays of worker power in recent years. In 2016, Verizon workers stepped out of their stores and onto the picket line to protest job security and flexibility. In 2018, public teachers across the U.S. protested poor working conditions and low pay. The Stop & Shop strike, which represents the largest private sector strike since Verizon, is just one more addition to this ongoing movement. This, once again, has proved, “the people, united, will never be defeated.”

Amanda Page-Hoongrajok is a graduate student in economics at the University of Massachusetts-Amherst.

Sources: Liza Featherstone, “Stop Shopping at Stop & Shop,” Jacobin; Sandra Garcia, “Stop & Shop Workers Are on Strike at Over 240 Stores in New England,” The New York Times; Jake Johnson, “‘When Workers Fight, Workers Win’: Union Declares Victory as Stop & Shop Strike Ends With Deal to Raise Wages,” Common Dreams; Katie Johnston, “Visits by loyal Stop & Shop customers decline 75 percent during strike,” The Boston Globe; Katie Johnston, “As strike goes on, effect on Stop & Shop is increasing.” The Boston Globe; Massachusetts Jobs with Justice, “We Stand with Stop & Shop Workers!,” The Action Network; United Food and Commercial Workers, “UFCW Announces Tentative Agreement for Stop & Shop Workers.”