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Of course, when it comes to the question of how best to help people in poorer countries, building up their domestic industries isn’t the only approach we might take. After all, when the reason these countries have such a hard time getting their domestic industries to flourish is because they don’t have the same kinds of institutions and educational resources and production infrastructure that the richer countries have (including strong financial and legal systems and so on), trying to build up all those institutions from scratch can be a massive challenge, to say the least – and certainly not one that can just be instantly accomplished overnight. In the meantime, then, one potential solution that’s much quicker and simpler than trying to bring high-quality economic conditions to people in foreign countries is to just bring the people to where high-quality economic conditions already exist – i.e. make it easier for them to come work in richer countries.

Indeed, as much as we’ve been stressing the benefits of allowing goods and services to flow freely across international borders, goods and services are only one part of the economy; another part that’s equally important is the labor market. And just as the market for goods and services works more efficiently when there are fewer restrictions on freedom of exchange, the same is true when it comes to labor mobility; the more freely workers can move around the economy to fill whichever jobs they’re best suited to, the more productive the economy as a whole will be – both at the domestic scale and at the global scale. As Caplan puts it:

[Having laid out] the economist’s case for trade, what’s the case for immigration? More of the same. Another name for immigration is trading labor. And as we’ve seen, trade is just a technology. If a company invented a self-driving lawnmower, Americans would rejoice. From the American point of view, the immigration of gardeners from, say, El Salvador, has exactly the same effect as the invention of a self-driving lawnmower. Our cost of living goes down. Our standard of living goes up. As a happy side effect, the Salvadorians get a huge raise – a raise that allows them to give their families a better life. This doesn’t mean that most economists want us to adopt free trade or free immigration overnight. The real world is full of complications. Nevertheless, almost all economists think that trade and immigration are greatly underrated. When you make a deal with another person, both of you are normally better off. When you hire another person, both of you are normally better off. Does it really matter if the other person comes from another country?

He continues:

The leading complaint is probably that mass immigration leads to poverty.  Virtually every economist who’s thought about this reaches the opposite conclusion: Open borders [in the style of the European Union] would massively enrich the world.  A typical estimate is that free migration would DOUBLE global GDP.  Why?  Because the status quo traps most of the world’s labor in dysfunctional economies where people produce at a fraction of their full potential. Moving a Haitian to the U.S. easily increases his output by a factor of twenty.  Hard to believe? How much could you produce in Haiti?

The Economist adds:

Workers become far more productive when they move from a poor country to a rich one. Suddenly, they can join a labour market with ample capital, efficient firms and a predictable legal system. Those who used to scrape a living from the soil with a wooden hoe start driving tractors. Those who once made mud bricks by hand start working with cranes and mechanical diggers. Those who cut hair find richer clients who tip better.

“Labour is the world’s most valuable commodity—yet thanks to strict immigration regulation, most of it goes to waste,” argue Bryan Caplan and Vipul Naik in “A radical case for open borders”. Mexican labourers who migrate to the United States can expect to earn 150% more. Unskilled Nigerians make 1,000% more.

“Making Nigerians stay in Nigeria is as economically senseless as making farmers plant in Antarctica,” argue Mr Caplan and Mr Naik. And the non-economic benefits are hardly trivial, either. A Nigerian in the United States cannot be enslaved by the Islamists of Boko Haram.

[…]

Workers in rich countries earn more than those in poor countries partly because they are better educated but mostly because they live in societies that have, over many years, developed institutions that foster prosperity and peace. It is very hard to transfer Canadian institutions to Cambodia, but quite straightforward for a Cambodian family to fly to Canada. The quickest way to eliminate absolute poverty would be to allow people to leave the places where it persists. Their poverty would thus become more visible to citizens of the rich world—who would see many more Liberians and Bangladeshis waiting tables and stacking shelves—but much less severe.

Naturally, most Americans – even those who are relatively pro-immigration – aren’t willing to go quite so far as to embrace the full-on “open borders” position held by Caplan and Naik. Needless to say, it’s perfectly possible to be in favor of a bit more freedom of migration without going all the way to fully open borders. In terms of the pure economics of the issue, though, there’s actually a very good case to be made that the more mobility people are allowed to have, the better. Bringing workers from poorer countries into richer countries really is one of the best and most straightforward ways to improve their economic lot. And not only that – in yet another instance of free exchange producing win-win situations, it turns out to be one of the best things rich countries can do to benefit themselves as well.

After all, when foreign workers come into (say) the US to work, they aren’t just “taking our jobs” – they also create jobs, because they consume goods and services as well as producing them. Being regular human beings, they need things like cars and groceries and appliances just like everybody else – and by coming over and buying those products, they increase the level of aggregate demand in the broader economy. This means that companies will have to hire more workers to meet that increased demand – and this means more jobs being created for Americans. It’s basically the same thing that happens when foreigners living abroad buy products from us via foreign trade – their consumption of American products, which they pay for with the dollars that we pay them for their work, is what helps keep us employed in the first place. The big difference, though, is that if the foreigners actually come to the US to work instead of staying in their home countries, they can potentially produce a lot more, and can therefore earn a lot more, and can therefore buy a lot more, and can therefore create a lot more jobs. That’s why, even with about 45 million immigrants currently living here (out of a total population of around 335 million), the US is able to maintain high overall levels of employment, including periods of full employment. If the immigrants were just “taking all the jobs,” such a thing wouldn’t be remotely possible; there would be 45 million Americans who were simply out of work. The fact that so many Americans aren’t out of work, then, shows that immigrants are creating new jobs, not just filling them.

If it’s still not quite making sense, consider the following question: Why is it that the US didn’t “run out of jobs” after the major population spike of the Baby Boom? After all, it introduced a whole new slew of people into the population in much the same way that a massive wave of immigration would – so wouldn’t we expect it to have destroyed the economy when all those people joined the workforce and took all the jobs until there were none left? But of course, we know that that’s not how the economy works; there aren’t a fixed number of jobs to be filled. The more people there are, the more demand for goods and services there is – so as the working population grows, so does the number of jobs. That’s why the Baby Boom, far from destroying the economy, ultimately produced an economic boom as well. And that’s why the same thing would be true of a massive wave of immigration – because after all, a massive wave of immigration is functionally the same thing as a Baby Boom, except with the added bonus that most immigrants are already full-grown adults, so they don’t need to have 18+ years of their education and other expenses paid for by American parents before they can start contributing to the economy; they’re already past all that, so they can start making a net positive contribution right away.

Speaking of which, there’s another important point here: When immigrants come over to the US to work, they aren’t just taking manual labor jobs; they’re also making tremendous contributions in terms of inventing new products and production techniques, starting new companies, making new scientific and technological breakthroughs, and so on. As Ian Hathaway points out:

Almost half of Fortune 500 companies were founded by American immigrants or their children […] and among the Top 35, that share is 57 percent.

These 216 companies produced $5.3 trillion in global revenue and employed 12.1 million workers worldwide last year, spanning a wide range of industrial activities.

[…]

And, research has shown that the economic benefits of immigrants are lasting. U.S. cities and regions that welcomed more immigrants in the past have been linked with higher incomes, less poverty and unemployment, and greater educational attainment today. Immigrants also make outsized contributions to science and technology, whether measured as patent productivity or breakthrough discoveries—in recent years, U.S.-based researchers have been awarded with 65 percent of Nobel Prizes, though more than half of this group was born abroad.

And Shai Bernstein, Rebecca Diamond, Abhisit Jiranaphawiboon, Timothy McQuade, and Beatriz Pousada add:

Immigrants represent 16 percent of all US inventors, but produced 23 percent of total innovation output, as measured by number of patents, patent citations, and the economic value of these patents. […] Immigrant inventors [also] create especially strong positive externalities on the innovation production of their collaborators, while natives have a much weaker impact. A simple decomposition illustrates that immigrants are responsible for 36% of aggregate innovation, two-thirds of which is due to their innovation externalities on their native-born collaborators.

Seeing these figures, it’s hard not to think about this line from Stephen Jay Gould, and to wonder how much more advanced our species could be if only we were more willing to let people from other countries live up to their full potential:

I am, somehow, less interested in the weight and convolutions of Einstein’s brain than in the near certainty that people of equal talent have lived and died in cotton fields and sweatshops.

The truth is, for all that we’ve been talking up the benefits of lifting barriers to trade between countries, economists have determined that those benefits would be positively dwarfed by the benefits of lifting barriers to migration. After all, as things currently stand, there really aren’t that many more trade barriers to be lifted, because most of them have already been removed; the main goal there is just to make sure they stay that way. With migration, on the other hand, there are still immense unrealized gains that a policy change could bring about. As Posner and Weyl write:

There is a consensus that the economic gain from further opening international trade in goods is minimal. Studies by the World Bank and prominent trade economists find that eliminating all remaining barriers to international trade in goods would increase global output by only a small amount, 0.3–4.1%. For global investment, the most optimistic estimate in the literature finds a 1.7% increase in global income from the elimination of barriers to capital mobility. Many believe that liberalization of international capital markets has gone too far. Three top IMF economists recently argued that even liberalization that has already taken place has brought limited gains to economies while generating inequality and instability.

At the same time, the benefits of liberalizing migration have dramatically expanded. Sharp reductions in transportation costs have made the natural barriers to migration de minimus compared to the potential gains. On the other hand, the potential economic benefits of migration have exploded. A typical Mexican migrant moving to the United States increases her annual earnings from roughly $4,000 to roughly $14,000, and Mexico is a quite wealthy country by global standards. Potential gains from migration from poor countries to Europe and the United States, especially if language barriers are low (as in the case of Haiti and France, for example), would involve gains of as much as ten times, involving tens of thousands of dollars per migrant.

To take an extreme but illuminating example, imagine that the countries of the Organisation for Economic Co-operation and Development (OECD), the club of wealthy countries, were to accept enough migrants to double their population, presently at 1.3 billion. This would move roughly 20% of the global population to the OECD. Suppose too that each migrant on average created income gains of $11,000. This would constitute an increase on average of roughly $2,200 for every person on the planet. Given that global income per capita is approximately $11,000, this is roughly a 20% increase in global income. If historical experience is any guide, gains to those who stay in poor countries would be equally dramatic, as most migrants remit a large fraction of their income to the countries they came from. In sharp contrast to trade, these gains have transformative potential for global well-being, if they can be harnessed and shared.

Jason Brennan delivers the stark conclusion:

The consensus among published economic work on immigration seems to be that the restriction introduced by mostly closed borders on labor mobility is the single most inefficient thing governments do. Scholarly articles in economics estimate, on average, that the deadweight loss of immigration restrictions is around 100 percent of world product. That is, gross world product should be about $160 trillion, but immigration restrictions cut this to a mere $80 trillion. Moreover, the people who suffer the most from these deadweight losses are the most vulnerable in the world. While doubling world economic output isn’t everything, it swamps most things on the political agenda.

And David Brooks agrees, summing up the whole issue – “the easy problem,” as he calls it – like this:

Over here in the department of punditry, we deal with a lot of hard issues, ones on which the evidence is mixed and the options are all bad. But the immigration issue is a blessed relief. On immigration, the evidence is overwhelming, the best way forward is clear.

The forlorn pundit doesn’t even have to make the humanitarian case that immigration reform would be a great victory for human dignity. The cold economic case by itself is so strong.

Increased immigration would boost the U.S. economy. Immigrants are 30 percent more likely to start new businesses than native-born Americans, according to a research summary by Michael Greenstone and Adam Looney of The Hamilton Project. They are more likely to earn patents. A quarter of new high-tech companies with more than a $1 million in sales were also founded by the foreign-born.

A study by Madeline Zavodny, an economics professor at Agnes Scott College, found that every additional 100 foreign-born workers in science and technology fields is associated with 262 additional jobs for U.S. natives.

Thanks to the labor of low-skill immigrants, the cost of food, homes and child care comes down, living standards rise and more women can afford to work outside the home.

The second clear finding is that many of the fears associated with immigration, including illegal immigration, are overblown.

Immigrants are doing a reasonable job of assimilating. Almost all of the children of immigrants from Africa and Asia speak English and more than 90 percent of the children of Latin-American immigrants do. New immigrants may start out disproportionately in construction and food-service jobs, but, by second and third generation, their occupation profiles are little different from the native-born.

Immigrants, including illegal immigrants, are not socially disruptive. They are much less likely to wind up in prison or in mental hospitals than the native-born.

Immigrants, both legal and illegal, do not drain the federal budget. It’s true that states and localities have to spend money to educate them when they are children, but, over the course of their lives, they pay more in taxes than they receive in benefits. Furthermore, according to the Congressional Budget Office, giving the current illegals a path to citizenship would increase the taxes they pay by $48 billion and increase the cost of public services they use by $23 billion, thereby producing a surplus of $25 billion.

It’s also looking more likely that immigrants don’t even lower the wages for vulnerable, low-skill Americans. In 2007, the last time we had a big immigration debate, economists were divided on this. One group, using one methodology, found immigration had a negligible effect on low skill wages. Another group, using another methodology, found that the wages of the low-skilled were indeed hurt.

Since then, as Heidi Shierholz of the Economic Policy Institute explains, methodological advances suggest that the wages of most low-skill workers are probably not significantly affected. It turns out that immigrant workers are not always in direct competition with native-born workers, and, in some cases, they push the native-born upward into jobs that require more communication skills.

Shierholz found that between 1994 and 2007 immigration increased overall American wages by a small amount ($3.68 per week). It decreased the ages of American male high school dropouts by a very small amount ($1.37 per week). And it increased the wages of female high school dropouts by a larger amount ($4.19 per week).

The argument that immigration hurts the less skilled is looking less persuasive.

Because immigration is so attractive, most nations are competing to win the global talent race. Over the past 10 years, 60 percent of nations have moved to increase or maintain their immigrant intakes, especially for high-skilled immigrants.

The United States is losing this competition. We think of ourselves as an immigrant nation, but the share of our population that is foreign-born is now roughly on par with Germany and France and far below the successful immigrant nations Canada and Australia. Furthermore, our immigrants are much less skilled than the ones Canada and Australia let in. As a result, the number of high-tech immigrant start-ups has stagnated, according to the Kauffman Foundation, which studies entrepreneurship.

The first big point from all this is that given the likely gridlock on tax reform and fiscal reform, immigration reform is our best chance to increase America’s economic dynamism. We should normalize the illegals who are here, create a legal system for low-skill workers and bend the current reform proposals so they look more like the Canadian system, which tailors the immigrant intake to regional labor markets and favors high-skill workers.

The second big conclusion is that if we can’t pass a law this year, given the overwhelming strength of the evidence, then we really are a pathetic basket case of a nation.

Continued on next page →