Immigration

One of my favorite Wall Street economists called me up after the close today (after the market plunged in disappointment over the Fed's $400 billion "twist."), and exclaimed, "We could fix most of our problems by doubling or tripling legal immigration quotas." My response was "Amen."  It would provide an instant boost of demand for housing and other durables, and it would bring in more skilled workers.  Yes, it would bring in more workers at a time of record unemployment, but the skills mismatch in our economy has got to be overcome somehow, and this would do it.  We're a nation of immigrants.  It's only a question of how far back you have to go to find them.  When he asked whether Congress would pass immigration reform in the foreseeable future, I had to admit, the answer is "No."

A new paper by Brian Cadena uses a clever instrument to better understand the relationship between immigrant inflows and labor market opportunities.  From the abstract (my emphasis added):

This paper demonstrates that immigration flows respond to differences in labor market conditions by documenting the systematic change in newly arriving low-skilled immigrants’ location choices in response to exogenous supply increases among the US- born. In contrast to previous treatments of this question, this paper relies on an identifiable source of exogenous variation that alters the expected returns to entering a labor market. Using pre-reform welfare participation rates as an instrument for changes in native labor supply, I find that immigrant inflows shifted away from cities with more welfare leavers toward cities with smaller reform-induced supply shifts. The empirical methods I use improve upon previous immigrant location studies by explicitly allowing for unobserved city amenities that provide different values based on the immigrant’s source country. The extent of the selection uncovered is substantial: for each additional native woman working in a city as a result of welfare reform, 0.8 fewer female immigrants choose to live and work there. These results provide direct evidence that selective location choices among immigrants tend to equilibrate labor market returns across geography.

If you read all the way to the fifteenth paragraph of this news article covering President Obama's appearance with Mexico's President Calderon on Wednesday, you will find the following claim:

By some estimates, one-tenth of Mexico’s population resides in the United States without permission.

And then you might wonder, now that President Calderon is in the United States on a diplomatic visit, what part of that problem will he own?  You can read the text of the remarks at the White House website, and you won't find much.  Here are the relevant passages about the recent law passed in Arizona (my emphasis added):

The latest news from the Grand Canyon State is that the governor has signed a bill that "prohibits classes that advocate ethnic solidarity, that are designed primarily for students of a particular race or that promote resentment toward a certain ethnic group."  The target is apparently a Mexican-American Studies program in the Tuscon school district.  Whether you like laws like this or the immigration law passed last month, they both seem to be desperate attempts to push back against the demographic trends that are going to shape the state's future.

A new report from the Brookings Insitution gives an indication that Arizona is just the leading edge of these demographic changes. 

In more than five years of blogging, I have noticed that posts on immigration generate some of the most heated exchanges in the comment section.  Last week's short post on the new Arizona immigration law was no exception. Here are some more points I'd like to make.

First, what does the law mean?  There have been different characterizations presented in the media, but what I had in mind was similar to this one presented by Roger Noriega:

The Arizona law  requires the police to determine the immigration status of any person who is stopped for any "lawful" reason.  Only if that person does not present valid, government-issued identification is there a "reasonable suspicion" that he or she is "unlawfully present in the United States," after which the officer must make reasonable attempts to verify the person's immigration status.  State authorities are required to report the arrest or conviction of an illegal alien to federal immigration authorities.  The law requires an illegal alien (or a lawful alien who is not carrying his green card) to pay fines and jail costs.  The vast majority of the bill is dedicated to imposing stiff sanctions on those who employ or smuggle illegal aliens.

This is consistent with how I think we should begin addressing illegal immigration.  (See my first post on immigration reform from March 2006.)  If this is not the way the law is intended to work, then the law should be modified.