Intro. [Recording date: December 20, 2016.]
Russ Roberts: I want to remind listeners to go to econtalk.org and in the upper left-hand corner you can vote for your favorite episodes of 2016 and share other feedback, which I really appreciate. Today's guest is the economist George Borjas,... Today we'll be discussing his latest book, We Wanted Workers: Unraveling the Immigration Narrative. George, welcome to EconTalk.
George Borjas: Thank you so much, Russ. I don't know if you realize this but it's almost 40 years since the first time we ever met.
Russ Roberts: Yeah. I know. I do realize it.
George Borjas: [?] cool. If somebody had told me that we'd be here today talking about this, 40 years ago, I would have said, 'Not in[?] your dreams.' But somehow we're here, okay?
Russ Roberts: Yeah. I don't like to think about it because it's so long ago. The other part, of course, that's hard to imagine and couldn't have been imagined is that we'd be talking not via phone but via Skype; it would be recorded and it would be available to anyone around the world at zero direct cost--many good things in the last 40 years, at least for us.
George Borjas: I know. That's for sure.
Russ Roberts: So, let's start with the title of your book, which is clever: We Wanted Workers. Where does that title come from?
George Borjas: Okay. It comes from a quote, from a statement by Max Frisch, who was a Swiss novelist, essayist. And he was reflecting on the immigrants, on the guest workers really, that Europe tried to import during the 1950s and 1960s, particularly Germany but many other European countries as well. And those guest workers came in and they clearly contributed to the economic miracle. For example, the post-War Economic Miracle in Germany, right? But Max Frisch was looking at it from afar, and he basically said, looking at it in a more general sort of way, 'We wanted workers, but we got people instead.' And the reason that I think that's sort of one of the themes that I stress in the book is that even though I'm an economist, I tend to be a little dissatisfied with the very mechanical way in which economists view immigration. The typical--let me call it the 'economistic' way of looking at immigration looks at them as a bunch of robotic workers that you can basically move from place to place as the need arises. And that, I think, is sort of what Max Frisch is referring to when he said, 'We wanted workers.' And, it's true: Immigrants played a role. Okay? But the fact is that immigrants are human beings as well. And people make decisions. And people make decisions that are based on what is best for them. They are rational human beings, like you and I, right? And those decisions might or might not be precisely what they are receiving [?] in mind. And they may or may not increase the benefits; or they might actually create some harm on the way. The point is that, the fact that immigrants are something beyond workers, and that they play a role that is not just this robotic kind of role of moving from factory to factory, means that we have to look at the impact of immigration in a much broader framework. We have to take immigrant decision-making into account, in particular. And that, I think, was one of the things that motivated me. It's really one of the themes that motivated me as I was trying to write this book in an easy-to-explain way for a general reader: that we have to look as immigration not just--let me put it a different way. A lot of people make the analogy between immigration and trade. And in fact, immigration is like trade, to some extent. When we import a widget, a point that I make in the book, it's sort of like importing the raw labor creates a widget, only that we importing the raw labor would allow us to create the widget domestically, right? But the fact of the matter is that when widgets break down, we can throw them out. When immigrants break down or get sick or things happen, we have a responsibility. And that is one crucial way in which immigration is not like trade. And that's sort of the thematic content, what that statement is trying to capture in the book.
Russ Roberts: Yeah, well I think--we'll come back probably to that analogy between trade and immigration--which, of course, they are both related to open borders. If you have open borders, you can choose to have open borders for goods; you can choose to have open borders for capital; you can choose to have open borders for people. And the impact of those different cases have some similarities. And as you point out, they also have some differences. So, I think it's interesting how hard it is for people to think about those clearly, even s economist. Even myself.
Russ Roberts: Let's start with a standard argument you hear, that you attack in the book--correctly, I believe. People often say, 'Well, we have to have immigrants because if we don't, there will be no one to do the--certain types of jobs.' Americans, quote, 'Americans won't do these jobs'--whether it's mowing lawns, painting, basically construction, agricultural work in particular which--these are all areas that have a lot of immigration workers. What's wrong with that argument? Is that correct?
George Borjas: Yeah, the usual [?], the immigrants do jobs [?] don't want to do. And the problem with that basic argument is that [?] ignores the role of markets. And the role of incentives. I think the correct statement is really, immigrants do jobs [?] don't want to do, at the going wage. The presence or absence of immigrants basically changes the market. And markets react to either, to people coming in or people going out. The way I start this in the book, as you know, is by describing--it's a little anecdote of the firm in Georgia back in 2006 where at the time the Bush Administration was trying to look serious about enforcing immigration policy regarding illegal immigration. And they actually conducted quite a few raids on firms that hired illegal immigrants at the time. And one of the raids happened to be on a firm called Crider in Geogia, a chicken processing plant. And the nice thing about this example is that, Crider did precisely what we would teach a profit-maximizing, rational firm to do. Crider basically woke up after Labor Day weekend finding that 3/4 of its workforce had been basically--had disappeared--because of the raid. And, you know, what does Crider to at that point? Well, they put an ad in the paper. And the ad they put in the paper is: Increased wages. We want workers at increased wages. You know, less supply; higher wages. So, to me, it's not surprising that markets respond in the way that common sense tells you they respond. What I always really found very puzzling about the immigration context and the supply-and-demand issue is that most of us have no trouble, you know, given our training we have no trouble saying supply and demand--it's a very nice, unifying tool through which to explain why prices go up and down. And somehow, that idea tends to disappear from a lot of people's minds--a lot of economists' minds--when it comes to immigration. And I always found it a little puzzling. I mean, I don't quite know why there's a resistance to accepting that prices will change when supply shifts. But in the case of immigration, you tend to see the resistance quite often.
Russ Roberts: Well, I'd be in that group, to some extent. So, let's get into that, because I think that's a central issue that we should talk about. First, on the Crider example, in Georgia, it's not surprising that overnight, finding that you are out of workers you are going to pay more. The more interesting question would be 6 months to a year and 2 years later. Was that just an emergency move on their part or was that a response to the fact that there was suddenly a smaller supply of workers of low-skilled workers to that particular area of the country, and we normally wouldn't expect the loss of 100 workers in a town or a city or a state or a country to have a big impact on wages? It's a small change. But that had a big change. It was observable, partly because it was--they had a very urgent short-run demand for workers. But the more general question I guess is the following. And I want to phrase it--it's hard to phrase, because I'm a big fan of supply and demand. Of course, the question is: Supply and demand of what? Labor, with a capital "L"? Low-skilled labor? High-skilled labor? Labor that has a particular kind of skill? Certainly all those kind of things are going to have impacts on how you use supply and demand and whether you use it carefully. I guess the question I would have is that, when we talk about labor, generally--if we said, for example, if we try to imagine the kind of experiment, which is the kind of experiment you do in your work: What if the United States had not liberalized immigration in the last 25 years? Which it has--the last 30 years, I guess--post 1990 is the key when it started to become more liberal, or is it a little before that. But I think post-1990 has been a relatively liberal era for open borders. Do you want to think about that as an L--a supply and demand for Labor? Or do you worry about the fact that it depends on what kind of workers they are; it depends on whether they are complementary or substitutes? Does it depend on what parts of the country they go to. It just seems like a little more complicated than just supply and demand for labor.
George Borjas: Oh, I completely agree, Russ. Okay? One of the things in my work over the last 10, 15, 20 years has been that you really have to match the skills of immigrants to the skills of natives, if you want to sort of detect an impact. And a lot of the literature has gone the wrong way, basically because, you know, the matching is not quite proper. I mean, I give you an example of this in some work that I've done on mathematicians, which I sort of talk a little bit about in the book. You know, the Soviet Union collapsed in the early 1990s, 1992 or so, right? And a bunch of mathematicians came to the United States. Now, from an outside perspective, you'd see the supply of mathematicians increasing, right? But it turned out that the mathematicians who came to the United States happened to specialize in particular topics. So, if you were to look at the average mathematician in the United States, what actually worked on very different kinds of topics, you would see actually very little impact. But if you look at the mathematicians in the United States who specialized in the topics that mathematicians in the Soviet Union had specialized in, then you detect a negative impact of supply and demand--the sort of the basic [?] would give you. So, you know, I am very appreciative of the fact that you really have to very carefully match who it is that the immigrants are going to hit first. Because, as you said, there's complementarities involved as well. For better or worse--and I think it's for worse, actually--much of the literature has focused way too much on trying to measure the own[?] impact--in other words, try to detect that when the group of a particular skill, the number of that group goes up, the weight might go down--in the short run. And again, I'm not doing [?] distinction--short run versus long run. In the short run, the theory is very clear about that. And in the theory it's also clear that in the long run, what's going to happen is capital will adjust and with constant return to[?] return to world, the average wage will return to what it was pre-immigration. But that doesn't mean that even in the long run there are not distributional impacts. Those groups that had a relatively larger supply shock in terms of more workers will tend to be a little worse off than those groups that had a smaller supply shock. So, all these things come into the picture when one tries to estimate the impact. And that is partly the reason why the literature is actually very confusing. Different people are trying to estimate different things. Short run, long run confusion enter into the picture. And again, from the point of theory, the short-run, long-run distinction is very clear. From the point of data, it's far less clear. Because we don't really know what the long run will be in a labor market hit by a supply shock. Will it be a day? Will it be a year? Ten years? We don't really know that. No one has really ever analyzed the dynamics of what happens to labor markets as a result of a supply shock. And then, we also have to deal into the skill issue, which means that: How do you find skill groups? Could be very problematic. Because, you know, at some point the [?] nature to defining a skill group. Like, for example, in my work I've defined it in terms of location and age, basically, in [?] of what I've done. In all, there is education and there is education, right?
Russ Roberts: Yeah. It's a good place to start--
George Borjas: Yeah, go ahead.
Russ Roberts: It's a good place to start. But obviously two people, each with, say, 4 years of education, a college degree, may have very different skills. And one may compete with one kind of worker but not at all with another type. So--
George Borjas: Exactly. That's what I'm trying to point out.
Russ Roberts: I want to take this--let's take this point more generally. Because I think it comes up a lot in lots of different areas of labor economics. It drives me crazy when people say, 'Seattle passed a living wage ordinance and employment in Seattle is doing fine.' Well, most people in Seattle are not going to be affected by the minimum wage. It's only going to be the people down toward the lower end of the skill distribution. And you have to look at those workers to see if there is any impact. Because otherwise, the overall impact is going to get lost in the noise of--particularly if there is growth in the Seattle area, which there is; it's doing very well. So it's hard to know whether there is any effect. But if you are trying to measure it, you certainly don't want to look at, say, employment of all workers. Because the theory doesn't expect that to change very much, if only a small proportion of workers are affected by the minimum wage. And I think, similarly, if more low-skilled workers come in to the United States, you and I are not going to be very affected on the wage side. We're going to be affected on the price side. It's going to be probably good for us, actually, because many of the things we buy might get cheaper as a result. But, if hundreds of thousands of economists came in from the Soviet Union, that could affect our wage. And certainly if it had happened 20 years ago, would it be affecting our wage today? As long as they could teach what we teach, roughly, research what we research, approximately. And--the basic point is undeniable, that certainly you have to be careful. One of the things that comes through in your book very clearly is how hard it is to make those kind of measurements, given that our data are imperfect--as you point out, we don't have, people don't walk around with a sign on them saying 'I'm a substitute for such-and-such kind of worker.' You have to, inevitably, make assumptions. You made one just a minute ago in passing. You mentioned the phrase 'constant returns' as a certain assumption about how capital and labor combine. And it may be a decent approximation. It may not be for a particular city or state or a time period when you are trying to measure the impact.
George Borjas: That's exactly right. Actually, there's two things I want to say to what you just said. One is the role of assumptions is huge. And we're not appreciate[?] that. We don't emphasize that enough when we discuss the labor market and immigration, sort of what the general findings are. And, like, this whole literature--a lot of people, and I sort of cite in the book some examples, claim that the data have shown that on average the immigration has no impact on the long-run wages. Right? And that is true--that is what the data show. What the discussion that is unusually emphasized is that that has been assumed by the constant returns assumption. The fact that on the average, the impact of immigration, on the average, is zero, has nothing to do with data. It's all been built in by the fact that the model underlying this analysis that assumes constant returns. And the other point you raised, which is, again, extremely relevant in this context, is the minimum wage example. You raised it in the context of, you know, you have to really match what is being affected by the minimum wage or not, right? I want to raise it in a different context, which is a lot of people make what I, what is intent of pure theory, completely contradictory arguments when it comes to immigration and when it comes to the minimum wage. Somehow, you see people have no qualms whatsoever saying immigration in the short run doesn't have an effect on wages. And at the same time they say that increasing the minimum wage has no effect on employment--in the short run. As you know, those two things are completely contradictory. In the context of the minimum wage they are basically claiming that the labor market, the labor demand curve is perfectly inelastic. In the context of immigration they are claiming that labor demand curve in the short run is perfectly elastic. You know, one of those things, and probably both are wrong. Labor demand curve should probably not in that, in either extreme. And it's really sort of--I've always been fascinated by the intellectual contradiction, in sort of claiming these two things simultaneously.
Russ Roberts: Well, here's the other question I have on this; and then we'll move to some other examples and try to summarize some of the empirical work and get to this--I think we'll want to re-emphasize this point about assumptions because I think it's very clear. So, workers aren't widgets. They are not the same. Importing workers is not the same as importing the goods that workers overseas might produce, partly because workers bring their cultural habits. And that's obviously an issue that you talk about in the book. But they also bring the fact that they want to buy things--
George Borjas: But--
Russ Roberts: So, which makes them not like a widget. So, in general, if you ask me, 'Is the increase in the U.S. population between, say, 1900 and 2000, has that been good or bad for workers?' We wouldn't want to use a supply-and-demand model, because supply-and-demand model--it's a technical term; it's a partial equilibrium. And partial equilibrium is probably not the right way to simply think about--it simplifies what's going on when we think about a growing population. So, that's the problem I have when I think about an increase, say, in immigration. To me, it's a lot like an increase in population. It's true you bring in adults rather than infants--usually. But obviously it's a little more complicated than just saying, 'Well, there's a supply shock.' I'm willing to accept the fact that in the short run, that can certainly be the case where workers with skills who are close to the workers who are coming in, that it's going to be hard on them. Of course, they already have jobs; their wages, a lot of them, their wages are not going to go down instantaneously with the opportunities to hire additional workers that come with foreign immigration. So, I'm not quite: Explain to me how the supply and demand framework should be used in, say, a case like population or immigration. And why it's different. It seems to me it's very different from the minimum wage.
George Borjas: No, I agree with you, okay? In the long run, it's more of a group[?]. In the long run the real question is economic growth. What does having more people do to economic growth? Right?
Russ Roberts: Yep.
George Borjas: And the question then becomes, what do you want to assume is the underlying technology?
Russ Roberts: Say that again? What do you want--?
George Borjas: The question becomes: What are you going to assume about the underlying technology.
Russ Roberts: Correct.
George Borjas: Okay? And if you assume constant returns, then not much will happen in terms of per capita income, in the long run.
Russ Roberts: And therefore, how do you explain--that's probably not a good starting place.
George Borjas: No, no, but therefore the question is: Do immigrants completely replicate what we have now? Or is the skill distribution of immigrants different from what we had originally? And then it will depend on factor proportions, I think.
Russ Roberts: So, I'm going to disagree with--let me agree with half of that and then let me disagree with the other half.
George Borjas: Okay.
Russ Roberts: Even though it's maybe only one half there. It's certainly true--let's suppose we take a country like the United States at a point in time, and now we're going to increase the population via immigration, by 20%. A huge increase. Big, big increase.
George Borjas: Actually double it--
Russ Roberts: Great. Let's double it. And I'm going to think of two or three different cases. In case Number 1, the skill set--and I'm ignoring the cultural side of this for now, obviously; we're only going to look at the economic impact, the financial/monetary impact on wages and markets. So, obviously, if everybody is the same--excuse me--if the distribution of the new people mimics, is almost exactly the same as the current distribution, we'll have doubled everything. We'll have doubled all the low-skilled workers, all the high-skilled workers. And it's the case--
George Borjas: And the long-run capital should double as well.
Russ Roberts: Because?
George Borjas: Because--the, you know, in a global--yes, you have to say, now you have to say, well, the rate of return to capital will increase in the United States as a result of initial people coming in. Right? That will bring in initial capital somehow.
Russ Roberts: Maybe from overseas. Maybe people will save more.
George Borjas: Exactly--
Russ Roberts: Okay. So that's the case, and maybe we have another Grand U.S. next to the old U.S. So, it's twice as big; it's got twice as much capital. But we don't know if it has twice as much. But it has more capital and more labor.
George Borjas: Yeah.
Russ Roberts: Next question: The second case would be--
George Borjas: But the point is, in that scenario, per capita income doesn't really change.
Russ Roberts: Well, we don't know that exactly.
George Borjas: I think we do.
Russ Roberts: I don't think we do. The reason I'd say that is that I actually think there's, via Adam Smith, the division of labor is limited by the extent of the market.
George Borjas: Oh, but I am thinking of it, very specific production function here.
Russ Roberts: I know; and I don't think that way. I don't find that--
George Borjas: But that goes back to the beginning of what I said: It all depends on what you assume about the [?]
Russ Roberts: That's fine.
Russ Roberts: So let's leave that alone for the moment. Let's accept the fact that different assumptions about how people combine could affect the final conclusion. But it certainly wouldn't be the case--and you wouldn't argue the case--that in the long run all those extra workers would lower wages for the people who already live here. It could in the short run. It could because--for a lot of reasons. And it certainly could measure--well, anyway, that's Case One. Case Two: We double the population but every single person who comes is below the median or the average, one or the other, in their skill level. And Case Three is they are all above the median or the average of the skill level. And the question would be how different are those Case Two and Three from Case One? That is, obviously, they are different. They are not the same.
George Borjas: Oh, definitely.
Russ Roberts: So, you want to speculate about that for a minute?
George Borjas: Well, I tell you: I think about it this way. In the first case it's very clear what will happen. You have a brand new United States next to the old United States. Everything doubles. I should say, per-capita GDP (Gross Domestic Product) doubles--I'm sorry, total GDP doubles; per capita GDP doesn't change. And when we just replicate ourselves, not much happens--with constant returns. When we don't replicate ourselves, what's going to happen is, capital will still adjust. Right? In the long term, capital should still adjust; but there will now be a different [?] proportion than what we had originally. And what I would think would happen in terms of a very simple-minded model of long-run growth, right--what I think will happen is that the group that encountered the highest supply increase will tend to have relatively lower wages than the group that encountered the least supply increase. So, for example, in the [?] you said, suppose a lot of the immigrants or most of the immigrants or all of the immigrants are low-skill. If you are a low-skilled worker in the United States, you are going to have relatively low wages. But the high-skilled workers--there are complementarities involved in this production technology, right? The high-skilled workers are going to be much better off.
Russ Roberts: Yep. And--
George Borjas: But look--that's actually raising an important point. Once you go away from this very simple-minded replicating ourselves model, you recognize immediately the distributional impacts. And that introduced the notion of tradeoffs into immigration discussions. You know, not everybody will be better off. It's true that the economic pie accruing to the original population will increase, but it doesn't increase equally for everybody. Right?
Russ Roberts: Correct. But--
George Borjas: [?] Hmmm?
Russ Roberts: That's for sure. I agree with that 100%. But it seems to me that the simple short run story misses a key thing. So, I'm going to shift gears on you.
George Borjas: No, look. Before you leave this, I want to continue. The correct way of looking at this--I mean, I think both things matter, okay?
Russ Roberts: And I agree with that. [?] not irrelevant. That will be clear from this next example.
Russ Roberts: So, if I said to you--until recently, let's say, we didn't trade with China, either because they were so poor or because transportation costs were too high. Whatever the reason is, it doesn't matter for this example. And now suddenly we are trading a lot with China. Which is what happened between, roughly over the last 20 years, we increased our trade with China dramatically. I have no doubt that that was harder on people who made things that--who had the skills that were similar to the people in China than it was on me: there are Chinese professors who come here and Chinese academics and Chinese economists, but in general it's relatively small. And so I've benefited tremendously from increased trade with China because my clothes are less expensive. And so on. My toys, gadgets, etc. And clearly a lot of people haven't benefited this much. In fact, they may even have been hurt on net. It's true they also get to buy cheaper clothes, and cheaper gadgets, but they have, unfortunately, might not have a good job at all.
George Borjas: Or [?]
Russ Roberts: Right--they might not have any job. Again--in the short run. And that short run might be fairly long. So, we don't want to say--the terms 'short run,' 'long run' are kind of shorthand ways of saying 'it's more complicated.' But we all understand, if we're thoughtful, what those complications are. Now, if you said to me, 'Therefore, there's distributional consequences of trade with China, I certainly agree 100%. But I would never suggest that trade with China and the United States is something akin to a wash for the wages or wellbeing or standard of living in the United States. I'd say, in the short run it's harder on people who have those skills, but because of the gains to all the rest of the folks, those people now have more purchasing power; and they are going to demand and create or produce more things--things are going to be created and produced using the opportunity now that things are cheaper coming in from China. And therefore, lower-skilled workers who were hurt initially, they may get benefits that are not see; and in addition, their children and grandchildren will live in a much better world potentially because we are using our resources more effectively. And I would think the same thing would be true of immigration.
George Borjas: Look. Let me actually make two points about what you have said. I mean, I think it's a really nice thing to compare the analogy you made on trade with a similar example with immigration. First of all, suppose that instead of trade with China, we had gotten immigrants--and they [?] to be very low-skilled immigrants. Okay?
Russ Roberts: Correct.
George Borjas: And that will mean the same thing you said about the people being hurt by the Chinese imports. Some people will be hurt by the low-skilled immigrants. And you and I would gain tremendously. We can buy all kinds of stuff cheaper; we can hire people to clean our house, fix our rooves, and stuff like that. And you can show from the simple economic model that both in the case of trade you had in mind, and the case of immigration that I'm putting forth as an analogy, the economic pie accruing to [?] has increased. The pie increased and the plate[?] shifted. It changed.
Russ Roberts: The way the pie is divided.
George Borjas: [?] And then the question is: How much weight should we put to the fact[?]--and this is a value question now--how much weight should we put to the fact[?] that many people perhaps are much worse off right now than they would have been otherwise? You made an implicit judgment: You said that in the long run, my children, grandchildren, so on, were much better off and they have more [?].
Russ Roberts: Oh, but not just mine. My point was much broader than that. My point is that the children and grandchildren of the low-skilled workers who are hurt in the current world by Chinese trade, they are going to inherit a better world because we've grown the pie.
George Borjas: Well, what's a better world if you've tried[?] this and don't have a job? And can barely afford--you know. See, that's where you and I depart. I'm not willing to go into the next step. Because I don't know what a better world would be.
Russ Roberts: But that means you are telling me that when we decide to open our borders to Chinese goods, we should not. We should be very wary of the fact that American workers--and by the way, this is also true of innovation.
George Borjas: Right--[?] make analogy.
Russ Roberts: It's not just trade. If we have technological improvement that makes some people's skills obsolete, and they are not going to have a job, their children and grandchildren are going to live in a much better world--which is the history of the last hundred years of the United States.
George Borjas: Okay. You show me evidence that in fact the children and grandchildren of people who [?] trade are way better off than they would have been otherwise, I'm willing to buy into that. I mean, to me that sounds like an ideological argument more than a factual argument. And let me tell you another thing that you raise in your question. As you say, yes, there will be an increase in the economic pie. But this is where the distinction between workers and people comes in very, very nicely, okay? In the case of trade, the increase in the economic pie accruing to natives happens, and it's there: no doubt about it. In the case of immigration, it's not so clear. Because suppose [?] who came in have been low-skilled. Well, they are going to have impacts--forget all the other stuff that might go on. Just look at the Welfare State impact. The Welfare State impact is not trivial. And it may well be that the expenditures that they trigger on the Welfare State could easily offset the gains that accrue from them being like widgets in a sense, right? And that's why it is entirely possible for globalization[?] from trade to actually increase the economic pie, and globalization through immigration to not increase the economic pie at all.
Russ Roberts: So, that is relevant. That's a relevant point. But let me just answer your charge that I made an ideological claim. I'm going to make the argument that I made a logical claim, through the logic of economics. And I'll give you some evidence. My evidence would be the following. In 1900 the average standard of living in the United States was a fraction of what it is now. It's probably something between 10 and 30 times higher. Of course, it's very difficult, it's impossible to measure precisely, because so many products, we try to figure out the purchasing power of--income today versus income in 1900, those products were simply not available in 1900. There's no elegant or precise way to deal with that reality. Put that to the side. No one disputes that our material wellbeing today dwarfs what it was 100 years ago. Now, what happened over those 100 years is that we had an immense amount of creative destruction. And it came from 3 different sources. We had tremendous technological change. We had a huge increase in globalization of goods and capital. We had a huge increase in immigration and mobility. And we also had population change. So, hundreds of millions--maybe--well, I'll leave it at hundreds of millions--hundreds of millions of jobs were destroyed over that century. Over the last 100 years. And new jobs were created. Now, you can argue that it's certainly the case that many of the individuals who were hurt by those three changes of immigration, technology, and trade were harmed, at the time. But I think it would be hard to argue that their children and grandchildren were harmed. They live much better material lives through the process of creative destruction--through the process of growth. You can argue it wasn't worth it. But my claim would be that a farmer living in 1900, when 40% of the workers were on the farm--today it's 2% in the United States--that farmer's children and grandchildren are much better off even though the changes that caused that to happen were very tough on farmers in the meanwhile. They couldn't cover their mortgage; their prices went down because of competition and increased innovation in agriculture and economies of scale. And small farmers in particular went bankrupt. And they had a tough time. And their children had suffered through the fact that their parents didn't have a job; their farm was out of business; etc. Their farm was bankrupt. But I think overall, it's been a pretty good run? You going to disagree with that?
George Borjas: No, not at all. I actually make the argument myself sometimes. Okay?
Russ Roberts: I'm glad to hear it.
George Borjas: So, I actually agree with you. But the point that--look. There's a lot of things going on over the last century.
Russ Roberts: Fair enough.
George Borjas: So, to--so who knows? It's very hard to disentangle these facts. What I think is something that we economists have been guilty of is the following: When we teach trade and immigration in class, we always point out the models create these benefits and costs. Right? Even though the pie might increase.
Russ Roberts: Yep.
George Borjas: When you talk about trade and immigration in the public debate, public policy--especially with trade--you don't hear much about the cost.
Russ Roberts: Yeah, and I agree with you there. That's disgusting. It's dishonest.
George Borjas: And that's been a very destructive part of what we've done as a profession, I think. Because some people do get hurt. And people getting hurt, getting left behind and [?] more has consequences. Social consequences; political consequences. And, you know, we are in a world now who might be living through those consequences.
Russ Roberts: I agree with that. Actually, I agree with it very strongly. I think it's incredibly depressing how advocates for and against both sides of these issues and don't admit to various costs and benefits, depending on which side you are on. [?] a free lunch.
George Borjas: That was the--thank you for saying that. That was one of the things I wanted to get into my book: There are tradeoffs in everything, right?
Russ Roberts: Yup. I totally agree.
George Borjas: And you know that immigration is one of those things.
Russ Roberts: I'm willing--even though I'm more of an open-borders guy than you are, George, I certainly agree with that in your book. It made me think about more than I have. Which I really appreciate. And it also reminded me of something I'm very much in agreement with, which is the tendency for advocates to cherry-pick data on both sides of this debate and avoid those costs. I [?] 100%.
Russ Roberts: So, let's talk a little bit about the measurement of those costs. What would you argue is the best estimate, at least in the short run--and the short run could be long--
George Borjas: right--
Russ Roberts: of the harm to native American, low-skilled--native workers of low skills? That is, high school dropouts--
George Borjas: right--
Russ Roberts: high school graduates from the recent increase in immigration? And by the way, the other thing that drives me crazy is everyone just assumes that everything is linear--so if we made it twice as big, the effect would be the same. Or if we do it now versus 50 years ago, it doesn't matter. And of course, you point out many times in the book very well that you have to be careful about historical context, the types of workers, the countries they come from. Those are all relevant. So, talk about what we know about the impact on low-skilled workers in America when immigrants come in.
George Borjas: Look, the number I carry in my head is that what we've seen in the last 20, 30 years has basically been something on the order of like a 20, 25% increase of supply on the bottom end of the skill distribution. I think the best available number is that that has basically increased--has lowered the wage at the bottom of the skill distribution by something between 3 and 5%. Which is not a huge amount. I mean, it's not a huge impact, by any means. But it's not zero.
Russ Roberts: Agreed.
George Borjas: And, you know: The question is: How much attention should one put when one thinks about immigration on that particular loss? And that's really much more of a value question than it is an economic question. I mean, what I'm trying to resolve in the book is to sort of point out to people that, yes, you can cherry-pick data, and you can do this and you can do that. But overall, there is some evidence that the people who are most affected, once they[?] find things properly, people who are most affected by immigrants will, just like you, are going to be hurt a little bit. But I think one thing that I don't do enough in the book and that people don't do enough generally, is sort of--it comes back to something that we talked about earlier: those who [?] come along with complementarities. And we've not really put much attention on measuring the gain that you and I get as a result of [?] immigration. And those gains could be substantial. And that truly is what the debate should be about.
Russ Roberts: Well, your point about the--let's say it's 5%--it does remind me that low-skilled workers in America, the last 25 years, have been very challenging, for three reasons. And we've mentioned them all. One is the increase in immigration of low-skilled workers. The second is technology, the increase in artificial intelligence, etc. And the third, of course, is trade.
George Borjas: Right.
Russ Roberts: All three of those--trade with countries who have a lot of low-skilled workers.
George Borjas: Right. They [?]
Russ Roberts: Yeah. So, this explains why there are a lot of folks in certain parts of the country who aren't doing very well. And it's a serious issue. So, let me--let's not debate whether 5% is small or large. I wouldn't debate it. It's small to some; large to many. But if you are one of those workers, it's large, I assume. If you are poor, 5% is not a trivial amount. Potentially. It seems to me the right policy response to that is not to keep out low-skilled workers. It's not to reduce innovation. It's not to keep out products from countries with low-skilled workers. It's to try to improve the skill-set of the workers who are here. To try to encourage them to finish high school. It seems to me a very strange policy idea to say, 'You have to keep out workers from, say, Mexico or Latin America, because they compete with American dropouts; and they get hurt.' Shouldn't we just try to improve our school system and our culture to get people to graduate high school?
George Borjas: Uh, okay. That's actually a great point. And my usual answer to that is two-fold. One is: Who pays for that? Because, you know, providing education for many, many more people is not--you know, there's not a free lunch, right? Somebody pays for that. And I don't know what the estimates of that would be, but I would like to know before you make a decision as to what the right thing to do would be. What would be the cost of doing that? Right?
Russ Roberts: Yep.
George Borjas: And then the second thing that's always puzzled me about this, and I've never really thought it through completely because I haven't had the time to sort of sit down and work out a model, is sort of related to what you said. A lot of people say, 'Look, it's true that, or it may be true that the bottom end has gotten hammered because of immigration and so on. But one good thing about all this is I think can encourage them to go back to school and get more education. Right?' And there's some kind of an upgrade, a skill-upgrade they call it, or something along those lines. And one way to look at it is that way. Another way to look at it is the following: These people decided, before this supply shock, that the optimal thing they should do was to get x schooling and no more. And now, there's a shock out their own control that they now have to revisit that mathematization[?] problem. And they have to incur the cost of moving away from whatever they have picked before to some other equilibrium. Right? Is that an optimal way to run a--is that an optimal thing that's come out of immigration policy, to force people who had already pre-decided they didn't want to do certain things, to make them do them? And I don't see anybody discuss this very clearly. And, you know, in the abstract, we can all say, 'Of course, we can just get everybody--let's make everybody go to college. Let's do that.' But a lot of people don't want to do that. And how do you compensate those people who don't want to do that, through the fact that you are not changing the environment in a way that they have to do something that they don't want to do?
Russ Roberts: Yeah. I think, instead of saying 'Force,' I would say, 'Incentivize.' But it's the same point. Right? Do we want to incentivize people to go to college, say, who don't want to go now. Etc. I think the key point in answering that--and we don't know the answer precisely at all, but the key point would be it's not just that they are going to be incentivized to go to college. It will be, or to say, in high school, say, in graduating, the key point is that with more workers and more people, presumably there's more--and if there is economic growth as a result and more capital coming in, the opportunities and the return to finishing high school and going on to college will be higher than they were before. Just as you mentioned--before, that those new workers will be complementary to, say, our skills. Of course, the question is how much and how big.
Russ Roberts: George, talk for a minute about your personal story. Because it's very interesting. And I think listeners will probably guess that you were an immigrant. And that your experience affected your interest in this topic. Again, I think--that's a small part of the book, but it's a very interesting part. And, talk about that for a little bit.
George Borjas: Okay; thank you so much. I tell you: I was born in Cuba. And my family used to own a small clothing factory. They manufactured men's pants. And, like I say in the book, I'm actually one of those rare economists that spent a lot of time at a factory with capital and labor. The manufacturing product that was sold in the marketplace. So, I've actually seen that firsthand. Okay? So, the factory was confiscated very soon after Castro took over. And basically, you know, my father was very ill from my childhood; and there were rumors that Castro was going to ship out all the children to the countryside and re-educate them or something. My family wanted to get me out of the country, no matter what it involved. But my father basically got sicker over that period, and eventually passed away. And that always disrupted these plans. My mother and I were eventually able to migrate--overseas--just a week before the Missile Crisis closed the border with Cuba. So I was very, very lucky in being one of those last rights[?]. Many years go by, and some--I'm an immigration, obviously; I'm kind of predisposed to immigration topics. And I'm at Columbia U., a grad student at Columbia--this a few years before we met at, you know, in Chicago, right? And Barry Chiswick comes by; and here's a paper; and that paper is about assimilation. That paper is actually, now, you look back on it, and it's sort of the foundation of immigration economics in the modern era. The paper that sparked the whole field. And his claim was--his finding was--that if you look at immigrants who just arrived in the United States and compared them to immigrants who had been here a long time, the immigrants who just arrived earn a lot less than those who have been here a long time. And then he proceeded to interpret that finding as a proof of economic assimilation. The longer you are here, the more you learn whatever it is you have to learn--the language, the American way of life, whatever. Right? The American way in the labor market. And you improve your human capital in some sense. In that seminar I asked the question that clearly came from my own background; and it happened to be because I knew that the human flow was composed of two distinct[?] waves--those who came, like myself, before 1962, and those who came many years later. There were many, many rumors or observations in the Cuban community that those who came before 1962 were the entrepreneurs, the highly skilled; those who came years later were not. So, I said, 'You know, couldn't it be that the reason you are finding that the more recent immigrants do worse than the earlier ones, not be the result of assimilation but just be the fact that the groups are just different kinds of people? Like, in the Cuban [?] I had in mind?
Russ Roberts: [?]
George Borjas: Exactly. And that was really this--this was the mid-1970s. That was the birth of my first paper on immigration, which was published in 1985. So, I moved to California. And this idea that I asked [?] about, kept floating in my head, as California was literally changing dramatically over in that period. This is the early 1980s. This is when you and I had met; and I moved to California: the early 1980s. And you can basically see California changing. Before 1980, California was not a particularly heavy immigrant state. And I get there; and overnight, you can sort of see the town changing. Okay? And I said to myself, 'This looks really interesting.' And it was again [?] change. And I want to study this, out of curiosity. And a question that kept cropping up in my mind was that I had asked at a seminar: How, exactly, would you measure assimilation when you have different "ways" of people being different? And that's what I said in the study; that was really my answer to immigration. And that's the way I got involved.
Russ Roberts: And how much do you think we know now? And there are many, many examples in the book trying to measure this; but try to summarize them. What do we know now about people's ability to assimilate? Whatever that means--there's cultural and economics and assimilation. But let's stick to the economic side, again--the idea that the wages of the children and grandchildren become closer to the wages of the natives.
George Borjas: Right. Well, there's two kinds of estimation we are talking about. One is what happens if you are an immigrant, lifetime, and the other is what happens to the children and grandchildren. Right?
Russ Roberts: Yep.
George Borjas: The whole Chiswick paper was really what happened to some of the immigrants, lifetime. And we know a lot more about that now than we did when Chiswick began--obviously. What we know is that the groups of immigrants who came in the 1940s, 1950s, 1960s, 1970s--you know, assimilated quite well in terms of, they experienced a lot of wage growth. The groups that came in the beginning of the 20th century and the groups that came of the end of the 20th century, did not experience as much wage growth. It's sort of a curious finding. Because if you look at the 20th century in the United States, it's basically book-ended by two mass migrations. And what we tend to find is that they [?] came into mass migrations don't tend to progress as fast as those who came in a period of less immigration. Okay? So that's actually very interesting, sort of topic for future discussion. And we don't quite know why it happened. But it's interesting.
Russ Roberts: Could be a supply effect. Could be something different. Could be there was a big recession in 2008--
George Borjas: Exactly--
Russ Roberts: that set everybody back. We don't--
George Borjas: We don't know. I'm being completely honest. We don't know, but it's just a very interesting pattern. The second thing, which is what happens to the children and grandchildren. And again, the only experience we have here is what happened in the 20th century. So, what we get, we have data for, is we can track the people who came in the early 1900s, look at their children, look at their grandchildren over the century. Right? And what we see is that they are [?]. The children improve over time. And ethnic inequality--in other words, the difference between Group X and Group Y narrows down a lot. And that's what you would expect from the melting pot working. Now, you didn't raise this point, but I make this point in the book: Which is the following: A lot of people look at that 20th century experience and say, 'Look, you know, even though we are having, perhaps we are having some problems today with the new immigrants--they are not doing so well, whatever--it all worked out in the 20th century and therefore you can just extrapolate into the future, and it will work out fine. And this is one of the points I want to make in the book, which sort of came up in our conversation before. You know, conditions on the ground matter a lot. You cannot use things that happen at one place at one time, regarding immigration, and imagine that it will happen in another place at another time. Because, again, immigrants are not just robotic workers. And they example I'd like to give of the 20th century is that--sort of a few examples--is the following. One is: Look, when immigrants in 1900 came in, they went into the manufacturing sector. It's not too much of an exaggeration that the Ellis Island immigrants built up the manufacturing sector of the United States to a large extent. Now, the important thing about that is that those jobs eventually became unionized. And were very high-paying jobs. And those union jobs were, you know, were, you know, [?] transferred within the family. So if your father--one number that I always find incredible is that in 1915 or so, almost 3/4 of the Ford Motor Company workers were foreign born. Well, just imagine if you were a Ford employee and became unionized, got a great-paying job. Your children got that job. Your grandchildren. And that was really the middle class in the 20th century for many immigration families.
Russ Roberts: Yeah. That's a fantastic example. Of course, it was harder for other people's children or grandchildren to get those jobs, because the union wanted to keep them out and were eager to keep the gains very narrow. So they--
George Borjas: Exactly--
Russ Roberts: I just want to emphasize that.
George Borjas: But nevertheless the fact that the immigrants were so over-represented in the manufacturing sector clearly helped them.
Russ Roberts: Yeah.
George Borjas: And the question is: What is it now--what conditions today will lead to that kind of assimilation path in the next hundred years? I don't know. Another issue is, there were two wars. And the Germans were, in particular, highly discriminated against in WWI. And those[?] states passed legislation making it illegal to speak German in public. Making it illegal to actually speak German in public schools. And that was in effect an assimilation, right? Again, we don't want to have another World War, but how do you produce those underlying conditions? And that's one of the reasons--I think there's something you've actually talked about before in some of your work, is that--there is, the incentive to assimilate culturally doesn't really exist any more. The [?] kind of assimilation doesn't really exist any more.
Russ Roberts: It's true.
George Borjas: You know, I give the example in the book of the [?] California, [?] out a memo prohibiting people from using the world melting pot because it's a micro-aggression. Just imagine what doing that means in terms of, you know, future assimilation. It's not really clear, right?
Russ Roberts: Well, the example you also give in the book--which I think is fantastic and relevant, is, through most of a large part of American history, immigrants were eager to learn the language. But, of course it's hard to learn a new language when you are an adult. But the children, at least, would learn the new language. And the parents would often do their best to speak the native language at home to encourage their kids. In fact, my wife's grandparents came here from Germany in 1939, escaping the Nazis; and they never spoke German again. So, think about how crazy--think about that house: A husband and wife, not speaking their native language because they are so horrified and traumatized by the Holocaust; so of course their children spoke English much better than they would have otherwise. Of course, they didn't know German. That was--there was a cost to that, of course. But in today's world, we make it, for reasons that I'm not going to try to explain, we make it easier for people to not learn English. We have wonderful private and public accommodation of people where English is not their native language. Obviously Spanish being the second language. And there's something good about that; and there's something not so good.
George Borjas: Right. And look: the other point that you can make is that there are now gains to be had by making sure you retain the ethnic identity. In terms of all kinds of programs that try to divide people by ethnic groups and reward people and penalize people accordingly. And that also affects assimilation. So, I think that a usual--we all have a tendency to do this. And we all look at data; and we always look at data from the past. And we assume the world is linear and we can just extrapolate from where we are now using the data from the past. Right? It's not so clear you can do this in this context. And that's one of the warnings, the warnings that I give in the book.
Russ Roberts: Yup. Yeah, and I agree with that. So, let me make a philosophical observation and see where you stand on this. So, I'm going to give you my summary of what we know about this and why I come down as I do. And I'm going to be as honest as I can be. So, I concede that immigration is hard on low-skilled workers. I think the effects are relatively small, but I concede that, for them, small is not really the right word. It might be large to them, because 5% of a poor person might be more significant than it might be to me. And I get that. I also believe that over the longer period of time it leads to growth, and better use of resources; and that's going to enhance the opportunities of their children and grandchildren. Especially if we get rid of things like mandated second-language signs, etc. I think we should be encouraging people to learn English and use English; and I hope culturally we'll move toward a more assimilatory--I think it's okay to say, melting pot. I would like to see that. But I understand I don't have control over that. So, I think the economic effects are relatively small. For me, and others, but especially for me. So I concede that. They are bigger for people who are not like me. But for their children and grandchildren, I think that they'll be okay with it; and I think they care about their children and grandchildren. And I see a huge benefit to the people who come here. So, as somebody who is not an nth generation American--just like you, I'm not as new as you are--
George Borjas: Right.
Russ Roberts: but I have--my 4 grandparents, 1 was born in Poland and 3 were born in the United States. I think--they all came in the 1880s part. And I concede the part that I have an emotional reaction to this issue, partly because if those people hadn't come here they would have been killed in the Holocaust. And they would have been really poor, either way. And I'm really glad that we got--that my ancestors came here. That I got to be born here instead of in Poland, or somewhere else. And I'd like to see that opportunity available to other people. So, I see it as a wonderful thing for the people who come here--mostly. I see it as mostly a good thing for the people who are here. And for me the only issue is the cultural issue--is that for a net negative or a net positive, to have diverse people coming here who may not share all the cultural values of America. And there I do worry about the melting pot and assimilation. But that's where I stand. Where do you stand? And does your personal story play a role in your willingness or eagerness to let--or antagonism to people coming here?
George Borjas: You know, we are not that far away, believe it or not. I mean, I think I will--in the little summary you just gave at the very end of what you just said, you sort of didn't really talk about the people being hurt by it so much. And the question is how much wage we put on that. You know, one of the things at the end of the book that I have is I sort of say to myself, 'What would I do if I had control over immigration policy?' Right? And even though there is an impact on the low-skilled labor market, I don't come out at the end and say, 'Let's just stop all low-skilled immigration.' In fact I say we shouldn't do that. We should actually--there is something quite--in the way you put it, there is something quite historic about the United States giving the opportunity to many low-skilled people from all over the world to come to this country and live, you know, much better lives. Right? And I don't want it--I would never want to throw that away. That's part of what the United States is about. But what I think we've made the mistake on, is ignoring the fact that the long run is far away. And there is a need, right now, to address the dislocations suffered by people at that low end. And unfortunately, both in the case of trade and immigration, we've tended to be models[?] people. We tend to look forward and say, 'Look, in the long term, the economic pie will go up. Your children might be fine.' Whatever. Right. But that's 20, 30 years down the line. What do we do with the people who are being hurt today? So, I'm not that far away from you. What I would actually argue, that we cannot just dismiss the short-run impact. So willingly. I think we have to take--we have to think of immigration--if we are going to do these kinds of things, we have to think of immigration policy in a broader way. And that broader way is not just how many immigrants to admit and which immigrants to admit, but what to do about the people who are being hurt by it now. And once we address that, then how much more in your ballpark?
Russ Roberts: I think we have to deal with cultural issue, too.
George Borjas: Yeah; all of that [?] book. I mean, the cultural issue--look at Europe right now. Right? The cultural issue is at the core of all this. And is something--we wanted workers; we got people, instead. And that's what encapsulates what's really at stake here.
Russ Roberts: You have any thoughts on what we might do to--I mean, I would argue that Europe's problems are much worse than the United States's, because, for whatever reason--historical or policy-wise--workers here in the United States are much more likely to assimilate. Their children and grandchildren are, I think, as well. We can debate how fast that is relative to the past. I agree with you that it probably isn't the same. But we seem to be doing a better job--better than Europe is. Is that just good luck? Is it other things that we might do as a nation, though, to make that easier?
George Borjas: Well, look, we've done a lot better job than Europe has in the past. And we did a lot better job than Europe did in the past by basically keeping our hands off the whole assimilation process. We let the process work. The government really--you know, we've had immigration policy, but unlike many European countries we've never had an assimilation policy. We've never penalized it. We've never--you know, apart from a special case like Germany and things like that, right, we've never really done--the government never really has been that much involved in the process of assimilating immigrants and their children. Right? And, the question becomes, in today's world: Is that hands-off approach something that's wise? Or should we begin to rethink that? And I actually don't have an answer for that. I don't really know what the correct approach is.
Russ Roberts: But I think there are things the government does that reduces the incentive to assimilate? Right? They mandate certain things.
George Borjas: Oh, I agree. I think, I think, from the point of view of the country, assimilation is a great thing. I think taking actions and putting in policies that retard assimilation or that encourage ethnic identity to remain generation-after-generation is not a good thing in the long term. Okay? But, you know, I wish I had a magic wand to sort of pass by and return to--you know, one great example of this is that if you think--if you think of the [?] grandparents, and you think about the public school system in New York City back in 1900, 1910, 1920--you know, their goal was to make these immigrant kids Americans. Okay?
Russ Roberts: Yeah.
George Borjas: They learn the language and they were going to come out as American kids. Right?
Russ Roberts: Yup.
George Borjas: You say that today in a school, and you get fired. And that's a problem. That's a problem we want to address.
Russ Roberts: And those kids desperately wanted to be American.
George Borjas: Exactly.
Russ Roberts: They were eager to leave behind their customs and traditions. Often.
George Borjas: Yup.
Russ Roberts: It's been a fascinating ride, when you think about the ethnic pride that we have now, and the negatives about that in terms of seeing us each separate versus part of the same thing--
George Borjas: I know[?]--
Russ Roberts: There's a tradeoff there that's unavoidable.
George Borjas: Right.
Russ Roberts: And certainly maybe we've reached a tipping point where people don't want to be "American". They want to be something American--whatever it is.
George Borjas: And I think if you are from[?] California, say if you are saying 'melting pot,' you've done, you've conducted a micro-aggression.
Russ Roberts: Yeah, that's a fascinating--how that came to be, of course, is unknowable. It's an emergent phenomenon. But that's how I think you would--you would argue, I assume, that that's a reality we have to accept.
George Borjas: That's right.
Russ Roberts: We can't change that easily. And we need to take that into account when we think about--
George Borjas: And the important thing for policy is you really have to take that into account before you let in too many people, for example. Like Germany did. You know. It's not something you can ignore.