Wednesday, October 24, 2012

Why are people so weird about immigration? Episode #321

I have upped my immigration griping a lot lately.

Usually I complain about either high skill work visa advocates that would never dream of "picking winners" so blatantly in any other policy arena but for some reason consider it good economics to do it with the labor market - or the "Staple Act" advocates who are like the high skill work visa advocates on steroid - or more recently the absolutely insane claim that liberalization of student visas is somehow low-hanging policy fruit.

Evan Soltas has now joined the ranks of people who utterly confuse me on this. He tweeted:

"Immigration fact of the day: The average likelihood of winning the Green Card Lottery is 0.26%. 50k visas, 14.7m entrants." [he must be rounding or adding by country likelihood because that doesn't quite come out right - DK]

Which I took to be a complaint about how tight the lottery was and a suggestion to expand it (that is certainly how others on twitter took it). That would be yet another weird way to expand immigration, because the lottery is for people from underrepresented countries. In other words, forget the people from Mexico, elsewhere in Central America, India, China, etc.... you know, the people that are traditionally very interested in becoming Americans. Instead toss green cards at populations where demand to migrate has traditionally been weaker.

It's nice, of course. More diversity in the melting pot is always good. But it's really a niche channel.

I'm still not sure if Soltas wants to expand this green card channel, but his readers seemed to.

But then I came across this post of his at Bloomberg, where Evan repeats the same "shortage" of scientists and engineers argument you always hear. Over half a century of thorough economic research has debunked the idea of persistent skilled labor shortages, and pretty standard economic theory suggests it shouldn't be a problem. So why do smart people want to tilt the scales in favor of these types of workers? I don't get it.

It's not shills or novices that have contributed to the literature on skilled labor shortages. I'm talking about George Stigler, David Blank, Kenneth Boulding, Kenneth Arrow, Walter Oi, Burt Barnow, Richard Freeman, and Sherwin Rosen.

Imagine if any other policy area worked the way immigration policy does. Take housing policy. Imagine if the government looked at McMansions out there and decided that clearly since these houses are worth more they are more valuable. (A couple years ago at least) their prices are going up fast - so they're clearly in high demand. What the government needs to do is subsidize these home buyers. They need to make it easier for them to buy a home relative to the boost they give to dinky small home owners or renters.

Oh wait - they have a policy like that already. It's called the mortgage interest deduction and economists think it's a bad idea because:

1. It's not good to pick home ownership as a winner over renting, and
2. If you're going to subsidize home ownership, there's no reason to do it in a regressive way

And yet this is exactly what all kinds of smart people advocate with immigration policy. I don't get it.


  1. btw - these policies make big impacts on both the housing market and high skill labor market.

    I wouldn't end H1-Bs any more than I would just end the mortgage interest deduction. I'd phase them both out gradually - the home interest deduction very gradually. We don't need another wave of peoples' homes going under water. In fact I wouldn't even breath a word of that one within 100ft. of the Senate floor until we are out of this recession.

    1. I just made up a random number, and then when seeing it realized how dumb it was.

      Let's say 2,000 ft. from the Senate floor, or 100 ft. from a C-Span camera.

  2. Re: "Over half a century of thorough economic research has debunked the idea of persistent skilled labor shortages."

    This surprises me. I work in the high tech industry. It is difficult to find qualified engineers and scientists who are US citizens/residents. Hence we routinely sponsor H1B's and such. How does the economic research determine if there is and isn't a labor shortage? Are advanced degrees and level of specialization considered?

    1. Difficult to find, or difficult to find at the wage that you'd prefer to pay them? Those are two very different claims.

      It's difficult for people to find lots of things. Usually this is solved by bidding up prices, which increases supply.

      What research has found is that high skill labor is very responsive to price signals. In certain areas (like biomedical scientists) where policymakers have tried to circumvent this process there have been large gluts in the labor market.

      Globalizing labor markets is part of supplying these needs, and foreign IT workers are going to continue being important. I just don't see the point of giving a leg up to this particular group.

      There is one rub with high skill labor markets, and that is that there is sometimes a lag in supply adjustments. I'm not sure how bad this is in IT where the time to get adequate training may be shorter.

      The H1-B is also structured strangely since firms have to sponsor workers. That depresses wages further because workers are tied to firms and don't have outside options. Other immigrant statuses don't distort the labor market in this way.

    2. The counter intuitive part for me is that those with STEM degrees can expect higher (nominal) salaries ... so why don't more US citizens opt for these fields of study as opposed to business or liberal art degrees ... no offense ;-)

    3. no sane person would elect STEM. Look at eduction as an investment. Who would rationally go into a business were your competitors have such a huge cost advantage. An American STEM student may pay $200,000 or more for their education while an H1-B has no investment whatsoever.

      And, then there is the rampant price fixing by employers including the well known conspiracy of tech not to hire from each other.

      Here was the news this past spring

      Apple, Google, others to face antitrust suit over staff poaching
      April 19, 2012|By Jessica Guynn



      In a 2007 email, Google's Eric Schmidt, above, was asked by Steve Jobs not to recruit an Apple engineer. "I would be very pleased if your recruiting department would stop doing this," Jobs wrote Schmidt, then-CEO of Google who also sat on the Apple board.

      In a 2007 email, Google's Eric Schmidt, above, was asked by Steve Jobs… (Julie Jacobson / Associated…)

      SAN FRANCISCO -- Apple, Google, Intel, Pixar and other high-tech companies will face an antitrust lawsuit that alleges they illegally conspired not to poach each other’s staffers.

      San Jose U.S. District Court Judge Lucy Koh rejected a motion to dismiss the claims Wednesday night. In a 29-page opinion, she ruled that the “Do Not Cold Call” agreements among the defendants probably resulted “from collusion, and not from coincidence.

    4. bpabbot -
      There are a lot of compensating differentials and natural labor supply restrictions for this kind of work. A lot of people aren't good at it, people that are have to go through a lot of difficult training. And there are simply productivity differences that are going to keep STEM wages relatively high. But that's not quite the same as a labor shortage. If you had a persistent shortage you wouldn't expect to see the sort of wage responsiveness that we do.

      Think of it this way - lawyers and Wall Street executives get paid very well too. Does that mean that we have a shortage of them?

    5. Another way to think about it is skilled labor - college majors - in general. They persistently make more than high school grads. Why don't we see more people going to college? Is there a shortage of college majors? Maybe at certain points in time, but research suggests college attendance is very responsive to the fluctuation of these differentials. Differentials will still remaining because of training cost differentials and productivity differentials.

    6. I agree completely on the lawyer point (there's isn't a shortage). I'm still not sure that applies to STEM degrees. Where I am employed naturalized citizens are outnumbered by both Europeans and Asians (ethnic Chinese+India). This isn't consistent with the legal profession. Also, is the demand for lawyers driven by how many lawyers are already practicing? Would there have ever been a 2nd lawyer if there hadn't been a first? ;-)

      I wonder if the abstract thought processes needed for STEM careers play a part. Perhaps the lack of qualified STEM experts has to do with personality and aptitude. What percentage of the population is happy spending their day with physics, formulas, mathematics, and computer code? What percentage have intuition for physics, formulas, mathematics, and computer code?

  3. Personally I think that immigration policy should prioritize good looking healthy smart young woman from economically disadvantaged countries (i.e. Eastern Europe) or countries that treat their women badly (i.e. the Muslim and Hindu worlds). It makes more sense than most modern immigration policies.

    1. Balancing out chauvanism with humanitarianism - I like that :)

  4. I think we can sort of split the high-skilled immigration supporters in two groups:

    1) The folks who don't think about it very much. (I mean come on, that explains so much about so many public figure "economists")

    2) The folks who support a generally more liberal immigration policy but think that high-skilled immigration is a good first step from a political point of view. The folks who would be competing with those high-skilled immigrants tend to be more ok with it than the folks who would be competing with low-skilled immigrants, so it seems politically feasible.

  5. According to Paul Krugman,"...immigration reduces the wages of domestic workers who compete with immigrants". Therefore, one possible justification for increasing high-skilled immigration while reducing low-skilled would be to decrease income inequality.

    I don't advocate this. My default position is libertarian and I'm not yet convinced that income inequality is bad. But putting that aside for a moment, would this not be the effect of such a policy?

  6. Doesn't it make sense to prefer immigrants who will pay more in taxes?

    1. Should we give breaks to rich people - maybe make it easier to deal with the DMV if you make over $200,000 - because they pay more in taxes?

      Why should your tax bill determine whether or not the government gives you a leg up?

    2. Not quite the same, but the rich can already have a path to citizenship.

  7. Just curious. Why do economists think that it is wrong to pick home ownership over renting? Isn't that a political question? Thanks. :)


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