20.8.04

AND ON TO THE RESEARCH PROJECT. Consider a rich country that has some industries seeking to hire additional workers, but no further suitable workers can be found at current wages. (Is there an upward-sloping supply curve? Dunno yet. That's why we call it research.)

Some employers seek workers with skills that can be proxied for by credentials. (Is this going to be another riff on the failures of the U.S. education system? No. The Provost will be asking for a sabbatical report in February. Best to keep it tractable. Even the most perfect of education system probably responds to market signals with a lag.) Dominic Basulto looks at the best-case scenario.
In order to retain its technological superiority, the U.S. needs to encourage an open policy toward the immigration of professionals and students. In addition, policymakers should consider ways to boost science & math education within the U.S. and provide incentives for businesses to invest in long-term R&D initiatives. Innovation is the key to future U.S. economic greatness and immigrants arriving in the U.S. recognize this. Open labor markets help to strengthen the U.S. economy and provide the foundation for innovation in future generations. At a time when Silicon Valley is facing a labor shortage of skilled engineers and scientists, the need to embrace skilled immigrant IT professionals is all the more pressing.

Failure to understand these implications could result in a "reverse brain drain," in which the U.S. loses its best and brightest to nations in the developing world. If the rest of the world no longer views the U.S. as the home of innovation and open markets, foreign-born Americans will be free to vote with their feet and move elsewhere. A recent article in The Wall Street Journal ("Give Us Your Nerds") [no hyperlink, sorry] puts it best: "Any policy that would depress the influx or close off our borders altogether is not in America's long-term interest, especially in a world where economic growth and competitiveness will depend above all on human capital."
OK, so if an immigrant has credentials, the optimal policy involves issuance of work permits. How cheaply can these work permits be obtained?

But wait, there's more. It's not just the high-tech industries that rely on [cheap?] immigrant labor. This essay argues that the immigrants who staff some of the more humble businesses do something of value as well.
Most immigrants move to America for the golden opportunity of living in a country that is as economic free as we are. If they were looking for a welfare state Canada and Europe would be attractive options, but most immigrants want to come to America. We continue to be a beacon of the possibility that hard work is rewarded and that a strong worker will receive his or her due. Whether it is working in fields, in restaurants, in cafeterias, or in offices, immigrants often work jobs that are best characterized as semi-skilled or blue collar. These mothers and fathers are raising children with the belief that hard work is the path to success and they serve as a strong example to the next generation that responsibility garners respect. In many ways, today’s immigrants are merely the most recent wave of lower-middle class citizens who have worked hard to provide their children with unlimited opportunities and it will not surprise me to see the second generation immigrants as successful businessmen, doctors, lawyers, professors, and politicians in numbers so large that our stereotype of immigrants and blue collar labor will be outdated.
So part of the research problem is to consider cheapening the cost of legal migration. (Is there a direction for future research? Ayup. But I'm not going to give all my good ideas away until February.) The welfare migration stuff has been done to a turn already.

As an aside, Cafe Hayek uses the existence of the illegal-immigrant underground economy as a way of getting a handle on the nonexistence of monopsony power in labor markets.

What else is there to be concerned about? Herewith a skeptic's summary of the open-borders argument:
The American economy has a labor scarcity, and the Third World — specifically Mexico — has a surplus. We should liberalize labor as the next step toward the ideal of Free Trade. “If there is a demand for labor and a willing supply of labor and the government prevents the participants from exchanging their services,” Doverspa contends, “the market is less efficient and both sides lose.” Moreover, there are certain jobs — very low on the economic scale — that Americans “will not do,” jobs that are increasingly filled by immigrant labor. As things stand, this immigrant labor is half-in and half-out of our economy; a sort of labor black market, which exacts a human toll in the form of distortions and perverse arrangements. In the interest, not merely of efficiency, but of justice, we ought to embrace these workers and make them legitimately part of our markets. Doverspa captures the efficiency side of this argument nicely: “Basic economic theory states that distortions to the market always cause a dead-weight loss in overall efficiency. The wall between nation-states continues to be one of the largest impediments to full economic freedom in the world.” Others, like Tamar Jacoby, have asseverated the claims of justice.
But all is not well with the world.
How does making a foreign nation a party to our most sensitive policies “form a more perfect Union”? How does importing Third World gangs “establish Justice”? How does perpetuating chaos on the border “insure Domestic Tranquility”? How does opening our borders to Moslem terrorists “provide for the common defence”? How does subverting our laws, diluting our citizenship, weakening our shared culture, empowering those who despise our culture, and undermining the consensus by which we became “one people” — how do these things “secure the Blessings of Liberty to ourselves and our Posterity”?

Perhaps my opponents on this issue have answers for these polemical questions; but I note (with, I confess, a tinge of cynicism) that they have not yet even begun to give us their answers.
Ah, more for the research question. Suppose that some fraction of the potential migrants (who can be credentialled; perhaps Mohammed Atta fancied himself an architecture critic whilst plotting his plots) are ne'er-do-wells. Screening them out when they petition for admission is costly. Do you raise the price of admission (the Immigration Lawyers' Full Employment Act of 2005?) What effect will that have on illegal immigration (the Law of Unintended Consequences suggests the coyotes will get rich.) So suppose, instead, that you lower the price of admission? To what extent will that free up resources for catching bad guys? Or, will the bad guys mimic unskilled workers, and sneak in? Questions, questions.

And so, to work.

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