The problem with skills-based immigration

Great piece in The Economist [subscription required], on the British government's new immigration plan, which explains concisely the problem I have with proponents of skills-based immigration restrictions:

Under the new rules, fewer low-skilled workers will be allowed in, while those with plenty of qualifications and experience will be welcomed, particularly if their skills fall into categories believed to be in short supply. A committee of experts will be assembled to determine exactly what those skills are.

This way of managing immigration has a respectable pedigree - sensible people such as the Australians and Canadians do it - but that does not mean it makes economic sense. Employers are better than governments at knowing what jobs are in short supply (as Australian employers discovered a while ago when the government got its sums wrong and left them with a critical shortage of doctors). If governments think that immigration is running at politically unacceptable levels, they should limit total numbers. Micro-managing the labour market is not the answer.

Until now, the government has been quietly and commendably liberal on economic migration, but now it is worried. It hasn't started building dykes, but is trying to channel the flow. That is a mistake: it risks ending up with a flood in one place, a drought in another and a policy up the spout.

Those who argue for such entry requirements simply assume it to be the case that such restrictions represent the most effective method of identifying the most suitable immigrants. It never seems to occur to them how this particular centrally planned system manages to get around the problem of information identified by Hayek. Such a system could no more predict the demand for, say, plumbers for the next year than it could the weather.

Comments

[someone]

This way of managing immigration has a respectable pedigree - sensible people such as the Australians and Canadians do it - but that does not mean it makes economic sense. Employers are better than governments at knowing what jobs are in short supply (as Australian employers discovered a while ago when the government got its sums wrong and left them with a critical shortage of doctors). If governments think that immigration is running at politically unacceptable levels, they should limit total numbers. Micro-managing the labour market is not the answer.

GodlessCapitalist, "lurker," and others have gone over this with you many times (not to mention people like Randall Parker (parapundit.com) on other websites), but you still can't seem to get it through your head: the U.S. and Europe are not free markets. They spend massive amounts of money on education, health, and social programs, especially for the unskilled and uneducated, both native and immigrant. This is not to mention other services like trasportation, police, courts, jails, fire, and other public safety services (e.g., inspecting housing for unsafe levels of various chemicals, unsafe construction in natural disaster prone areas)--and this probably doesn't cover everything. The bottom line is that living in a modern technological society is not cheap, and it's especially not cheap in one with many social services. The poor, both native and immigrant, are often not able to pay their own way. Bringing in more poor people in any society with heavy infrastructure costs and social programs on top of it means more net subsidies.

All that said, you are accurate in saying that the government is not the best predictor of the market. But I would rather have an imperfect regulated system than a completely distorted market making the decisions. There is simply no free market in the Milton Friedman sense--and by the way even he flatly said "you can't have free immigration and a welfare state." Like GodlessCapitalist said, loose/open borders is an extreme leftist idea dreamed up by class warriors, starry-eyed Utopians out to save the world, and kooky "anti-racists" that only masquerades as "conservative" or "libertarian."

I would ask as GodlessCapitalist has many times, do you believe there is such a thing as a net tax recipient?

[Frank McGahon]

I've gone over this a million times but you guys never get it - some "cognitive elite" - your arguments are bogus. The merits of the welfare state, redistribution, and the very idea of "net tax recipients" all stand or fall regardless of immigration.

If you think the idea of "net tax recipients" is a bad thing, better lobby to have social security withdrawn from old folks. While you're at it, lobby for governments to cut all support for universities (why not start with the University of California, Irvine?) and sack everyone working for the government. You might want to redesign the tax code to eliminate all that progressiveness: given the share of overall tax revenues paid by the top 10%, you'll probably find that "net tax recipients" are to be found a lot closer to the mean income than you'd think.

The number of immigrant net tax recipients is utterly swamped by the number of "native" net tax recipients. Restricting immigration to zero will have an effect of approximately zero on the number of people who receive more from the government than they pay back.

As for your argument that "the free market doesn't exist, therefore market forces don't apply", I shouldn't have to point out to you that this makes absolutely no sense. Anyone who says that businesses have a better idea where job shortages are than a government-sponsored group of "experts" is making a simple statement of common sense which is supported by empirical fact and is not making some sort of grand statement about the existence or otherwise of a perfect free market (incidentally, this essentialism is revealing of the mindset of the "hbd" race-taxonomy-crew, as if there was conceptually some sort of platonic essence of free-marketness that real world versions might only strive to emulate but never achieve).

You can adopt the ostrich pose all you like but skills-based-immigration doesn't work - you get shortages of workers people actually want and gluts of workers nobody wants, hence the phenomenon of Indian doctors driving taxis.

[someone]

The merits of the welfare state, redistribution, and the very idea of "net tax recipients" all stand or fall regardless of immigration[...]Restricting immigration to zero will have an effect of approximately zero on the number of people who receive more from the government than they pay back.

Stopping low-skill immigration will not stop these problems, but it will help make them not get worse.

you'll probably find that "net tax recipients" are to be found a lot closer to the mean income than you'd think.

I actually tend to agree here. Middle-income people are not paying much in taxes. But that is not an excuse to bring in more poor people.

[Frank McGahon]

Stopping low-skill immigration will not stop these problems, but it will help make them not get worse.

No, it won't. it's only if you have swallowed the "hbd" kool-aid and believe in all that eugenic baloney that you would make this assumption. Facts are that:

1) There is a demand for low-skilled labour - if there weren't, nobody would bother immigrating, the availability of cheap labour is a major bonus to any economy and the individuals who comprise it.

and

2) A considerable proportion of current "high skilled" natives are descended from "low-skilled" immigrants.

But that is not an excuse to bring in more poor people

The "excuse" for "bringing in" poor people and making them richer is that there are jobs for them to do in the here and now. This is vastly more important than what some ideologue insists is in the marginal collective eugenic interest of society in the future.

[Jim]

The problem in the US with the costs of immigration is not their net amount but who specifically pays as opposed to who benefits. Costs averaged across the entire country are irrelevant. Employees in the interior of the country do not pay the (border) state and local taxes, which fund the bulk of the services to indigents such as illegal immigrants, while they are the first ones to reap the benefits.

Beyond this, the costs of immigration are not all economic. people are not justunits of labor, even when they are imiigrants. A good deal of the heat over immigration policy has to do with questions of cultural accomodation, both or immigrants and natives. Some immigrants just refuse - think of the Kilkenny Laws - and some just can't wait, and then the natives bitch because they are "diluting our culture". Any treatment of this side of the issue in the debate is very rare.

[Frank McGahon]

The problem in the US with the costs of immigration is not their net amount but who specifically pays as opposed to who benefits

No, the problem with discussing this is that the financial costs of "providing services" to immigrants is a) not all that much - they typically don't qualify for welfare and where they use existing public roads etc. the marginal cost of accommodating each extra individual is tiny - and b) differs little from the cost of "providing services" to native poor and further, costs must be measured against benefits. This is almost never done by anti-immigrationists. You are also quite incorrect that the locations of "cost" and "benefit" are separate. The benefit of cheap labour applies wherever that labour is located: Economic activity made possible by cheap labour, whether it is small scale (pool-cleaning etc.) or large scale (fruit-picking etc.) just doesn't happen if the source of cheap labour is removed, that is a net loss no matter what way you slice it.

A good deal of the heat over immigration policy has to do with questions of cultural accomodation, both or immigrants and natives. Some immigrants just refuse - think of the Kilkenny Laws - and some just can't wait, and then the natives bitch because they are "diluting our culture". Any treatment of this side of the issue in the debate is very rare.

The only reason this is rare is because people try to dress up their nativist cultural objections in pseudo-economic nonsense. In any case, this is a problem not of immigration policy so much as "post-immigration" policy. The issue of cultural accomodation is a worthwhile question but you can't really deal with this by "pre-screening" - there's no real way of knowing, a priori, that immigrant a from country b will be "compatible" while immigrant x from country y won't. All you can do is ensure that the incentives work to encourage enterprising accomodating individuals and discourage those who have no interest in making any kind of economic or cultural contribution. The best way of achieving this is to not make welfare available to new immigrants (at least until they have worked for a set period of time) and to have a naturalisation process so that they can become full citizens. Probably the best way of achieving the opposite is to cart off immigrants into high-rise ghettos on the periphery of the city (as with France) or to ensure that not only will they never become citizens but neither will their children or grandchildren (as with Germany).

[Jim]

Your main contention is quite correct, that you cannot preselect who will adapt based on national origin. Class origin seems to be a better predictor, but it is crude too. These stereotypes, and that is really all that kind of thing is, apply decently to groups but not to the individuals in those groups, so they are useless.

Back to your comment on cost and benefit. Costs and benefits are indeed separate when the cost is born by taxpayers in one state and the benefit is enjoyed by an employer in another. Is the contention that the cheap labor of these immigrants benefits the overall economy? well, here's an example - meat packers in the Midwest use cheap Mexican labor. That's not the only way they cut costs. The labor is not only cheap because the pay is low, but all kinds of standards in the plants are low. The incidence of food-borne diseases is rising, and it is a symptom of the same shoddy practices as the use of easily exploited immgrant labor. It would help if the workers felt secure enough to organize, but that is a whoe separate subject.

Immigrants very rarely receive welfare payments, at least in the US. The advantage is too small compared to the burden of leaving home. What they receive is schooling in public schools and care in public hospitals that states such as California and Arizona have documented as costing a substantial amount. California compounded its own misery with a law requiring instruction in a child's naitve language until he achieved grade level. In practise this applied only to Spanish-speaking childen, an inequity intself. The stupid law was ferociously defended mainly by the bilingual ed people and finally voted down in a referendum where Mexican (naturalized)immigrants seem to have swung the vote. So here's a case where immigrants were eager to adopt those traits they saw as useful.

The fix is to make the employers, who are the direct beficiaries, pay the social costs of their cheap labor. This is a radical notion in the US., but in several states something like this may happen. Several states are trying to get Wal-Mart to pay health insurance for their employees. fruit gorwers and sch will end up doin the same if the states win awith Wal-Mart.

[Frank McGahon]

Jim, with the greatest of respect, your grasp of basic economics is, to say the least, tenuous. Cheap labour, by which I mean useful, good quality, labor provided at a reduced cost, is good no matter what way you shake it and it's not just for the "overall economy" (as if this was something utterly disconnected from the people active in it!).

Look, let's say I want my lawn cut, let's say it's worth $10 to me. Now if an "expensive labourer" want $15 to cut it, it doesn't get cut, or I have to do it myself. If a "cheap labourer" is prepared to do it for $5 we are both better off for this transaction - my lawn gets cut for less than it's worth to me and the cheap labour guy gets $5, making himself richer. Now, if you prevent me hiring the cheap labour guy, note that the expensive labour guy doesn't get the $15, the lawn just doesn't get cut. The world is poorer for the loss of that economic transaction.

The fix is to make the employers, who are the direct beficiaries, pay the social costs of their cheap labor. This is a radical notion in the US.

This notion is "radical" only in the sense that it is radically unhinged from reality. This is just standard anti-immigration boilerplate with an anti-corporate veneer. There are no social costs to cheap labour qua cheap labour. There may well be "social costs" to inept government public education or public health policies. If so, it behoves those complaining about those social costs to direct their ire at the failed or failing policies instead of railing about immigration. That they don't suggests that these issues are only of interest to them to the extent that they appear to bolster an argument to keep swarthy people out.

[Jim]

You have too much respect for my grasp of economics. What I am fumblingly trying to say is that cheap labor is only cheap if it really is cheap. It is not cheap simply because the real costs of it are fobbed off on society. I understand your point about cutting the lawn; it is the essence over the battle over minimum wages here. By the way, who cuts your lawn for so cheap? Has he got any openings?

Timing is everything - a friend of mine just got food poisoning from a salad. This kind of thing never used to happen; only the Chinese insisted on eating nothing raw. But now, because so much of the is cheap labor is illegal, and has to live in the shadows, and doesn't get screened the way food workers should, it is happening more and more. We all carry germs, that's not the point. How much more would it cost for 1) these people's own government, despite the Latin gift for government, to issue them passports like real citizens so they 2) could get visas and 3) live like normal people and be treated decently? But that would be a few concentrated costs on one set of people as against a rather diffuse cost, the risk of food poidsoning or whatever, on the rest of us.

When I said "social cost" I think that was the wrong or inexact term. I mean the administrative costs. It is not anti-corporate to make responsible for health care because it serves oot keep health care costs down. Employers as corporations stand a better chance with insures as corporations when it comes to negotiating these costs. Corporations cannot influence each other as easily as they can governments. And it isn't anti-immigration to insist that people get fair compensation, in pay and benefits, from the employers who gain from their labor.

Truly cheap labor is always good. I agree. In this case it works out to be a case where immigrants are just subsidizing the rest of us.

[Frank McGahon]

But now, because so much of the is cheap labor is illegal, and has to live in the shadows, and doesn't get screened the way food workers should, it is happening more and more

Which is a direct consequence of restricted (legal) immigration and wouldn't apply in the case of liberal immigration...

It is not anti-corporate to make responsible for health care because it serves oot keep health care costs down.

No, the problem is not that it is "anti-corporate" (as if that were a good or bad thing in itself), the problem is that it is a deadweight cost. Look: If the employee wants health insurance he can pay for it, if he doesn't pay for it, it is because he calculates that it isn't worth it to him - now, you might retort that that is because he knows some sort of public healthcare safety net is available (which is the same for any poor person, and applies more often to "native" poor) but if so, your beef is with that "costly" publicly funded healthcare and not the fact that a guy works for minimum wage. Your proposal amounts to forcing employers to pay for health insurance that employees don't want. At the margins this causes the exact same problem - the lawn doesn't get cut. Either the wage (the employee wants) plus insurance is too costly to make it worthwhile to hire the guy, or the wage (the employers want to pay) minus the insurance is to low to attract the worker.

[Jim]

With regard to health care, funny you should mention... It depends on the value of the individual worker. There is a growing awareness here that "presenteeism" - people dragging their sick ass to work - decreases productivity as these vectors spread their contagion. So companies are relooking their sick leave policies, and for that matter, their health care contributions. But that is for employees who have an individual value and are more expensive to replace than to care for.

Most immigrant workers don't have any individual value to an employer because their labor is a commodity. And the huge majority of these workers are young and male, who hardly take time off to eat, let alone go to a doctor, whether they can afford to or not. So that's a good fit. These guys often make enough to be able to contribute something for their own health care, judging from the volume of cash they send home;they just choose not to. (It amounts to the second or so largest source of foreign income for Mexico, for instance.)And if someone calculates wrong, Mexico sure is full of replacements. So this system is even cheaper than slavery, because there is no capital investment in the workers. And there is the advantage of free will, for what it's worth.

back to the assimilation issue - it always dies down one way or the other, regardless of how well immigrants assimilate. There are 60M Germans in the US who would qaulify as Volksdeutscth; sorry for the connotations. They constitute 50% of the population in Wisconsin, Minnesota, the Dakotas and Ohio, and that is just the heaviest areas. So where is all the angst? And no, they didn't assimilate fully when it comes to English culture, but close enough for government work. They and the rest of us form a new cultural identity, Anglo. How's that for making do?