A month or two back, Professor George Borgas, professor of economics at the Kennedy School at Harvard and a leading researcher on the economics of immigration (and a Cuban immigrant in childhood) published a new book, We Wanted Workers: Unravelling the Immigration Narrative. Borgas’s empirical work has led him to be somewhat sceptical of whether there are material economic gains to Americans from non-citizen immigration, and to suggest that perhaps immigration policy – even in the US – is largely just a redistributionist policy, typically away from the more lowly-skilled Americans. His empirical work has suggested long-term losses to these relatively low income people.
I haven’t yet read the book – much of which, I understand, is a more popular treatment of material dealt with more formally in his Immigration Economics a couple of years ago. But Reason magazine – a libertarian-oriented publication – has published a substantial and considered exchange of views, prompted by Borgas’s book, between Borgas and Shikha Dalmia, a senior analyst at a US libertarian think-tank (and an Indian immigrant). Dalmia apparently describes herself as a “progressive libertarian and an agnostic with Buddhist longings and a Sufi soul”, so probably not your typical libertarian.
The exchange between Borgas and Dalmia is now freely available on-line here. For anyone interested in immigration issues, it is worth reading. The specific issues are, of course, a bit different here than they are in the United States. A recent New Yorker review of various books on immigration, including Borgas’s, is also worth reading.
From the Reason debate perhaps two extracts struck me most forcefully. The first from the libertarian open borders Shikha
I agree completely that the “overreliance on economic modeling and statistical findings” on this subject is a regrettable development that fosters the notion that “purely technocratic determinations of public policy” are possible. In fact, the scientific hubris underlying such efforts prevents a full airing of the normative and ideological commitments that ultimately do—and perhaps should—guide policy.
and the second from Borgas
I ended my discussion in the first round by noting that “immigration creates winners and losers and the net gain may not be as large as some had hoped. So any discussion of immigration policy has to contrast the gains accruing to the winners with the losses suffered by the losers.” You did not address this very thorny issue in your response, so let me conclude by rephrasing it in even starker terms, as it isolates the problem at the core of our disagreement.
The evidence summarized in We Wanted Workers suggests that it is quite possible that the “efficiency gains” that receive so much emphasis in the libertarian narrative are totally offset by the costs associated with welfare expenditures or harmful productivity spillovers. As I said, it may well be that “immigration is just another government redistribution program.” My italicization of “just” was not a random click on my track pad. It was meant to drive home the point that there is a good chance that all that immigration does is redistribute wealth.
If there are no efficiency gains to be had, then espousing any specific immigration policy is nothing but a declaration that group x is preferred to group y. It is easy to avoid clarifying who you are rooting for by trying to reframe the debate in terms of amorphous philosophical ideals about mobility rights and the like. But this is where we go our separate ways.
When I read yesterday a new IMF article by Sebastian Mallaby (itself quite worth reading) asserting that “the movement of people [is] perhaps the most important of the three traditional forms of globalisation”, it brought home again how essentially ideological (meant not in a pejorative sense, but rather as “driven off a prior world view”, and we all have them) much of the support for large scale immigration often is. Perhaps the same can be said for the sceptics. And perhaps that is both inevitable, and not necessarily a problem, so long as we recognise the nature of the debate.
croaking cassandra 
In a global business you have 2 choices, either import cheap labour to keep manufacturing and production in the country or lose manufacturing and production to another country with lower input costs.
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Or back to the days of trade protection, duties and tariffs on imported product.
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The utopian ideology that fewer migrants equate to higher local wages ignore reality. Immigration is not driven by a magical target. Industry and business survival needs and profitability drive immigration targets. Immigration department is merely a administrator and polices those targets. The government can influence the direction of the type of industry but investments in more productive and more high tech type businesses however our government focus is mainly in agriculture and in tourism. A huge amount of effort and taxpayer dollars has gone into free trade agreements to gain access for farmers produce and to encourage tourists to come to NZ via subsiding and tax incentives for the Hobbit movies. Very little money has gone into R&D or supporting high tech industry in NZ.
Agriculture and tourism need low skilled people and are low productivity industries but both require enormous effort and taxpayers dollars cleaning up the mess that 10 million cows and 4 million tourists make.
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Clearly NZ has a comparative advantage in the things you sneer at, tourism and agriculture. We have a free market so if anyone wants to start a hitech company they are welcome to do it. I guess producing an animated hobbit movie takes hitech staff judging by the skilled workers employed.
I suspect you generalise anyway, I think there are a lot of high tech companies in NZ but not at the scale you would ideally like.
Is agriculture a low productivity industry, I very much doubt it, and I suspect most NZ farmers would not concur.
As for low skill, who cares, McDonalds is low skill too but an economy has got to produce a range of skills as we all cant be economists while we wait fo the mythical hi tech economy to put in an apperance
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If you factor in that 10 million cows only generate $10 billion in export sales and you compare that with 4.5million people that generate $160 billion in net disposable income plus margin you get GDP well in excess of $160 billion, then it is not people that has a productivity issue but the type of activity that people get involved in.
What is not factored into productivity is the mess that 10 million cows make that eat and drop doo doo all day. If you also consider the cost of the mess, the leaching and dirty waterways, the water contamination of the Havelock drinking water and many other communities, the methane gas damage to the ozone from incessant farting, The feeding grasslands that used to be massive kauri forests and we complain about palm oil deforestation in other communities when clearly our dairy cows is rather unnatural as we export 99% of our dairy produce.
I spoke to a ex cow hand who experienced in his childhood on a farm and he agrees, the amount of doo doo is just incredible, cleaning every single day, the stench and the mess. And as a teenager he got out of farm9ng as fast as he could run and as a result his family hires low skilled and cheap migrants to clean.
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It is not my intent to sneer at those industries but to explain the source of NZ productivity issue and why Auckland would have a productivity problem. Michael believes that the Governments immigration target of 50k is the cause and can easily be fixed by lowering that target to 15k. My argument is that the immigrant target is not the magically solution to NZ productivity but is derived from demands by industry. My argument is that industry drives those immigrant targets and therefore it is the types of industry focus that determine the type of migrants that enter NZ.
If our top 2 industries are tourism and agriculture, then the migrants we require would be low skilled, ie chefs, waiters, prostitutes and cleaners. Our Universities train highly skilled individuals that can’t find work and in the past we have brought in highly skilled migrants with PHDs and masters degrees that end up driving cabs because we do not have jobs for highly skilled migrants.
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I read the discussion between Borjas and Dalmia and found it quite interesting. Two things came to mind when reading it.
First, I remember Milton Friedman, also a Liberterian (although without Buddhist longings and a Sufi soul) being in favour of open borders in the absence of a welfare state. I think Milton Friedman found the immigration of low skilled workers to be incompatible with access to the welfare state. This has become an issue in the EU where they have started to put restrictions on the benefits that migrants from eastern Europe can get in western European countries (I recall some cases in the UK and Germany about this).
Second, I was reminded of Borjas’s innovative method of creating pseudo cohorts using census data in the US to track the assimilation of different groups against natives. I remembered that Winkelmann and Winkelmann (1998) (http://www.mbie.govt.nz/publications-research/research/migrants—economic-impacts/lmb981b.pdf) had used the same methodology on NZ data to investigate how different immigrant cohorts had assimilated into NZ. To my knowledge no one has updated the the Winkelmann and Winkelmann (1998) study, which would be interesting, given we have 20 more years of data. I would be interested to see how how more recent cohorts of immigrants have fared.
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The debate over immigration and productivity also needs to include the international student market which also requires lots of low skilled people and massive supermarkets and cafes that are needed to feed these international students our 4th largest export industry. Net migration numbers offered by Statistics NZ include the ebbs and flows of International students which has been increasing annually.
International education in NZ
• $1 billion a year in student fees
• $4.28 billion, including student spending on living costs ($2.2 billion a year in Auckland, 2.7% of Auckland’s GDP)
• NZ’s 4th biggest export earner (behind tourism, dairy and meat)
• Supports 32,000 jobs
• Government target: $5 billion a year by 2026
• 115,875 international fee-paying students in New Zealand,
• 97,950 at tertiary level
• Almost half (43%) take low-value courses at private training establishments (PTEs)
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http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11759352
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