March 18, 2006

Surprise! The Law of Supply and Demand applies to immigration!

Here's the abstract of a new paper by economist George J. Borjas:

Immigration in High-Skill Labor Markets: The Impact of Foreign Students on the Earnings of Doctorates

The rapid growth in the number of foreign students enrolled in American universities has transformed the higher education system, particularly at the graduate level. Many of these newly minted doctorates remain in the United States after receiving their doctoral degrees, so that the foreign student influx can have a significant impact in the labor market for high-skill workers. Using data drawn from the Survey of Earned Doctorates and the Survey of Doctoral Recipients, the study shows that a foreign student influx into a particular doctoral field at a particular time had a significant and adverse effect on the earnings of doctorates in that field who graduated at roughly the same time. A 10 percent immigration-induced increase in the supply of doctorates lowers the wage of competing workers by about 3 to 4 percent. About half of this adverse wage effect can be attributed to the increased prevalence of low-pay postdoctoral appointments in fields that have softer labor market conditions because of large-scale immigration.

It's amazing how few economists will admit that in public. The really funny thing is that Borjas has ridden this one basic Econ 101 idea all the way to an endowed chair at the Kennedy School at Harvard, in part because he has so little competition from other economists, the vast majority of whom want to pretend that, for mysterious reasons, the law of Supply and Demand doesn't apply to anything having to do with immigration. This is a fascinating example of market failure, and some economist should do a paper on why most economists are so reluctant to cash in on this massively important topic of immigration.

For a representative quote from the economic mainstream, Bryan Caplan of George Mason U. writes on his Econlog:

In "Educated Preferences: Explaining Attitudes Toward Immigration In Europe," Hainmueller and Hiscox confirm what I've been telling economists for years: Low-skilled workers are more opposed to immigration because they are less economically literate, not because they selfishly calculate that immigration is especially bad for their pocketbooks:

[P]eople with higher levels of education and occupational skills are more likely to favor immigration regardless of the skill attributes of the immigrants in question. Across Europe, higher education and higher skills mean more support for all types of immigrants. These relationships are almost identical among individuals in the labor force (i.e., those competing for jobs) and those not in the labor force.

As a professor, I work in one of the few labor markets that is almost totally open to foreign competition. How often do you think I've heard an American professor grumble that foreign Ph.D.s "Are taking our jobs!"? Try never.

In the Comments to this posting, various grad students say, "Yeah, sure, a professor would say that, wouldn't he?" One of many writes:

"Adding to the echo chamber, of course currently tenured professors aren't going to complain about it. That's like pointing out that undergraduates currently at Harvard aren't that exercised about Harvard's use of affirmative action."

In general, natives who have jobs requiring them to be highly skilled in their native language don't much fear that poor foreigners who don't speak their language are going to drive down their salaries. In contrast, natives who are better at working with their hands than at working with words rationally fear competition from immigrants who speak other languages. Unfortunately, almost all the published discourse is of course written by natives who are skilled with words, and thus have little to fear from foreigners.

My published articles are archived at -- Steve Sailer

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