May 16, 2014

The cure for all ills: Moar immigration

Here's a paper that lots of people are citing about "declining business formation dynamism" and decline in job relocation.
Declining Business Dynamism in the United States: A Look at States and Metros 
By: Ian Hathaway and Robert E. Litan 
Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation.

But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech. 
Here, the geographic aspects of business dynamism are analyzed. In particular, we look at how these trends have applied to the states and metropolitan areas throughout the United States. In short, we confirm that the previously documented declines in business dynamism in the U.S. overall are a pervasive force throughout the country geographically. 
In fact, we show that dynamism has declined in all fifty states and in all but a handful of the more than three hundred and sixty U.S. metropolitan areas during the last three decades. Moreover, the performance of business dynamism across the states and metros has become increasingly similar over time. In other words, the national decline in business dynamism has been a widely shared experience. 
While the reasons explaining this decline are still unknown, if it persists, it implies a continuation of slow growth for the indefinite future, unless for equally unknown reasons or by virtue of entrepreneurshipenhancing policies (such as liberalized entry of high-skilled immigrants), these trends are reversed.

You know, I realize this may come as a surprise, but we've actually had a certain amount of immigration during these recent decades of declining economic dynamism. So, before we rush into even more immigration, maybe we should consider the possibility that immigration discourages business formation and job relocation among Americans. 

I thought through the logic last year in conversations with my wife's nephew, when he was visiting us in Los Angeles from his small town in the Midwest. He played on a couple of informal soccer teams here, one otherwise all-Mexican, one otherwise all-Russian. The friendly Mexicans called him "Hollywood" because he looks like the kind of All-American handsome young man associated with movie stardom. (The brooding Russians called him "you.")

But, assuming you aren't going to be the next Brad Pitt, does it make sense for an American to relocate for economic reasons to Los Angeles, the immigration capital of America over the last generation? 

First, it's really expensive in part because of the steady population increase, and in part because it attracts immigrants from cultures where extended families crowded into one house are standard.

Second, wages are not very good here relative to the cost of living. That has something to do with the esoteric concept known as supply and demand.

Third, lots of people make lots of money owning small businesses in Los Angeles, but for an American outsider without many family connections, it can be a baffling maze of ethnic specialties and unfriendly extended family business networks. What's your best field? Well, in Los Angeles, a lot of fields are not particularly open to random Americans moving up into management, so good luck. Maybe you'll stumble into one that doesn't turn out to discriminate against you. Or maybe you'll waste a few years before you figure out that the good jobs in the field where you are an entry-level employee only go to, say, cousins from Yemen.

Fourth, California imposes numerous regulations and taxes on businesses, which makes it a difficult business environment for law-abiding Americans. In turn, it attracts a large number of immigrants from cultures where everybody cheats. (Here's my jury duty story about the Iranian used car dealers who stole two million dollars in sales tax revenue.) It's hard to compete when you are burdened with small town Midwestern values against businessmen who think Americans are chumps.
      

32 comments:

Anonymous said...

While the reasons explaining this decline are still unknown ..


I'm starting to think that economists are the single most stupid category of academic, surpassing even the "womyns studies" and "Afro-American studies" clowns.


we show that dynamism has declined in all fifty states and in all but a handful of the more than three hundred and sixty U.S. metropolitan areas during the last three decades


By an amazing coincidence, that time period matches up well with the latest period of liberalized entry of high-skilled (and any-skilled) immigrants.

BurplesonAFB said...

entrepreneurshipenhancing

Thought I was reading German for a moment.

Anonymous said...

""""""""""Third, California imposes a lot of regulations and taxes on businesses, which makes it a difficult environment for law-abiding Americans. In turn, it attracts a large number of immigrants from cultures where everybody cheats. (Here's my jury duty story about the Iranian used car dealers who stole two million dollars in sales tax revenue.) It's hard to compete when you are burdened with small town Midwestern values against businessmen who think Americans are chumps."""""""""""""""""""""


So then perhaps these migrating Midwesterners should adopt the attitude of many of our finest athletes: Cheat or lose, since everyone else is using PEDS and the only successful ones are those who cheat to win.

Cail Corishev said...

It's hard to compete when you are burdened with small town Midwestern values against businessmen who think Americans are chumps.

That's even becoming a problem for those who stay in their small Midwestern town, if they happen to be in a field that suddenly "needs" to be done by immigrants, like milking dairy cows or installing drywall.

Whiskey said...

America. Stick a fork in it.

Anonymous said...

Our biggest immigrant group, Mexicans, are extremely nihilistic. I don't blame them, I share their perspective. The paradox is that they have so many kids. What's the motivation - "I can't wait for my offspring to do roofing in the summer, or to learn the ins and outs of seeking benefits or of disability payouts." They may be nihilistic, but they must have one hell of a breeding instinct.

Don't expect too much dynamism from a guy who awakens every day to curse the day he was born.

countenance said...

"Declining business formation dynanism"

I think we have enough tattoo parlors, smoke shops and corner quickie marts to suit us.

Anonymous said...

Our biggest immigrant group, Mexicans, are extremely nihilistic

What does it means that Russians(of all people)are at the other end of the spectrum in that study? Does it mean anything?

Daniel said...

>>>Third, lots of people make lots of money owning small businesses in Los Angeles, but for an American outsider without many family connections, it can be a baffling maze of ethnic specialties and unfriendly extended family business networks.<<<

Excellent and necessary point to make, but you know how the blowhards of the commentariat (right as well as left) will gleefully jump on this, declaring us racist retrogrades, social luddites, incapable of "competing" in this global community. Let them laugh, but keep making the point. It will sink in to those who truly matter.

Another think which helps a lot: change your perspective on what this country is. I believe that the United States of America, that proud, vain but dear country, guided by a constitution that still meant something, into which I was born is dead. Dead, dead, dead. I don't worry about it anymore and mourning is pointless. All my allegiances now are contingent. I support what is commonsensically good for me and mine, otherwise forget it. On a broad scale, I care about the environment, that's it. I can't be shamed or humiliated anymore as I behold my affections trashed. I understand, now, the impulse for Jewish power and influence. It has little to do with intelligence. All along it was just an attitudinal perspective. It's lying there, pick it up, use if for yourself and likeminded, feel the power

Anonymous said...

What does it means that Russians(of all people)are at the other end of the spectrum in that study? Does it mean anything?

I don't know.
I posted the link, but the results seem almost random to me. I'd be inclined to put Russians, Irish, Jews and the French up there with the Mexicans - I'll have to reassess some of my prejudices. I'm first generation Irish American, and I've never found the culture to be particularly optimistic. Oh Danny Boy!

Anonymous said...

Fourth, California imposes numerous regulations and taxes on businesses, which makes it a difficult business environment for law-abiding Americans. In turn, it attracts a large number of immigrants from cultures where everybody cheats. (Here's my jury duty story about the Iranian used car dealers who stole two million dollars in sales tax revenue.) It's hard to compete when you are burdened with small town Midwestern values against businessmen who think Americans are chumps.
This is conservative bull, California for years was the less regulated because thousands of illegal immigrants labored in the underground economy. Texas is doing the same except for the Fracking and professional jobs. Texas is a poverty state unlike California in 1970 which was highly regulated and tax more because this was before prop 13. In fact regulation and taxes with little to do with economic output, the Bay Area has more regulation than Kern County it has lower unemployment and lower poverty. In fact the southern states with lower cost of living have high black populations and most of their students are minority so over 50 percent of the kids are on free and reduce, your conservative evangelical nuts working for you.

Stealth said...

" the Bay Area has more regulation than Kern County it has lower unemployment and lower poverty."

I would imagine that the Bay area has less poverty because only the more well-to-do can afford to live there. This might be by design.

Anonymous said...

What happens if their is a technlogical break thru that kills francking, thousands of Mexicans and whites in Texas will be out a job this happen in the 1980's Texas is a Mexican growing state it is not getting white, sorry Sailer. An economic bust in a decade my send the white population to other states. Automation is lowering factory wages many factory workers in the south make under 20 an hr. What if automation kills the factory jobs coming home and the south has to go to service work which the Republicans refuse to rise the minimum.

tsotha said...

Our biggest immigrant group, Mexicans, are extremely nihilistic. I don't blame them, I share their perspective. The paradox is that they have so many kids.

No they don't. The Hispanic-American fertility rate is 2.35 and trending down. I couldn't find Mexican-American in isolation, but most of those are Mexican descent. In Mexico it's even lower 2.29.

Oswald Spengler said...

Immigration is the leechcraft of cultural Marxism...it'll cure anything.

When in doubt, import a few million more unassailable and unassimilable immigrants.

http://www.youtube.com/watch?v=BD2kWCfTcaU

The stuff we sell is just the best

Passing all consumer tests, oh-ho

Days of heaven, nights of sin

Voodoo stick and shark's fin

When all around you seems like hell

Just one sip will make you well, oh-ho

Multi-purpose in a jar

If you ain't ill it'll fix your car

In days of yore, for all bad feelings

Washing socks and stripping ceilings

Nowadays, it's used medicinally

For all known human malady, oh

Oswald Spengler said...

"I believe that the United States of America, that proud, vain but dear country, guided by a constitution that still meant something, into which I was born is dead. Dead, dead, dead. I don't worry about it anymore and mourning is pointless. All my allegiances now are contingent. I support what is commonsensically good for me and mine, otherwise forget it. On a broad scale, I care about the environment, that's it. I can't be shamed or humiliated anymore as I behold my affections trashed."

--------------------------------------------------------------------

Indeed. What's left of the United States is little more than a jumped-up bazaar with an anthem and a flag.

And even that won't endure for much longer.

Anonymous said...

"...Mexican-American
business ownership rates and performance are only slightly better than African-American rates and performance. Estimates reported below indicate that only 5.1 percent of Mexican-American men are business owners, compared to 4.4 percent of African-American men and 12.6 percent of non-Latino white men.

Perhaps of more concern, the businesses owned by Mexican-Americans tend to be much smaller
and less successful than either African-American or white-owned businesses....Average
sales are less than one third of those of white owned businesses, $137,980 annually compared to $437,870 (U.S. Census Bureau 2006b)."

http://ideas.repec.org/a/bpj/bejeap/v10y2010i1n10.html

Anonymous said...

"While the reasons explaining this decline are still unknown"

Mass immigration and off-shoring destroys the middle class which destroys the velocity of money which creates a hidden deflationary spiral.

The downward spiral can't be stopped without halting immigration and rebuilding the industrial base.

The only possible way I can see this happening is if the military figure out what the problem is and throw Wall St. into the sea.

Otherwise it's all going down.

Anonymous said...

Americans are chumps, and we have to do something about that.

Anonymous said...

"In fact regulation and taxes with little to do with economic output, the Bay Area has more regulation than Kern County it has lower unemployment and lower poverty" - if the area were an economic dynamo you'd expect unemployment(people officially looking for work), and poor people(see above) to be present in large numbers, considering America has quite a few of both these days.

Anonymous said...

"Perhaps of more concern, the businesses owned by Mexican-Americans tend to be much smaller
and less successful than either African-American or white-owned businesses"


Or the "reported" turnover and profits are smaller. No one likes paying taxes, but at the low end of business some are more likely than others to see what they can get away with. At the high end, of course, nearly every large company seems to keep most of the profit offshore.

Anonymous said...

"This is conservative bull...Texas is doing the same except for the Fracking and professional jobs. Texas is a poverty state unlike California in 1970... which was highly regulated and tax more because this was before prop 13..."

Steve I'm not sure how it is in SoCal, but us up here in NorCal can always tell a true believer lefty when they can't go 3 sentences without bringing up Prop 13 (passed in 1978).

In the fevered lefty mind, Prop 13 is all that stopped California from becoming the liberal paradise. If it wasn't for Prop 13, Mexicans and blacks would outscore Asians and whites on the SAT.

The Anti-Gnostic said...

On a broad scale, I care about the environment, ...

They are going to take that from you too. Who do you think is going to win the debate between mestizos needing places to live and throw out their trash and setting aside millions of acres for a few white hippies to walk around in? That's why the Left has moved on to 'climate change.'

David said...

Don't forget title loan outfits, whorehouses, and bail bondsmen. A rakish gentleman, of a Saturday night, might pawn his automobile title for the scratch to consort with interesting ladies and, once arrested by the duly constituted authorities, hire his freedom to roam the wide world once more, all in a little space.

Anonymous said...

Tell it like it is broth'a!

Mr. Anon said...

"It's hard to compete when you are burdened with small town Midwestern values against businessmen who think Americans are chumps."

The nation is managed and governed by people who think that Americans are chumps.

As you pointed out, Steve, immigration levels have been high and increasing during the whole time of this decline in dynamism. So clearly, a lack of immigration is not to blame for the decline. Also during that same period, has been an explosion in the number of government regulations and government busy-bodies to enforce them. Did the Brookings nitwtis ever consider those as a cause for declining entrepreneurial dynamism?

Mr. Anon said...

"Anonymous said...

What happens if their is a technlogical break thru that kills francking, thousands of Mexicans and whites in Texas will be out a job this happen in the 1980's Texas is a Mexican growing state it is not getting white, sorry Sailer. An economic bust in a decade my send the white population to other states. Automation is lowering factory wages many factory workers in the south make under 20 an hr. What if automation kills the factory jobs coming home and the south has to go to service work which the Republicans refuse to rise the minimum."

I glided over this post and paid it no heed as it was obviously not written in English.

Take the time to compose a full sentence or shut up.

Anonymous said...

Prediction: Mexican and Mexican-American fertility is in the process of collapsing down to an Italian-Spanish rate of 1.3 or 1.4 TFR. All the ingredients are there: women in the workplace, access to contraception, plus a Catholic culture where the men are macho babies who expect their wives to coddle them like their mommies did.

Anonymous said...

"But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades"

How many homebuilders and banks when out of business after those two industries wrecked our economy? Not many. All the big names in my town are still in business. Our government spent hundreds of billions making sure they survived. If such businesses can survive after such massive incompetence, it gives you a hint of why dynamism has slowed.

Great fortunes should have been obliterated, forever, as a result of 2008. For the most part, they weren't.

Mr. Anon said...

"Anonymous said...

Steve I'm not sure how it is in SoCal, but us up here in NorCal can always tell a true believer lefty when they can't go 3 sentences without bringing up Prop 13 (passed in 1978).

In the fevered lefty mind, Prop 13 is all that stopped California from becoming the liberal paradise. If it wasn't for Prop 13, Mexicans and blacks would outscore Asians and whites on the SAT."

Yes, it's remarkable that some people still bleat on about Prop 13, as if it were the Nuremberg Laws or something. I remember that the antis were predicting the most dire disasters should Prop 13 pass. They said that the reduction in government "services" would result in - God knows what - calamity, certainly. However, I don't remember that any state or local employees lost their jobs after 1978, or that any government program or initiative was curtailed or eliminated.

ATBOTL said...

"You know, I realize this may come as a surprise, but we've actually had a certain amount of immigration during these recent decades of declining economic dynamism. So, before we rush into even more immigration, maybe we should consider the possibility that immigration discourages business formation and job relocation among Americans."

The same could be said of "free trade," the capital gains tax loophole and other policies that favor capital over workers.

The current situation, where policies that seem to have a strong temporal correlation and obvious mechanisms of causality with the bad economy are treated as unquestionable dogmas will not last much longer.

Anonymous said...

I'm starting to think that economists are the single most stupid category of academic, surpassing even the "womyns studies" and "Afro-American studies" clowns.


You could line up all the economists of the world side by side and you would never reach a conclusion.