Sunday, March 16, 2008

George Borjas speaks at ND

By Christina Pesavento, Rover Staff writer

This past Friday, Notre Dame students and faculty had the opportunity to attend a speech given by Harvard economist George J. Borjas as part of a series of speeches held by the Mendoza College of Business known as Ten Years Hence, a program that focuses on issues that are likely to play a role in the business world during the upcoming decade. Hailed by Business Week and The Wall Street Journal as “America’s leading immigration economist,” Borjas’ extensive research and numerous publications on the subject have made him a highly influential figure in the nation’s ongoing discussion of immigration.

At the outset of his speech, Borjas presents the audience with what he believes are the two critical questions that the United States needs to address when debating immigration policy: how many immigrants are we willing to admit, and which of the thousands of potential immigrants should be allowed into the country. Unfortunately, he remarks, politicians tend to ignore these questions and instead continue to argue about tangential matters that do not get to the root of the issue.

Since 1965, immigration policy has been built upon the family preference system, in which citizens can sponsor their immediate family members for permanent residence. Borjas points out that the problem with this system is that once an immigrant becomes a citizen, he or she can sponsor his or her own immediate relatives as well, and they in turn can sponsor their relatives after attaining citizenship. This effectively removes any limits on the number of low-skilled workers that can be admitted to the US. In fact, from 2001 to 2004, of the 3.8 million legal immigrants admitted, 2.5 million were immediate relatives of US citizens, while only 592 thousand were employment based. The rest included refugees and immigrants chosen based on a lottery system.

According to Borjas, the reason we are having such a heated debate over immigration today is because modern immigrants tend to perform much worse than immigrants of earlier eras in terms of the wages they are earning. Statistical data show that between 1960 and 2000, the percent wage differential between immigrant and native men has gone from a 7 point advantage to a 20 point disadvantage. When considering the fact that the vast majority of legal immigrants to the US are admitted based on family preference rather than employment prospects, combined with the estimated 11.6 million illegal immigrants who we can assume fall into the category of low-skilled workers, the cause of this phenomenon becomes obvious.

In terms of the effect of immigration on the employment opportunities of native workers, Borjas points out that the law of supply and demand would predict that the number of low-skilled workers admitted to this country would have a severe negative effect. However, some experts insist that the effect is relatively small. Borjas claims that the reason for this disparity is that “most studies exploit the geographic clustering of immigrants in cities that have a growing labor market and higher wages,” which “negates the negative impact that immigrants have on that city’s economy.” Yet when native workers in these cities see their wages falling, they migrate to other areas of the country, thereby diffusing the impact of immigration onto the country as a whole. In order to gain a more accurate perspective on the effects that immigration has on native workers, Borjas insists that we must look at the national economy rather than focusing on individual cities.

What probably came as a surprise to everyone in the audience was when, after giving an extensive lecture on the empirical findings regarding immigration, Borjas claims that such findings imply “nothing at all” about what the direction of immigration policy should be, and that “people who say otherwise are misleading you.” “In order to go from data to results about what immigration policy must be,” he says, “you must give a context to what you want the objective function to be.” It is a waste of time to try to come to conclusions based on detailed analyses of the economic impact of immigration because economists can already predict this by using simple economic principles. Politicians, however, continue to focus on arguing over the data without asking the bigger questions, namely “what do we want to accomplish from immigration policy?” and “whose well-being do we want to maximize?”

Among the outstanding policy issues that still need to be addressed, Borjas believes that the deciding factor will be the issue of national security. This is because even though workers and taxpayers may lose out, many influential people continue to gain from immigration. “It will be very difficult to change the system without a significant national security event,” he says.

When asked about the best way to combat illegal immigration, Borjas warned the audience to be wary of politicians who insist on the construction of a fence, which would be costly as well as ineffective, since illegals can and do enter the country through other places besides the Mexican border. The only effective way to prevent illegal immigration, he says, is to penalize employers for hiring them. This solution removes the incentives for immigrants to enter illegally, making it both far less expensive and far more effective than building a fence would be.

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