Peri Imparts Benefits of Immigration

By Ashley Serpa – What positive effects do migrants have on the U.S. economy? On November 13, 2017, in a lecture hosted by the UC Davis School of Law, Professor of Economics Giovanni Peri attempted to cut through the misinformation and stereotypes plaguing the current immigration debate.

In a talk entitled ‘The Economics of Immigration and Immigration Policy’, Peri made it clear that, while immigration has become a loaded discussion in the wake of the 2016 election, it has always been contentious. From the exclusion of Chinese immigrants and bias against Eastern and Southern Europeans at the turn of the last century to the treatment of refugees from the Middle East, the United States has often ignored the Statue of Liberty’s promise.

Speaking as Chair of the Department of Economics and Director of the Migration Research Cluster at UC Davis, Peri made several points that challenged prevailing popular notions about immigration. For example, the U.S. has not in fact been an outlier on immigration for the last 40 years. Indeed, most wealthy nations have experienced immigration trends similar to that experienced in the U.S. In both the U.S. and Europe, roughly 15 percent of the population is immigrants. In Canada and Australia, the percentage is actually higher. This is because these smaller countries offer immigrants fewer entrance obstacles to overcome.

Compared to other wealthy countries, the U.S. does receive more immigrants from poorer countries such as Mexico, India, China, and the Philippines. Contrary to popular belief, however, the inflow of immigrants has been highly skilled in the last few decades, feeding the growth of STEM. While the Trump Administration bemoans the “flood” of Mexican migrants, the data shows that there has been no net growth in their population, in part because the Mexican economy has improved. The debate about undocumented immigrants currently casting a pall over our political discourse is really one of what to do with the 11 million people already here.

Immigration and wage inequality

Peri went on to contend with the issue of immigrants and American wages. U.S. wage stagnation occurred at the same time as immigration increases, and many people assume causality. However, overall wage inequality decreased for people with postsecondary degrees or higher, and it is at these high education levels that the inflow of immigrants increases—not at the high school diploma or drop-out level, where inequality has grown.

Looking at the past several decades, it is easy to see how little effect immigration has on wage inequality. In the 1980s and 2000s, the U.S. witnessed skill-intensive immigration, but wage inequality went up. Conversely, the 1990s was the last decade in which there was unskilled-intensive immigration, and wage inequality actually went down during that period.

The misconception that immigrants bring down wages persists, Peri explained, because policymakers and citizens alike follow wrong models of labor markets—the “lump of labor fallacy,” for example, which assumes every job an immigrant takes means one fewer for a native. In reality, the rate of employment
grows at roughly the same rate as population—immigrants generate both labor supply and labor demand. They do jobs complementary to those held by the native population, and firms respond to the types of workers available. 

So what causes inequality at the lower education levels? Peri posited a confluence of factors, including workplace computerization and information technology eliminating jobs, offshoring due to international trade agreements, the decline of unionization and manufacturing, and the fact that the minimum wage does not keep up with inflation.

Possible policies

Lastly, Peri addressed specific policies that may be implemented by the current administration—ending the DACA program, for example. DACA covers 800,000 15-to-30-year-old undocumented immigrants, 65
percent of whom are in college. Their high levels of education improve their employment opportunities, making them net tax contributors at a time when millions of baby boomers are retiring. History shows that the push for aggressive deportations of undocumented immigrants would likely disrupt local economies, Peri said. During the Great Depression, for instance, several counties deported Mexican workers to ease the economic struggles of native-born Americans, but this produced no net benefit at best, and at worst caused further economic problems. 

The current administration could instead adopt a policy based on merit. The U.S. currently educates many immigrants, most of whom leave to work in their home countries. What if we gave them incentives to stay and harness their human capital in the U.S.?

“Immigration is an incredibly positive engine for growth,” Peri said. “The fear of a negative impact seems to me unjustified. Taking immigration as a whole, there is a positive impact.” By discussing immigration policies without using false information and bigoted stereotypes, he suggested, “maybe we can pass something positive—or at least not do harm.”

Learn more about Giovanni Peri.