Getting More by Letting Go

Kerry Howley reports on a new paper by the inestimable Michael Clemens examining a remarkable natural experiment in Fiji, the results of which further demolish “brain drain” arguments against skilled emigration. Kerry nicely captures the intuitive-once-you-think-about-it-a-second principle at work:

People locked in poor countries do not fail to invest years studying theoretical physics because they lack the appropriate imaginative capacity. If no one can afford to hire a cardiologist, no sane person is going to waste a decade studying to be one.  Migration increases the returns to higher education. It transforms a questionable investment into one worth making.

Morally Bogus Debates

Daniel Larison writes:

Wilkinson would prefer instead morally bogus debates about whether caring for the poor means abolishing borders and swamping our country with millions of immigrants.  For my part, I get really tired of Wilkinson’s lectures about things and people he identifies as ”nationalist,” when he has made it quite clear over the years that he makes no distinction between nationalism and patriotism, lauds others who fail to make this distinction and in any case doesn’t understand what patriotism is.

It’s amusing how the defense of the human right to travel and associate freely is so often and so desperately cast as “abolishing borders.” But I don’t think I’ve ever defended “abolishing” borders. When Kerry I move to Iowa next month, we will cross the borders of Maryland, Pennsylvania, Ohio, Indiana, Illinois, and Iowa, and I have no problem whatsoever with any of them. Jurisdictions need to be bounded. I’m for borders. What I defend is making national borders more like state borders — making it easier to legally cross and to gain legal residency. I defend this on the grounds that the severity of the restrictions placed on freedom, the extent of the violation of rights to movement and association, and the amount of harm to human welfare, cannot be justified on moral grounds by any imagined compensating benefits. If Larison thinks such restrictions can be morally justified, then I am more than happy to have that debate, because I think I will win. Of course, if he thinks the need to justify coercion and harm is “morally bogus,” then we may share too little normative vocabulary to understand each other. But I think we do understand each other.

If Larison is right that I don’t even understand what patriotism is, then I’m probably right that he doesn’t even understand what morality or justice is, which would explain why he seems not even to grasp that he bears the burden of defending his moral chauvinism. But it might also be that we understand all these things fairly well and just disagree about them at a pretty fundamental level.

Return Migration

Until my recent upsurge in interest in migration issues, thanks to Kerry, I had assumed that relocation was something people did for good and that people came to America to become Americans. I wasn’t aware of the large masses of Poles, Italians, Irish, etc., who came to the U.S. to work for a while, and then left again. And there’s a good reason for that: those people’s ancestors didn’t write American social studies textbooks. Anyway, most Mexicans don’t care that much to be Americans, either. But a lot of them would like to work here. And then, eventually, go home.

This story from Reuter’s about Polish immigrants to England moving back to Poland does a good job of illustrating the dynamic:

Four years after Polish graphic designer Chris Rychter headed to Britain to find work and study as a citizen of the European Union, he and his wife have returned home.

Part of a swelling tide of migration back east, they are having a house built in a suburb of the Polish capital.

“It took me just three days to find a job back in Warsaw,” Rychter, 27, told Reuters. “We never saw Britain as home… We went for the adventure and to get some professional experience.”

[…]

the Rychters show how Europe has shrunk and that — contrary to a popular view — migrant flows are not all one-way.

Economists now see a turnstile or pendulum effect of people moving between countries after quite short stints, in search of better conditions.

Statistics on migration within the 27-nation EU are not precise, but around half of an estimated one million people from eastern Europe who moved to Britain since 2004 have already returned home, according to a recent report by the Institute for Public Policy Research (IPPR), a British think-tank.

Increased labor market integration with Mexico would help improve the Mexican economy, making it relatively more attractive for Mexicans to stay or return, just like it’s doing for Poland.

Why Is Switzerland the World's Most Immigrant-Friendly Country?

I have to say I was pretty surprised the first time I saw this OECD graph, which shows the foreign-born as a percentage of total population [Click for full size]:

Why was I surprised? Because it’s relatively hard to become a citizen of Switzerland. But that was me thinking a path to citizenship and residency and work rights were a kind of logical package deal. And that’s wrong. So maybe Switzerland’s lack of birthright citizenship and relatively arduous naturalization process help explain their receptivity to immigration. I don’t know. And I don’t know about Swiss welfare eligibility rules either. (Anyone?) But it now strikes me that my initial surprise was probably misplaced.

That said, it doesn’t seem all that tough to become a citizen of Australia, another America-shaming immigrant haven, although it does seem that getting born in Australia is no longer good enough.

Welfare Magnetism

Poking around looking for stuff about immigration and welfare, I found this 1997 Dallas Fed paper by Madeline Zavodny. Here’s her conclusion:

Much of the motivation for eliminating most immigrants’ access to federally funded public assistance benefits was concern that persons migrate to the United States because of the availability of welfare benefits. The 1996 welfare law makes noncitizens ineligible for food stamps and SSI payments and allows states to discontinue AFDC, Medicaid, and other public assistance benefits to noncitizens. Several states intend to continue extending benefits to noncitizens, whereas others are likely to cut off benefits, widening the already substantial differences in welfare benefits across states. These differences in policy create concern that immigrants will move in response to interstate differentials and that states that continue to allow immigrants to receive welfare payments will become welfare magnets.

In this article, I find little evidence to support the contention that new immigrants will choose their destinations based on welfare generosity. New immigrants are attracted to areas with large immigrant populations. Because earlier immigrants are disproportionately located in high-welfare states, it may appear that high welfare benefits attract immigrants. However, immigrants do not respond to interstate differentials in welfare generosity but rather to differences in the sizes of the foreign born populations. Immigrants are also attracted to a specific subset of states—namely California, New York, Florida, and Texas—and do not respond to changes in welfare benefits within states over time. The recent historical evidence gives little reason to be concerned that new immigrants will choose their destinations based on the welfare differentials created by the new welfare law.

This is notable for two reasons. First, it seems like most people don’t know that the 1996 welfare reform made most noncitizens ineligible for most federal benefits. I didn’t either, until fairly recently. Second, it supports the idea that welfare isn’t a significant factor in immigrants’ choices about where to go. Maybe this has changed in the last 10 years; I’d like to see a more recent study. But I’d guess this holds up.

Milton Friedman's Argument for Illegal Immigration

Yesterday at Hit & Run, Kerry Howley put up a brilliant post on Milton Friedman’s most misused utterance (riffing off Bryan Caplan’s also outstanding post) which I thought was more or less dispositive.

But in the comments, MikeP (this man needs his own blog, if he doesn’t have one) points to this immensely useful post containing a partial transcript of a much more considered and representative discussion of immigration by Friedman from a lecture titled “What Is America.” It really puts the wall-builders’ favorite Friedman quotation in its proper context.

You had a flood of immigrants, millions of them, coming to this country. What brought them here? It was the hope for a better life for them and their children. And, in the main, they succeeded. It is hard to find any century in history, in which so large a number of people experience so great an improvement in the conditions of their life, in the opportunities open to them, as in the period of the 19th and early 20th century.

[…]

You will find that hardly a soul who will say that it was a bad thing. Almost everybody will say it was a good thing. ‘But what about today? Do you think we should have free immigration?’ ‘Oh, no,’ they’ll say, ‘We couldn’t possibly have free immigration today. Why, that would flood us with immigrants from India, and God knows where. We’d be driven down to a bare subsistence level.’”

“What’s the difference? How can people be so inconsistent? Why is it that free immigration was a good thing before 1914 and free immigration is a bad thing today? Well, there is a sense in which that answer is right. There’s a sense in which free immigration, in the same sense as we had it before 1914 is not possible today. Why not? “

Because it is one thing to have free immigration to jobs. It is another thing to have free immigration to welfare. And you cannot have both. If you have a welfare state, if you have a state in which every resident is promised a certain minimal level of income, or a minimum level of subsistence, regardless of whether he works or not, produces it or not. Then it really is an impossible thing.

Look, for example, at the obvious, immediate, practical example of illegal Mexican immigration. Now, that Mexican immigration, over the border, is a good thing. It’s a good thing for the illegal immigrants. It’s a good thing for the United States. It’s a good thing for the citizens of the country. But, it’s only good so long as its illegal.

That’s an interesting paradox to think about. Make it legal and it’s no good. Why? Because as long as it’s illegal the people who come in do not qualify for welfare, they don’t qualify for social security, they don’t qualify for the other myriad of benefits that we pour out from our left pocket to our right pocket. So long as they don’t qualify they migrate to jobs. They take jobs that most residents of this country are unwilling to take. They provide employers with the kind of workers that they cannot get. They’re hard workers, they’re good workers, and they are clearly better off.

Friedman’s point about free immigration and the welfare state, then, was simply that if the U.S. is going to offer welfare payments to anybody who legally migrates, then we’re going to have to put a limit on legal migration. But because free migration is such an unmitigated good, limits on legal migration make both the immigrants and the natives worse off. So, illegal migration, which severs the fact of residency from welfare eligibility, is therefore desirable in the context of a regime that guarantees welfare eligibility to all legal residents.

Friedman’s considered view is that free migration without a welfare state is first best. Welfare for all legal residents makes first-best free migration impossible. In that case, a high rate of illegal immigration is the second-best solution.

Now, Friedman’s discussion would have been much clearer had he recognized the logical and practical possibility of severing legal residency from welfare eligibility. It need not be the case that all legal residents are made eligible for welfare. Indeed, there are many actual effective restrictions on welfare eligibility based on legal immigration status. In the 1999 ISIL interview, Friedman says of this possibility: “I don’t think that it is desirable to have two classes of citizens in a society.” And then he admits that he had never thought about it before. Well, if he had, he would have grasped that illegal immigration — which, remember, he thinks is pretty great — ensures a very stark separation of classes. Because tight immigration restrictions hinder pareto-improving mobility, create underground economies that encourage corruption and abuse, and do much more to create invidious structural inequalities than would a formalized guest worker system, Friedman’s own logic clearly leads toward opening up labor markets while restricting welfare eligibility. It is no accident that Lant Pritchett, an economist very much in the Friedmanite mold, argues for precisely that.

But the important takeaway here is this: Friedman’s view is that a certain kind of unrestricted welfare state makes illegal immigration good, because it severs residency from welfare eligibility. Friedman is unequivocal about the desirability of free migration. Anyone really committed to Friedman’s stated view about welfare and immigration should by no means try to restrict immigration, but instead should try to enable illegal immigration. A devout Friedmanite should stand stoutly against every fence, every border cop, every increase in the INS budget, any proposed database check for a new workers’ legal status, etc. I think it makes more sense to argue first for a guest worker program. But if that is in fact impossible, then Friedman has it right: more illegal immigration is the best we can do.

Remittances

Please direct your attention to this excellent post on the economics of remittances by YouNotSneaky! (for my money far and away the best anonymous econblogger):

But what about the argument that remittances are all biscuits and gravy with tiny bits of sausage in it? Welllll, no. Sort of. I mean, yes, but, let’s think about things more carefully here.

Exactly. But more technically…

Bottom line is that most of the so called “gains from remittances” are straight up gains from IMMIGRATION. Or in other words, they are gains from the fact that some person from a poor household in a poor county has managed to make their way to a rich country and now has a richer income. Strictly speaking the gain from remittances is just the gain from INTER-HOUSEHOLD reallocation of income between the migrant and those who stay behind, not the overall increase in household income due to migration.

A bunch of illuminating graphs intervene and then:

All that basically means that the observed benefits from remittances that people rave so much about are mostly just straight up benefits from LABOR MIGRATION. Which are huge, but somehow that just isn’t being said.

It is interesting that people fix on the humanitarian effect of migrants sending money back home. The immigrant, prior to migration, was presumably just about as poor as the people he or she is sending money home to. So if it’s so good for those people to get that money, then it was just as good for the migrant to make it in the first place. But I’m just saying the same thing.

There’s a lot more, all of it interesting.

[Hat tip: Ambrosini.]

I Want a Blue Card

The estimable Shika Dalmia, in a WSJ piece in favor of scrapping the current cap on H1-B’s, informs me:

In response, most industrialized countries, facing their own skills crunch, are liberalizing their immigration policies to make themselves more attractive. England recently scrapped its Byzantine work permit program in favor of a Canadian-style point system that will allow entry to some skilled workers even before they get a job. New Zealand has a remarkable program that gives accredited private companies fast-track access to work visas that they can hand to foreign workers along with a job offer. Australia is considering modifying its skilled visa program along similar lines.

Even more radical is the blue card program that the European Union proposed last year to bump up its skilled workforce by 20 million over 20 years. The card will admit not only skilled workers – but their entire families – and give spouses the legal right to work in all 27 EU countries within three months of applying. By contrast, the U.S. Congress recently questioned even a relatively modest suggestion by Bill Gates to raise or scrap the annual H-1B visa cap. Astoundingly, this cap was lowered to 1990 levels four years ago.

I want a blue card! The right to work in 27  other countries? Wow! That would be an immense increase in real freedom. I seriously want to look into this.

My own interest I guess is a clue to how this could work out in the long run, which is that an already stratified system of mobility rights will come to favor the wealthy and skilled even more heavily as jurisdictions compete for the most productive workers. I suspect that an increased volume of global migration among the skilled would do a good deal to acclimate incumbent residents to foreigners, thereby softening the ground for more general liberalization. But I’ll have to think about it. What do y’all think?

Correction: Dean Baker Not So Bad!

It looks like I’ve been unfair to Dean Baker. Thanks to Chris Hayes, I see that he’s generally been quite good on promoting skilled immigration as a means of lower national inequality. For example:

If Leonhardt and the NYT were interested in free trade, we could ask hospitals what barriers prevent them from hiring Mexican doctors who would be happy to work for one-half of the wages of their U.S. counterparts. We could do the same for law firms, universities, and even newspapers. We could standardize education and professional standards so that Mexican kids could grow up and work as doctors in Los Angeles or lawyers in New York, just as easily as kids born in Chicago or Boston. This would lead to huge gains to the U.S. economy and greater equality in the United States instead of greater inequality.

That makes a lot more sense to me, and I’m glad to see it. All apologies, Dean Baker. That said, the post I dug into below is now even more confusing to me.

Of course, I think allowing in foreign skilled professionals in order to bring down national inequality is silly. The reason to do so is that they are people, they should be free to work where they like, and allowing them in makes both them and incumbent residents better off.

The Sound You Hear Is Your Paradigm Shifting

Please absorb this extremely important advance in economic methodology and basic intellectual rigor:

Income Per Natural: Measuring Development as if People Mattered More Than Places

by Michael Clemens and Lant Pritchett

It is easy to learn the average income of a resident of El Salvador or Albania. But there is no systematic source of information on the average income of a Salvadoran or Albanian. In this new working paper, research fellow Michael Clemens and non-resident fellow Lant Pritchett create a new statistic: income per natural — the mean annual income of persons born in a given country, regardless of where that person now resides. If income per capita has any interpretation as a welfare measure, exclusive focus on the nationally resident population can lead to substantial errors of the income of the natural population for countries where emigration is an important path to greater welfare. The estimates differ substantially from traditional measures of GDP or GNI per resident, and not just for a handful of tiny countries. Almost 43 million people live in a group of countries whose income per natural collectively is 50 percent higher than GDP per resident. For 1.1 billion people the difference exceeds 10 percent. The authors also show that poverty estimates are different for national residents and naturals; for example, 26 percent of Haitian naturals who are not poor by the two-dollar-a-day standard live in the United States. These estimates are simply descriptive statistics and do not depend on any assumptions about how much of observed income differences across naturals is selection and how much is a pure location effect. Our conservative, if rough, estimate is that three quarters of this difference represents the effect of international migration on income per natural.

The bottom line: migration is one of the most important sources of poverty reduction for a large portion of the developing world. If economic development is defined as rising human well being, then a residence-neutral measure of well-being emphasizes that crossing international borders is not an alternative to economic development, it is economic development.

The whole paper is here.

Note that this isn’t an argument open to some kind of refutation. It’s just a better way of measuring things — a way that makes the way the world works clearer. Seeing this alternative metric in action should help us realize just how much of profound moral importance is obscured by the economic nationalism at the foundations of conventional welfare economics. Soon enough, it simply won’t be an option for honest intellectuals to ignore the perspective Clemens and Pritchett encourage us to adopt. Paul Krugman: hello!