Bryan Caplan kindly replied to my post on his recent paper on how to think about free migration. When Bryan wrote the following:
[I]f you equate “culture” with “trust” or “social capital,” real estate markets are a helpful measuring stick. If social capital is important and immigration has large negative effects on an area’s social capital, then immigration would cause housing prices and rents to fall.
I interpreted Caplan as having said something like the following:
I was surprised by Caplan’s argument that real estate values are a helpful measure of social capital in a given region, as there are presumably many confounding variables.
Caplan clarifies his remarks:
Let me spell out my argument in more depth. My claim isn’t that “real estate values are a helpful measure of social capital,” but that real estate values are a helpful measure of quality of life. The better an area’s package of beauty, convenience, culture, opportunity, safety, schools, etc., the pricier its real estate becomes. So if…
(a) immigration has a big negative effect on social capital, and
(b) social capital matters a lot for quality of life
…then immigration should reduce real estate values. To see the argument more clearly, imagine if immigrants all carried bubonic plague. As soon as plague-infested immigrants moved to an area, natives would flee in terror, and local real estate prices would plummet. Immigrants would directly increase the demand for housing by renting and buying, but the indirect effects of their deadly presence would heavily outweigh that direct effect.
This is helpful, though I don’t think my interpretation was unwarranted given the text. My suggestion is that the burdens associated with less-skilled immigrations are not best understood as akin to the bubonic plague. Indeed, these burdens are outweighed be benefits, as I explicitly stated in my post, e.g., the presence of less-skilled workers tends to enhance the productivity of skilled workers, who can outsource household production at lower cost than if the supply of less-skilled workers were somewhat smaller.
Yet this compensating benefit is not enjoyed equally by all native workers. Less-skilled natives in particular, particularly the children of the foreign-born living in culturally and economically isolated communities, will likely experience some degree of wage repression as a result. Moreover, the assimilation process might prove somewhat more difficult for these less-skilled natives if there is a sustained influx of migrants from their country of (ethnic) origin.
I can see why we might dismiss these concerns. We could, for example, simply transfer wealth from those enriched by less-skilled immigration to this class of less-skilled natives with foreign-born parents. But social transfers are a somewhat crude mechanism, and one assumes that a broader swathe of low-earning natives — not necessarily less-skilled natives — will benefit, and not just the narrower group that is most heavily impacted. This could constitute a case for a more narrowly-tailored transfer regime, but that strikes me as a highly implausible political outcome.
Moreover, transfers aren’t necessarily the solution to the problems created by cultural and economic isolation. In Sweden, for example, foreign-born workers are often excluded from the mainstream workforce, yet they tend to enjoy generous social transfers. This strategy is not generally seen as a success in terms of facilitating upward absolute mobility and fostering a more harmonious social environment. We could, as in the EITC, link transfers to labor force participation, thus at least mitigating economic isolation to some degree. Jesse Rothstein’s work suggests that EITC-induced increases in labor supply will tend to reduce market wages for all low-wage workers. We have to weigh these competing considerations.
Caplan offers the following conclusion:
Salam’s probably right to think that skilled immigration would do more for real estate prices than unskilled immigration. Skilled immigrants have higher willingness to pay, and on average make better neighbors. But that hardly shows that low-skilled immigration is bad. Yes, if there’s a fixed quota of immigrants, more unskilled immigrants mean fewer skilled immigrants. The whole point of my piece, though, is that immigration quotas should be abolished. We don’t have to weigh skilled immigrants against unskilled immigrants. As long as they get jobs with willing employers and rent apartments from willing landlords, the more the merrier.
I take this to mean that if we’re going to have a fixed quota of immigrants, we’d be better off welcoming more skilled immigrants than low-skilled immigrants. I’m quite happy to leave it at that, as I think Caplan’s arguments for permitting free migration aren’t sufficiently convincing given certain facts about U.S. political dynamics:
(1) Contra Caplan, immigration does not reinforce anti-statism because immigrants represent an out-group that, per AGS, is distrusted by the relatively affluent political majority. Immigration changes the composition of the electorate over time, thus changing in-group/out-group boundaries; and immigrants are in some respects seen as more sympathetic than the native-born.
(2) It seems unlikely the the political left is going to decide that it doesn’t care about Gini coefficients any more, and so the free migration of less-skilled migrants will create overwhelming pressure for increased social transfers on grounds of maintaining or mitigating current levels of post-tax-and-transfer inequality.
(3) Caplan suggests that one way around anxieties about the political externalities of less-skilled immigration is to forbid immigrants and their descendants from voting:
Suppose, however, that you remain convinced that immigration has serious political externalities. You have to ask yourself: are immigration restrictions really the cheapest, most humane way to address the problem? The answer, again, is No. Consider a simple alternative: admit immigrants to live and work, but not to vote. If necessary, we could make their non-voting status hereditary. Or suppose you worry about immigrants’ political ignorance. If so, we could restrict the vote to immigrants who successfully pass a civics test. Are you afraid of class warfare? We could give immigrants the right to vote once their lifetime tax payments surpass $100,000. Whatever your complaint, there exists a remedy far less objectionable than exclusion and deportation.
Suffice it to say, many of our interlocutors, on the political right and left, would consider this measure unacceptable. If we assume that a diverse, affluent market democracy will extend the franchise to less-skilled immigrants and their descendants, as I think it should, we are left without some way to check serious political externalities.
(4) Caplan has himself identified a potentially serious political externality in a paper co-authored with Steven Miller — less-skilled individuals, immigrants or otherwise, are more likely to support anti-market policies. Shifting the balance of the electorate from skilled might also lead to an increase in corruption, per the work of Niklas Potrafke.
I want to emphasize that I am not endorsing a ban on less-skilled immigration. Rather, I am suggesting that we should not embrace free migration, i.e., we should not allow any law-abiding foreigner to live, work, and settle in the United States. And if we do decide to maintain some immigration controls, as I think we will and should, we would be wise to increase the relative share of skilled immigrants while decreasing the relative share of less-skilled immigrants, as this will help mitigate the political externalities and the impact on the most vulnerable less-skilled natives, e.g., children of immigrants who are culturally and economically isolated.
Some will find it strange or indefensible to prioritize the interests of this class of less-skilled natives as opposed to, say, affluent professionals who profit from a sharp reduction in the price of services or potential migrants who are being effectively barred from dramatically improving their life prospects and that of their kinship networks via migration. The latter complaint strikes me as more pressing than the former, yet we can address this concern by selecting less-skilled migrants from the poorest countries — not from relatively affluent neighboring countries, like Mexico and several of the Central American states. That is, it seems sensible to prioritize less-skilled Haitian immigrants over less-skilled Mexican immigrants, for the simple reason that Mexico is a far richer country than Haiti that offers far better life prospects.