Recently, George Borjas offered an estimate of the impact of immigration on GDP under a standard “textbook” economic model.
Of the $1.6 trillion increase in GDP, 97.8 percent goes to the immigrants themselves in the form of wages and benefits; the remainder constitutes the “immigration surplus” — the benefit accruing to the native-born population, including both workers, owners of firms, and other users of the services provided by immigrants. The standard textbook model of a competitive labor market yields an estimate of the immigration surplus equal to $35 billion a year — or about 0.2 percent of the total GDP in the United States — from both legal and illegal immigration. The immigration surplus of $35 billion comes from reducing the wages of natives in competition with immigrants by an estimated $402 billion a year, while increasing profits or the incomes of users of immigrants by an estimated $437 billion. Three key results are implied by the standard economic model: (1) if there are no wage losses, then there is no immigration surplus; (2) the redistribution of income is much larger than the surplus; and, (3) the size of the net benefit accruing to natives is small relative to GDP.
One reason we might want to emphasize skilled immigration over less-skilled immigration is that skilled immigrants will tend to put pressure on the wages of skilled U.S. workers, who tend to command higher wages than less-skilled U.S. workers. As Josh Barro has observed, one reason why health care costs in the U.S. are substantially higher than in other market democracies is that U.S. physicians are very well-compensated by international standards. Increasing the supply of foreign-born and foreign-trained physicians might help mitigate this problem, and in turn increase the profit or the incomes of the users of medical services.
Matt Yglesias interprets Borjas’s findings as follows:
There’s also the strange contention that the surplus comes from reducing wages of natives “while increasing profits or the incomes of users of immigrants by an estimated $437 billion.” The problem here is that the class of users of immigrant labor is virtually everyone. Immigrants pick crops and build houses. They work in meatpacking plants and fast food restaurants. They clean hotel rooms. They also write computer software and treat sick people. It would be foolish to pretend that there’s zero distributional impact of all this, but the idea that “users of immigrants” is some discrete class of people whose interests need to be weighed against those of wage-earners is a delusion. The big winner across the board would be retired people, who consume services but don’t earn wages. Like the fact that the big economic loser from increased levels of immigration is previous immigrants (who face the most direct labor market competition) this should be a clear sign that immigration politics isn’t about economics. If it were, you’d have a bunch of cantankerous old white people demanding open borders while young Latinos argue for pulling up the ladder of migration opportunity. In reality, you get exactly the reverse as people’s policy preferences track their cultural affinities or phobias. [Emphasis added]
Matt is probably right that immigration opponents tend to be motivated by cultural rather than economic concerns. It is not obvious that this is objectionable in itself, as failures of cultural integration can give rise to serious tensions within a society. But some of us who oppose an increase in less-skilled immigration do so precisely on the grounds that it will have a negative impact on the economic well-being of previous immigrants, and in particular previous immigrants who have yet to fully integrate into U.S. cultural, economic, and political institutions. While most immigrants might not share this concern, liberals haven’t abandoned their advocacy of coverage expansion on the grounds that many non-college-educated white voters who might benefit from it are nevertheless opposed. There is another sense in which the interests of previous immigrants and the broader citizenry might be in tension. At least some previous immigrants might welcome the prospect of new arrivals who share in the cultural traditions of their native country, as it will make it easier for them to sustain these traditions in their new country. That is, an ongoing influx will tend to reinforce ethnic enclaves and endogamous marriage, both of which impede assimilation. If assimilation is one of the goals of the broader citizenry, as it should be in my view, the case for restricting immigration for less-skilled workers with limited English proficiency seems fairly strong.
It should be acknowledged that skilled immigrants with a high degree of English proficiency might also form cultural enclaves and resist assimilation, but the costs associated with this kind of cultural “apartness” are far more manageable than when the same kind of self-segregation occurs among asset-poor households.