Open the Floodgates

The Economic Consequences of Immigration, by Julian L. Simon, Cambridge, Mass.: Basil Blackwell, 402 pages, $39.95

How many immigrants, of what kinds, should the United States admit—and on what terms? These are the questions Julian Simon's The Economic Consequences of Immigration addresses.

Simon is a well-known proponent of more immigration—but this was not always his position. When he began studying the economics of population two decades ago, he believed, he tells us, that more people would be damaging to the world and the United States; it was the literature that changed his mind. His careful and critical review of the relevant literature explains the problems with various studies not in the technical jargon of the economics journalists, but in language appropriate to the laymen Simon hopes to reach. As such, this book provides a model of how professional economists should write for a general audience—and perhaps for each other as well.

Simon's analysis of the economic consequences of immigration is detailed; he takes us through his reasoning step by step. There is perhaps much more to be considered than most of us realize: not only whether or not immigrants take jobs from natives, but their tax contributions and the demands they place on public treasuries; their effect on natural resources, the environment, technology, and the productivity of natives; and the consequences of their use of capital goods.

Immigration is not, Simon finds, high by historical standards—and immigrants constitute a far smaller percentage of the U.S. population than they did in the early 20th century or than they do in many other countries such as Great Britain, Switzerland, and France. On average they're as well educated as the U.S. population and include a disproportionate number of professional and technical people. More of them work, they save more than the native population, and they're just as law-abiding.

Furthermore, they get less in transfer payments—welfare and public services, including education for their children—than natives, mainly because most of them are too young to be getting Social Security or Medicare.

Immigrants take jobs—but they also make jobs, and they make more jobs than they take. They're more likely to create new businesses than natives.

Does no one get hurt? In the short run, increased unemployment of those most like the immigrants is a possibility, just as foreign trade may reduce employment and output in some local industries but benefit the country overall. Simon's general conclusion is that immigrants have improved the lot of natives, however, and that more immigration would be beneficial economically for the United States. How much more?

Simon isn't sure. But he is sure that higher levels of immigration, above the current level of up to 800,000 a year, would be beneficial, and he recommends that total immigration be increased every year. Because we don't know at what levels undesirable consequences may occur, Simon doesn't argue for open borders, but he isn't certain that there are any good arguments against an open-border policy. He notes that before World War I limiting immigration was thought to be an uncivilized restriction of freedom.

Simon recommends not only admitting more immigrants—doubling the current level, and then perhaps doubling it again—but also giving preference to immigrants who have completed courses of study in the United States, those with more formal education and better skills in the English language, and those who will bring with them financial assets. But Simon's ideal is an auction, even though he sees it as a policy unlikely to be adopted. Potential immigrants would bid against each other for the limited number of chances to become U.S. residents and eventually citizens. An auction would self-select those who felt they had the best chances for economic success in the United States and would thus benefit natives. Immigrants would be permitted to repay their immigration fees out of earnings as an add-on to taxes.

An auction would be at least as fair as the current system, Simon argues, and it could be used to compensate sending countries for the loss of their citizens. I'm not entirely convinced, however, that economic capability is all we want from immigrants.

I've talked to quite a few recent immigrants who drive taxicabs in the United States. One of them was from the Soviet Union. He remarked on the competitiveness of American life, the high incidence of crime, the lower level of benefits provided by the state. But, he said, there is freedom! I think it's good having those people around.

As for illegal immigration, Simon would prefer a guest worker program. Otherwise, he says, we should just "muddle through." But muddling through is what we did until the U.S. Congress passed the 1986 Immigration Reform and Control Act, which established penalties for employers who hire illegal entrants. I and others predicted that this legislation would be ineffective in restricting illegal entry, would encourage discrimination by employers as a means of avoiding legal penalties, would increase the use of fraudulent documents, and would generate demands for ever-stronger enforcement measures.

Those predictions are proving correct. A report earlier this year from the General Accounting Office documented widespread discrimination against job applicants who look or sound foreign. Meanwhile, the current commissioner of the Immigration and Naturalization Service, Gene McNary, is advocating a national identity card or "employment authorization document" to be carried by all employment-aged individuals—to make the law against hiring illegal aliens more effective and reduce its discriminatory consequences.

An "employment authorization document" could obviously be used—or will no doubt be used—for many other purposes. This threat to liberty in the guise of making employer sanctions work better is the most important issue in immigration policy today.

The coming debate has powerful people on both sides. The opponents, who may argue for repeal of employer sanctions, include some business interests, immigrant groups such as the League of United Latin American Citizens, the American Civil Liberties Union, and Sen. Alan Cranston (D–Calif.), who calls a national ID card an "internal passport system—a primary tool of totalitarian governments." Proponents of a national identity system include the Federation for American Immigration Reform, Sen. Alan Simpson (R–Wyo.), and Reps. Howard Berman (D–Calif.) and Bruce Morrison (D–Conn.). The consequences of a national identity card are serious enough that this is a good one to fight.

Other immigration legislation—the Kennedy-Simpson bill—has passed the Senate this year and could be a vehicle, in the House or in conference, for passing an amendment creating a national identity card. The bill would make a variety of changes in the system for granting visas and has been the subject of a Wall Street Journal op-ed by Simon himself, who concludes that the proposed system of preference is designed to reduce Hispanic and Asian immigration but overall doesn't allow total immigration to increase.

Immigration policy is one of those areas where the broadcast media, especially television but radio as well, have served us badly. The telegenic side of the story—the supposed floods of immigrants, legal or illegal, and the fear that newcomers will take jobs from natives and bring with them new languages and cultures—seems to outweigh any rational and dispassionate arguments of the kind Simon offers.

Simon's book documents the terms in which the debate has been carried out, and an appendix based on Rita Simon's historical research demonstrates that our xenophobia is not new. Although we find past immigrants beneficial, we always fear the current wave, and the media and the politicians have fed these fears.

Julian Simon has given us not only the best and most comprehensive book ever written on the economic consequences of immigration but a book that deals directly with the public-policy issues. It is an essential book not only for economists but for policymakers as the nation continues to debate who and how many shall come through the golden door in the months and years to come.

Annelise Anderson is a senior research fellow at the Hoover Institution at Stanford University and the author of Illegal Aliens and Employer Sanctions: Solving the Wrong Problem.