The New Kids on the Dock

Friends or Strangers: The Impact of Immigrants on the U.S. Economy, by George J. Borjas, New York: Basic Books, 274 pages, $22.95

Two hundred years ago Benjamin Franklin cursed the newly arriving German immigrants as "generally the most stupid of their own nation." This attitude was nothing unusual. Although America has always prided itself on its rich immigrant heritage, Americans have persistently held unfavorable opinions of new arrivals.

Hence, the Italians and Irish were spurned in the late 1800s, as were the Chinese and Japanese at the turn of the century, the European Jews between the two world wars, and the Cubans in the 1950s and '60s. With 20/20 hindsight, we now know that the public's intolerant attitudes toward each of these immigrant waves were unfounded; each group has made positive contributions and has readily integrated itself into the American social fabric.

This history should make us suspicious of those who argue today that the Mexicans, Vietnamese, Koreans, and other "new immigrants" are qualitatively less desirable than those who came before. Yet George J. Borjas, an economist at the University of California, Santa Barbara, has written a new book, Friends or Strangers: The Impact of Immigrants on the U.S. Economy, that makes precisely this point. His thesis can be summarized in nine words: "The new immigrant is less skilled than the old."

Borjas provides a blizzard of statistics to validate his claim. Relying extensively on Census Bureau data on the foreign born from 1940 to 1980, he compares the economic performance of each post-World War II immigrant wave to that of U.S.-born citizens. He documents a "troubling" decline in schooling, labor-force participation, annual hours of work, and earnings, and a rise in the poverty and unemployment rates of each successive immigrant cohort.

For example, in 1940 newly arrived immigrants had earnings that were 13 percent higher than those of natives; by 1960 the newly arrived immigrants' earnings were 8 percent lower than those of natives; in 1970 they were 10 percent lower; and by 1980 they were 17 percent lower. On average, the new immigrant will earn $5,000 a year less (in 1988 dollars) than the old immigrant did for each year of his or her working life.

What accounts for this decline in the quality of America's immigrants? Borjas argues that two factors are responsible. First, the 1965 Immigration Act made family reunification the cornerstone of U.S. immigration law. This presumably lowered the skill level of newly arriving immigrants. Today, some 90 percent of all immigrants to the United States come through family connections.

The more important factor responsible for the decline, according to Borjas, is that the 1965 act shifted the national origin of America's immigrant stream from Europe to Asia. He maintains that the Europeans tended to be highly skilled and educated and have a strong knowledge of English when they came—all factors important in predicting economic success in the United States. His data confirm that European immigrants in the United States are doing much better than Asians and Central Americans.

On this last point, Borjas is less than fully convincing. European immigrants appear to do much better than other ethnic groups because of an artifact in the data: The typical European immigrant has been in the United States considerably longer than the typical Asian or Mexican. On average, the European should have higher earnings because every immigrant group's incomes rise dramatically over time.

Should we be especially concerned about the economic adaptation of the Asians and Mexicans? Borjas says yes. Most other studies, however, including those by the Urban Institute and the Rand Corp. of the Asian and Mexican communities in California, find that these immigrant groups are assimilating socially and economically in much the same manner as earlier immigrant groups. The Rand study calls the recent Vietnamese immigrants—many of whom came after the 1980 census, the last snapshot of immigrants investigated by Borjas—"one of the most skilled immigrant groups ever to come here."

Nevertheless, Borjas's main conclusion, that the United States is turning away the most-skilled immigrants—thus diverting many of the most talented people to Canada and Australia—should be of concern to policymakers. While immigration through family connections is now relatively easy, only about 5 percent of the visas, or about 50,000 per year, are reserved for skill-based and employer-sponsored immigration. U.S. businesses must often wait up to three years—and spend thousands of dollars in legal fees—to bring technically trained, foreign-born workers here. Today, the top mathematician in the Soviet Union wishes to immigrate to the United States, but he cannot get a work visa; he will go to France. America is turning away the Einsteins.

Borjas's policy prescription is the economist's dream and the politician's nightmare: auction off immigrant visas to the highest bidder. This has been proposed by other eminent economists as well, including Gary Becker and Julian Simon. The argument is that if we must use some method of rationing visas, the most efficient and the fairest approach is to use the market to allocate these visas to those who accrue the highest economic return from purchasing them. The idea is intellectually intriguing but politically a nonstarter.

Borjas also endorses a point system—under which immigrants are awarded merit points based on their personal characteristics, such as age, education, and occupation—to determine eligibility for visas. Similar policies have been successfully adopted by Australia and Canada. These countries have not experienced a decline in immigrant skill levels to the extent that the United States has.

One point about Friends or Strangers warrants emphasis. In no place does Borjas argue that the new immigrants are economically harmful to the United States. In fact, he argues emphatically that "the methodological arsenal of modern econometrics cannot detect a single shred of evidence that immigrants have a sizeable adverse impact on the earnings and employment opportunities of natives in the U.S."

All of his data lead not to the conclusion that unskilled immigration is undesirable, as some have mischaracterized his findings, but rather that skilled immigration is more beneficial than unskilled immigration. This suggests that America's immigration laws should be reformed by opening the gates to more Einsteins, not by shutting them to the huddled masses.

Stephen Moore is director of the American Immigration Institute and an adjunct fellow with the Indianapolis-based Hudson Institute.