tv Key Capitol Hill Hearings CSPAN September 2, 2016 9:00am-10:01am EDT
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panels and researchers and economists discussing the economic impacts of u.s. immigration policy. with a particular focus on the domestic labor market. the first panel looking at labor and wages. another before noon focusing on illegal immigration. this afternoon immigration and real estate, entrepreneurship and how immigration affects political and economic institutions. just getting started live here on c-span2 >> my name is alex nowrasteh and i'm immigration policy analyst here are if anything this toy 60 election will turn more on the candidates of perspective immigration positioned than on any other. donald trump the republican nominee won his primary primarily based on this topic for his support for reducing illegal immigration building a ball and deporting unlawful immigrants. wednesday night he delivered a major address on this topic in phoenix were basically double down on the position, squashing the rumors he was softening on
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this issue. hillary clinton seems to support a more moderate liberalization opening of immigration policy, enhanced enforcement and legalization of many of the rise immigrants. libertarian party candidate gary johnson, former governor of new mexico, has for a large-scale, combined with legalization for undocumented immigrants without enforcement apparatus. the topic of immigration has produced the loudest and most vivitrol disagreement of this election season so far. although polling shows immigration is not a top issue, in the minds of voters, the electric certainly has not been this interest in a topic in about a century. unfortunately, that type of interest is combined with a healthy dose of misperception, of both the public and policymakers. an attempt to remedy that misperception and to influence the debate on this important topic, cato has put together this conference and find some of the best researchers and
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hotlines and academics from around the country who work on this topic to present their findings with the goal of informing this debate. we will publish an edited volume of contributions written by our distinguished panelists. today's conference will consist of five panels with of course a lengthy between. the first panel, this one sitting right here will discuss labor, wages and other related issues. the second will discuss unlawful immigration, border patrol, border enforcement and the government's role in effecting that the third will discuss how the often overlooked topic immigrants affect the real estate market, particularly important to americans since the housing crisis and the great recession. the fourth will examine entrepreneurship in the united states. the last panel will delve into the most recent front you researched in a immigrants affect political and economic
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institutions in destination countries to each of these topics individual is worthy of their own conference by themselves, but one panel on each will have to do this time. so without any further ado allow me to welcome david roodman, who will be moderating our first panel on immigration and labor market. david. >> good morning. i work for the open philanthropy project which is a potentially new philanthropic vehicle primarily financed by facebook cofounder and his wife who also serves as our president. the subject of today's conference would hardly have received more attention in the presidential campaign. the subject of the spam could hard have received less attention which is what is the evidence act to say about the impacts of immigration on the receiving economy. up until a few years ago i was a senior fellow at the center for
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global development, and my former colleague michael clements i believe we speaking this afternoon of course one of the foremost advocates of the few that openness to immigration is one of the most powerful ways to reduce poverty in the world. and also the lack of openness represents the greatest market for an open economy. that argument is part of the reason i'm here, part of the reason the organization is interested in this issue as a great maker. before i was simply of his consultant admitted evidence review on exactly this question. i am pleased to present to you some of the leading producers of research in this area as one of the leading consumers of it. without further ado of like to introduce giovanni peri. giovanni is professor of economics at a chair at uc davis.
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he's published extensively in journals and books about exactly question we are going to hear about and has received grants from the macarthur foundation, the world bank and the national science foundation. he has an internet presence played want to read more about and you can. giovanni. >> thank you. thank you for inviting me. this is a great honor and a great conference. i'm going to jump right into my topic, only 20 minute 20 minuteg to squeeze in the information. i hope you can bring more or less -- if you miss some, don't worry. the question going to try to address and tried to distill all a bit of research that's been done and 15 years on this is can we consider immigration as one of the cause of the wage stagnation, especially for low educated, low skilled worker that is happened in the last 35 years?
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i will show you how many people just think very simply that one reason is that we have too many immigrants are taking jobs, maybe even this simple supply store is they pushed down the wage at first i would give you a couple of hints of how this played out at the national level. using a very simple framework that economists use and then i'll ask if we don't find much at the national level, canopy of the local level, some specific labor market which is being inundated by immigrants. wages have been depressed or her employment level has been low. one question will come by because the evidence seems to me to pile up against this idea that many in rarely there are some challenge them something reason to think in some cases immigration can actually boost wages of native workers. i think there are two facts people put together in this immigration hurts wages.
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first, in the last -- 1980-2004, low-skilled and high skilled open up your uncle initiative to give up his. no college educated people in terms of wages has been really relatively badly inhis 34 years and in 34 years a period in which immigration has increased a lot in the united states. fact number one, college education has done much better. this is the growth rate of wages between 1980-2014 dividing the labor market from people who do not have a high school degree and some college, more than batchelder this is the percentage change other wages. weekly wages over these 34 years and you see why the college and more than college educators has been robbed of their will, that wages have grown between 25 and
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30%, almost 1% per year in real terms. the high school diploma not well. that wages have gone down. even if you just break this into two groups, college and noncollege, college educated have done quite well. noncollege educators have done quite poorly. could it be the migration is responsible for this divergence? just stating this fact and stating that migration has increased the share of foreign-born but 10% over the same period is enough for some people decide yes, immigration must be. however, if you're just willing to do next that you will see other states have changed. in particular economies have documented -- has played a very big role in changing the demand for labor. international trade, off shoring, shrunk dramatically.
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there is no clear implication from just the growth of immigrants. if immigration has to be a reason at the national level for explaining that, let's look out immigration just at the national level has changed the supply of those groups. it is just the supply story. dark human immigrants that came in that low-skilled group. been there should be a very high supply of immigrants down here at a very low supply of immigrants up here. if they change the structure of wage to supply forces, then the inflow of less educated must be much, much larger. the truth is that looking at the picture of his 34 years and comparing the inflow of immigrants to the size of each group in percentage terms of immigrants, the income of immigrants has increased the supply of very highly educated much more.
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it's almost an upward to your innocence goes exactly the opposite way from what you would need to generate this type of which. maybe they have played some role. so the economists have used a lot of a simple model of supply and demand. this is quite broadly used model in the field. i have criticized this model a lot because it considers everything else fixed. fortitude is six and will talk more about that. let me just show you a live in taking the model that people will assume is depressing effective immigration, how far do we get in explaining these changes in wages through immigration? taking a simple demand supply model at increasing the supply
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of immigrants and leaving everything else fixed, how far do we get in explaining the wage change? i'm going to focus on, can we explain that bad performance of no college educated for disabled immigrant? among college, can we explain particular that performs for the least educated of all of which are the group of high school dropouts. i see that this didn't come out the way it was written. there is a civil model that says and just to point out the relative wage of two groups, college and noncollege, no point on the screen. the relative wage of college and noncollege workers, depends on the relative proximity which is
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the first of i wrote and of the relative supply. if you increase the relative supply of group and believe the rest of from 60 unchanged then you will depress the wages of that group. how strong you depress the weight of the. depends on this parameter which is called inverse of the elasticity or elasticity of supply. we can take this simple format but very robust to see if the change of college and noncollege that is being generated by immigration, how much would a project i depression of the noncollege wage relative to college? if we can do the same exercise between high school dropouts among high school dropouts. relative supply generated by dropouts versus high school graduates can't and how much it generate this depression of wage of high school dropouts. the important parameter that we
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need to estimate order to do this exercise which is as i said i elasticity. i'm going to take the parameter that people who are in favor of finding a negative impact of immigration are going to point is the correct one. i'm going to buy this model. so and find a negative effect. the college-noncollege elasticity, that's equation for college and noncollege has been as many times and there's a certain consensus of what elasticity is, between 1.5 and to work three. i'm going to take a 11.75. in reality the estimate about substitutable or how different ouare people with high school ad people who are dropouts is more contentious. some people think there are similar to other people say they're relatively dissimilar. in these exercises the most
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negative potential of elasticity or the smallest and most negative center with the smallest elasticity saying that people without a degree and people with a high school degree are not very substitutable. they are as different as college and noncollege. i want to point out i can show you for each decade from 1972 1972-2014, by how much increase the growth of high school and by how much? they change the relative supply which is directly affecting the relative wages. the first called on the effects i attribute to immigration with this relatively simple model.
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college educated started doing much better and high school started falling behind. this is the actual relative change. minus 13 with seven means in the '80s colleges increased the road to the wage by 13.7%. in the '90s by 3.7 and in 2000 by 6.6. inequality increased. however if you look at what part of this number can be explained by the immigration part, this is the part that can be explained by this market. in fact, into of these decades of the three com immigration went the opposite way. immigration myself would actually reduce because there are so many college educated and the percentage of the group the coming. in the nice immigration went down a little bit. this is college noncollege do.
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take the high school dropout versus high school graduates. this is the growth in percentage of dropouts. this is the growth due to immigration. this would be the wage of immigration. again you see in two of the three decades between the '80s and 2000 immigration would not explain that increase in dropouts or explain very little. these exercises done and i think some rifle a bit literature to say even if you take the most sort of negative estimates of these effects, for the college-noncollege you simply don't have the numbers to generate a negative effective immigration because a lot was college intensive. it works the other way. and for dropout high school graduates, units of action but only in the '90s.
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in the '90s look very different from the rest of want to emphasize, really where allah of the researchers pointed out, there's been very much shape affected by the '90s which were different from the '80s and very different from the 2000s. how? this is way of looking how the '90s are very different from the 2000 from the '80s. this is group as a percentage of the group. this is the growth in each decade. this is what happens in the 2000s and this is what happened in 1970. it means the change of immigration as a percentage of the group and the low-skilled group, so you see every decade this is almost upwards looking. only really in the '90s that
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this group low-skilled was increasing this group up to the other. but any other parents it was not very much. if we are sitting in 2000 this is the election of george bush versus al gore then maybe we have to keep in mind this decade, immigration did mattered. this is how the wages in that period, so you think of immigration hurting the group where they go in the largest part. a mirror image of that. in the other courage wage inequality increased.
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some of the national i think the number of very hard to explain any of this increased inequality. what about the local level? it is certainly true immigrants are very carefully distribute in among different regions but there's a long tradition to use local immigration laws. they have not found much of an effect on the wage at the local level. and that's what people have moved at the national level they said yes, local region are not closed economy. people move. there is a lot of research. let me summarize it with a recent paper we did to just wrap it up. immigration as a local effect and it's an important and significant local effect in wages, at the very first you should find a negative
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correlation between places of large immigration and wages of low skilled, or wages in general of workers. they going to, they depress the wage. enough to establish if this correlation is causal or not. even on the surface the correlation is interesting. if there is no correlation it means at least part of the forces. this is a scatter plot of the change in the vertical axis. for all the u.s. labor market, broken down by decade, for each decade. again is more immigration depresses wages you have observed a negative correlation. these are the labor markets
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we're using. if you use a scatter plot for the change implement rather than wages of native worker, you get plot to zero. in terms of correlation you have zero correlation with employment at a little positive correlation with average wages. if you break wages into wasteful of -- [inaudible] you can see now much a matter of positive relationship that it is a correlation that find relatively positive correlation with the wage of the college. it looks like to summarize this story, labor markets where a lot of immigrants when, for more skilled did the same in every other market, even grew a little
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such. is that because of correlation? i can't i just want to keep in idea,. [inaudible] this is true every death the very local level or if you look at the state. or if you look at the region. even if you try to address this causal point, and again it even -- economies are to isolate the part of immigration flows just my preferences of immigrants based on the year they prefer going or of the greatest
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immigrants went a and not attractive by jobs. even if you isolate that so-called supply push and you would estimate average wage unwaged of those, you find essentially small but significant effects on the wage of low-skilled. still all of it positive effect on the way to college educated. so in a sense this evidence altogether seems to say that just but a number are not there to great an effect in aggregate. at the local level the evidence that has been accumulated is that there is little effect, particularly little on the wages of low educated and made a little bit positive effect on the wage of the hi. let me spend the last one and a half minutes, i will make it into three and half minutes, i was a could there be some -- the research, researchers have studied mechanisms that make
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possible the idea that immigration affects positive wage of native workers. the first is even when you look at similar cycles, they're not the still type of worker. they specialist in type of jobs which are more manual, were outdoor at the low end of the spectrum that natives are leaving. if you have a component of complementing, helping the productivity of native worker, even when they are leaving, this should be a challenge. second, and even is the expert. sometimes just the type of technology be used debate on what worker they have when there's a lot of immigrants which to manage a rebel taken not to make, use what we call more mechanization. they use technology that uses immigrants more intensely and makes them increase their
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productivity. finally the local level immigrants consume also and generate a potentially higher friday of goods and services which are supplied and this could also be a channel of increase in productivity. but if one has the fortune to live the way i did on a very important positive effect of immigration, one is to look into details. high skilled immigration is a large in percentage terms part of immigration and there are several who say it's crucial that immigrants are crucial to enhancing any increasing innovation wage. as far some work on this. at a couple of words on this, particularly science, technology, engineering and math worker which i know are in very large percentage, seem to boost
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for activity. you go from people with some college all the way to people with a ph.d, you see immigrants are really concentrated in the very high-end of the education specter. about 30% with this 10-degree in the u.s. are immigrants. you can calculate a sum that is a positive productivity extranet of this group because this group about better technology. the group increases the innovation. just to referring to a paper we wrote, we calculate increasing h-1bh-1b1 visa worker due to the increased cap of the visa that was passed in the '90s and then withdrawn in the 2000, maybe these local productivity
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due to the info bought about 5% for college educated and about 2% for non-college educated. i'm going to wrap it up and i'm going to say that the aggregate level i think that these little things i showed shows if immigrants have an impact on any part of the wage distribution it was in the '90s and it was kind of normal relative to the other decades. at the local i will do seems to be some positive, many good reasons to think if there was little bit of a negative effect, many other channels were upset, generated a positive effect of the local level. in particular high skilled immigration can help as an important contributor. thank you. sorry. [applause]
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>> next we have ethan lewis who is a professor at dartmouth college, in particular an associate professor of economics and is also a fully within the sugar of economic research. as we heard it sounds like he is particularly expert shall we say in the impact of immigration on entrepreneurship, although i'm sure lots of other good ideas but he's also published in lots of poppe journals on the adventure of the topics. look forward to hearing from h him. >> hi. so thank you for having me here today. to talk about immigration. as alex oliver to in the introduction, immigration has been in the news a lot lately and there's a lot of competing claims out there about what the impact exactly of immigration is. what i thought i would do for
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you today is to be kind of an overview of how economists think about the labor market impact, what impact it has on workers, and, unfortunately, a lot of the things you see in the press and in the public policy debate stem from misconceptions about what exactly that impact is. i want to try to get past those first and get to what we understand through all our evidence and work studying immigration, that impact to be, and so i called my talk -- so that's three models i've got to get your in 20 minutes so i better jump right in. often the way these talks with immigration or even in the public policy debates, the concern about immigration stems basically from looking at like the larger numbers you're like
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the baseline is some eight digit number that represents the number of immigrants living in the u.s. so this must have some huge impact on our workers. i'm going to basically argue today that focus on the number, the of the number of immigrants is the wrong way to think about immigration but i will get to that. often in the kind of debates this kind of an explicit comparison to another large number which is like the number of unemployed people. you see headlines like this. usage in this policy briefs from advocacy or decisions. here's an example, the number of illegal immigrants outnumber the number of unemployed natives. it's an article here and if you want to call it that, and this particular article was drawing on two separate unrelated sources. its recent estimates of the number of illegal immigrants and the bls report on the number of unemployed.
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it did make the link for you. it's often like implicit but the argument is clear. if someone we got rid of all the pesky immigrants, there would be all these job openings for nativeborn workers and the unemployment rate would go down. but is that really true? that brings me to my wrong model number one which is where at the logic of this breaks down, it comes in thinking there's a fixed number of jobs. so it is a fixed number of jobs come one immigrant comes in, some native has got to lose their job for the immigrant to get a job. i just want to point out that economists have an argument against this point of view for a very long time. there was an economist in 1892 called david schloss who turned, came up with this term the love of labor policy. maybe you've heard this before. associates argued i foresee workers to shorter hours, generate jobs, same kind of argument to economists have been
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arguing against this for a very long time, and it's just this wacky idea that will not go away. let me start by showing users not a fixed number of jobs in the u.s. the number of jobs in u.s. has gone from 60 million to 140 million in the past year, more than doubled. notice it is and always to a. there's recession is where it's not growing, and the past decade up in that corner hasn't been that great as we all know. it's these periods of slow growth will restore to get the feeling, not the reality but the feeling that the economy is a zero-sum. but it is an. more to the point there's a huge body of research and giovanni showed some of the evidence that is directly about this exact question. this is been studied and studied and studied empirically. to immigrants displace, for every immigrant that comes in how many natives lose their job?
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and basically what the upshot of this research is the exact opposite of that kind of simple thinking to its that for every american who comes in, not on does a native not lose their job but anything is like a slight increase, more than one job created. giovanni talked about some of the reasons for this not a key one is the immigrants are not just showing up and sucking money out of the u.s. economy by virtue of being here. they are consumers. they demand all the things they need to live, housing, clothing, entertainment, et cetera. and as th as a result that by if is almost enough to generate enough jobs to employ themselves. but on top of that there's all the other mechanisms that giovanni also alluded to, the fact that on average special is a different kinds of jobs. i'm getting to the end of my talk and i see things like that. there's supply demand channels by which they raise product diversity better than study. one of the most visibly obvious
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ones which has been studied is immigrants raise the diversity of restaurants in an area. this by itself generates employment the backend to store a lot of businesses. so this many channels by which they can act to raise the number of jobs rather than decrease it. go back to the motivation for this talk which is that simple logic about a fixed number of jobs least exactly the wrong policy conclusion. if we rounded up all the immigrants and send them home, this would most likely lead to increase in native unemployment, not a decrease. the number of jobs would be destroyed by that. okay. so i hope the audience looks pretty receptive to the idea that this fixed number of jobs idea is pretty wacky but it's so pervasive i thought it had to beat it down. let's get to the next level of sophistication of from models which is what about wages. we on the supply and demand,
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more workers must mean lower wages. you probably have seen a picture like this where you've got some kind of -- the number of workers on the x. axis and then you've got this downward sloping line call the labor demand curve. they don't usually tell you where that comes from. why is a downward sloping? i'll come back to that in a minute. did have the supply curve and you can draw it upward sloping if you want, it's fine. i do so provided by drawing the number of workers, that red line. in a market economy industry simple model, which is the intersection of supply and demand. if you add workers comp the wake has to go down. isn't that right? indeed there's a paper by a very prominent labor economist at harvard basically saying with the title of which was the labor demand curve is downward sloping aggressive the rest of us poor labor economist have forgot that
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basic economics. recently and advocacy organization took his numbers quite seriously and they came up with this estimate that immigration is costing us all $2500 a year. this was put up by, maybe it's too low to see, a negative population growth incorporated which i'd never heard of. there's information in the name of that organization that i will come back to. is this really true? is it really costing us all $2500 a year? that would be an enormous cost of immigration if that were true. us dartmouth professors don't always believe what the harvard guys say, and this one turns out to be nonsense. i'll explain carefully what i mean by that. that brings me to my wrong model number two, which is it turns out that labor demand curve that
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comes from this fallacious assumption that stock of capital is fixed. if you haven't heard the term capital stock the we economist use it, basically this refers to all the other inputs in the economy besides workers to produce output. this is their buildings, lovely auditorium, our computers and microphones, et cetera, but we use to help us produce output. this is a substantial part of economy. to those who work with are responsible for lisa third of a gdp. so the entire reason for the picture, that downward sloping demand curve is the assumption that that stock of capital can never change. so what happens in this kind of oversimplifying year of the work is when immigrants come in, the amount of tools people have to work with goes down. there's less capital for each worker to work with. so maybe you already also to my
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next of which is economist don't believe this at all. i can start again with a pretty simple fact that the capital stock is not fixed. this is already even for worker terms the capital stock of the u.s. for worker has also more than doubled in the past 50 years. let me explain why this doesn't really happen, what immigration doesn't really delete the amount of capital per worker. i can illustrate it with an overly personal example. so suppose that giovanni emigrates to the u.s. and then fixed capital stock use of the world, what would happen is because the stock of capital is fixed people have to share an office with someone and you have to share a computer wa with sumt because you can't get another computer. so suppose hoosiers the computer with me. as the result of having to share space with him i'm going to be less productive, right? in a market economy by wages are going to have to go down for
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employers to be willing to hire me. but that kind of overly simple example of this is what it's not going to happen. because giovanni is going to realize that he could be a lot more productive if he added a machine and it's not that expensive for him to get his own computer. there's an enormous return on capital for him to just buy a computer. that's why it doesn't really happen. what economists say is in the long run the labor demand curve is completely horizontal, that the kind of capital stock to bring back capital workers to what it was before immigration i added, don't let it run over you with the economist with the words in the long run. economist get made fun of forcing this a lot. in the long run we are all dead your it turns out we're not talking about the span of human lifetime. we are talking about basically right away.
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the reason is simple. in contrast with the big numbers i should get the beginning of the number of immigrants, the annual arrival of immigrants to the u.s. are quite small. less than point is yours are too. give you some perspective, that's lessening of workers added each year just from kind of basically kids growing up in answering the labor force. -- intricate if you're okay with the idea that the economy adjust just fine to natural population growth, and unless you work at the national -- about okay. then you will be okay with the idea that the kind of capital stock is just fine to immigration. the last thing i will point out about this is that $2500 number, the reason it's absurd and nonsense is it comes with a very
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particular way of calculating the impact, which is it assumed all 40 million immigrants living in the is arrived yesterday and the capital stock had no time to adjust. and that's absurd. like, fact what happened is a dribble in over the past 50 years and the capital stock have plenty of time to adjust. all right, so those are my two wrong models in the labor market and to promise you the right model. they were wrong in exactly the same way. you're focused on the absolute number of workers coming into the u.s. really what matters instead is not the outfit number of workers but the road to numbers of different kinds of workers. so janitors do not compete with engineers for jobs. it makes a lot more sense to think about workers of different types, o are workers of the same type competing with each other. indeed, dissembled by things let
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me just imagine there's actually just two types of workers, unskilled and skilled, and, in fact, that some simple and it is oversupplied as a comeback to enemy. it turns out to be a pretty good approximation of the is labor market if we define unskilled as noncollege and skilled as college. basically college age workers compete with the each other and noncollege workers compete with each other for jobs. what matters into set up is how much immigration affects the ratio of unskilled and skilled workers. that's when you can have impact on the labor market. and it turns out there's a formula for that. sorry for doing math in this stuff, but pretty simple formula. it's righ right there. whawhich is you take the numberf unskilled immigrants to unskilled natives and you subtract off the same ratio for
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skilled immigrants and skilled natives in this setup. another way to put this is each of those ratios represents how much immigrants drove the workforce of that type. let me illustrate this point with three examples. imagine all immigrants were unskilled. in the first ratio of with the potential ever larger number. that the ratio would be potentially zero. and so this would have a large positive impact on the unskilled and skilled ray scheppach make sense. they are all unskilled. supposed the second number were large and the first number worst year. so all immigrants were skilled at they don't have exactly the opposite case. so there's one more example that turns out to be highly relevant. imagine if immigrants and natives were roughly equally unskilled and skilled. in the first ratio would be about the same as that second ratio and impact on the skill ration would be zero.
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in that case the labor market impact to immigration would be zero despite the fact immigration with potentially a large share of the workforce over all. more generally, what you would do is multiply this with the salt of the relative demand curve to get the which impact. this summer to the picture i showed you earlier. the problem with a picture earlier was it was oversimplified. just a point that nobody is rejecting supply today. that's a core product of economics. i'm going to reject that but it's just that very simple model with one type of worker is not adequate to describe the labor market impact by immigration. so that's in three. what about and practice? why don't we take a look at these two skilled ratios for immigration. i will toast with the labor market impact is. that's shown in this figure which is similar to the number that giovanni khashoggi. the darker bar, the noncollege
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immigrants. basically each of the decades 90s and 2000 come immigration raised the number of unskilled or noncollege workers by roughly 6%. if that's all that happened, there would potentially be a modest decline in wages of noncollege workers in mr. oversupplied model. but notice as a giovanni pointed out that is balanced out by inflows of highly educated immigrants. so not all immigrants are unskilled a lot of them are highly skilled as we know. and that balances out. another way to put this is kind of a lot of the popular focus is on the absolute height of those bars, like immigrants and large share of the workforce. but really what i'm telling you today is that what you should be focused on is the difference in the height of those bars, and that's small, teeny tiny. there's not much potential for
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immigration to affect the labor market are on top of that, that model is complete oversampled by. there's not just two types of workers. immigrants differ in a large number of ways from natives even among the unskilled natives come unskilled immigrants, sorry, they tend to be more of extremes of the education this division as giovanni showed. they tend to have not as good english skills so they tend to specialize in jobs that don't require a lot of communication. the net effect, you can write out a model with many were still groups. and so the more complicated than that form the idq but giovanni has done this initiative some of the results of that calculation basically what you end up with when you do all the calculations is that the vast majority of nativeborn workers see wage increases even in just three but also verified empirically as a result of immigrant inflows. on top of that there's other mechanisms by which the labor market adjusts.
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so even that relative demand curve i've alluded to, that assumes a kind fix production technology that firms can't let that go to the doctor so that a different kind of worker available. and practice firms to adapt and has the effect of wiping out the labor demand curve and essentially making the harm, if there is harm, which is very country on the immigrants themselves is born, is produced your so to sum up, i showed you two wrongs and one right model of the labor market impact of immigration. the wrong model number one is that there's a fixed number of jobs. this is completely wrong and is so pervasive and it's exactly the wrong policy conclusions. so that if we actually rounded up all the illegal immigrants and sentinel, this would probably lead to increased into a plan rate of nativeborn americans because it would destroy jobs, not create them.
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the wrong model number two is a kind of fixed stock of capital. which is implausible on its face but in practice because capital adjusts, is basically no long run away time from just adding more workers to use economy is very good at standing up. so scale is the wrong focus of immigration debate. it's important to point out as adjustment happens in the timeframe that immigration is a drinker it's not short run calculations are not even very relevant. the right model is one in which immigration affects the labor market when it affects the rest of supply of different types of workers, that's why the right focus of policy is on fuel shortage and that sort of thing. that's the right way to think about it. and not the absolute number of workers. in practice as it turns out as immigration does very little wage harm. if they're using our bases because because you on the immigrants themselves but the
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vast majority of immigrants, nativeborn workers see wage increases, not decreases. we are basically all better off for immigration. that's really heartening in this kind of time of dishes rooted about immigration but anyway, thank you very much. [applause] thank you. our next and final speaker is the ninth of you are based in d.c., is that right? alan is a senior research fellow in markets, trade and institutions division -- alan de brauw -- the international food policy research institute and has a lot of other important titles. his research has focused on the effects of migration on source households. we are focusing on the receiving country, and also the role of world economy of developing countries. i have used some of that work before.
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and understand the impacts of agricultural intervention your covers quite a broad range and i look forward to your comments. to the extent a dozen cramp your style the ask you to speak into the microphone. >> thank you. i'm going to, thank you for having me. i'm pleased to be here following giovanni and ethan. i'm going to tackle that the elephant in the room which is george's famous paper written in 2003 entitled the labor demand curve is downward sloping. afforif or do i just want to sam a development economist. i take a short bit of a different perspective than a labor economist. most of my work has been focused on thinking about the impacts of migration on the sources community rather than, i'm thinking about a migrant in mexico. migrants in el salvador, internal migrants in china, migration within ethiopia, that kind of thing.
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that's a very different type, it's a bit of a different problem. when you think of internal migration you can think about as international migration with reporters effectively, all that's not quite the case in china. i want to point that out that's a way of thinking about migration i'm kind of used to. the other thing, weakens results with -- labor economist concern themselves wit with the. we can all a bit late to the game but what i meant by that is when we try to find a relationship between two different variables we worry a lot that there's actually something else out there that's going on. i actually saw george borjas recent dispute in 2003 when i was a professor of economics at williams college. basically he made the claim that the labor demand curve is downward sloping, everybody is estimating it wrong effectively because is that a properly accounting for adjustments to
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local labor supplies, et cetera and that the wage elasticity in immigration is minus 23 or minus point or rather than a negligible come rather than these guys arguments. what i want to do is say let's not believe him for a moment. let's take what they just said and say okay, we are going to believe his arduous for a moment. rather than a negligible or large, and large systematic review of literature and estimate it at about minus point you. what does that mean? let's be careful about what we mean by elasticity to it means if we raise the relative supply of one part of one component of the labor force, the wages in that group will decrease by a certain percentage that if we raise the relative supply by 10% of one group, wages will decrease like 2% was to systematically reviewed
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estimate, but what transit is arguing its 3% or 4%. last year he used that minus .3 in -- borjas arguing. to basically set it free of any kind of increased immigration basically effectively attentional cost to the north. in terms of gdp, so we're not talking a cost in terms of just wages be we're talking about real cost to the economy to gdp per capita would decline with large-scale migration from seven countries or poor countries to the north. one thing that i want to note is that i'm and we've seen this little bit and talked about it a little bit, if we look at historical migration, i took the first three bars from one of borjas papers, and these partial 1960-2000 art is dated.
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2010-2015 i added. immigration to the u.s. or immigrants is labor force were a huge component of the labor force until basically the great depression did you get a big depression and wages decline. employment possible is decline and migrants say we've got something better to do. actually there was a lot going on in that period of time. but regardless, 1960 and 1970 when he starts his study by the lowest point in migration in immigration position of labor force in u.s. history. is increased but it hasn't new increased as much as in the 1910s, 1920s. it looks like it level off which again with a big recession that we had makes sense. so i'm going to focus on a variable bias when i saw this paper and i focused on the wrong variable which i'm going to blame but there's this bigger labor force shock -- >> we believe this conference
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momentarily as abuse in nice and a pro forma session for the 15th and final time during the summer break. this on legislative session is expected to be briefed the presiding officer: the senate will come to order. the clerk will read a communication to the senate. the clerk: washington, d.c., friday, september 2, 2016. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable deb fischer, a senator from the state of nebraska, to perform the duties of the chair. signed: orrin g. hatch, president pro tempore. the presiding officer: under the previous order, the senate stands adjourned until 3:00 p.m. on tuesday, september 6, 2016. adjourn:
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