An Immigration of Change

With the party make-up of Congress shuffled around like a Thanksgiving tossed salad, a whole new spin of old issues is on the horizon, notably the administration's plan to give immigration reform another chance. This seems like a good time to understand the economics of immigration as a lot of people get it wrong.

To be sure, the debate rages. On the pro-side is Berkeley professor David Card. On the con-side is Harvard professor George Borjas. Borjas claims immigration lowers low-income wages through basic supply and demand analysis. Card argues the situacion is more complex. Immigrants buy things, too, and the economy "absorbs" their impact. There's downward pressure in some places and upward pressure in others. Borjas has a hard time believing that the economy can correct that well or that quickly.

In sum, Bojas focuses on the slope of the demand curve for labor (which is negative: as supply shifts rightward, the more people you have and thus the lower the wages). Card focuses on the shifting of the demand curve (which is rightward: the more people you have, the more stuff they want in virtually all other markets). Both parties are correct and both miss part of the story. The Borjas story is great for the short term. Price changes tend to happen very quickly. But the long-term impact is better told by Card. The lowering of wages increases social totals and everyone ends up buying more things. There are losers, but there are winners and society as a whole is better off.