Nomination and smackdown by Will Wilkinson:
Nationalist accounting tricks: Immigration reduces inequality | The Economist: DID you know that nation-level income inequality would drop if the government herded all the poor people onto boats and dropped them off on a distant island? Newsweek's Mickey Kaus, apparently excited by this sort of logic, proposes something similar as a winning solution to America's alleged inequality woes. The difference is that Mr Kaus proposes to keep relatively poor people out in the first place:
If you're worried about incomes at the bottom, though, one solution leaps out at you. It's a solution that worked, at least in the late 1990s under Bill Clinton, when wages at the low end of the income ladder rose fairly dramatically. The solution is tight labor markets. Get employers bidding for scarce workers and you'll see incomes rise across the board without the need for government aid programs or tax redistribution. A major enemy of tight labor markets at the bottom is also fairly clear: unchecked immigration by undocumented low-skilled workers. It's hard for a day laborer to command $18 an hour in the market if there are illegals hanging out on the corner willing to work for $7. Even experts who claim illlegal immigration is good for Americans overall admit that it's not good for Americans at the bottom. In other words, it's not good for income equality.Odd, then that Obama, in his "war on inequality," hasn't made a big effort to prevent illegal immigration--or at least to prevent illegal immigrration from returning with renewed force should the economy recover.
This is badly misleading. A move to United States is an upwardly mobile move for almost all low-skilled immigrant workers, and it tends to reduce inequality on the whole. As a matter of description, Mr Kaus' conclusion follows only if we grant him the premise that the trend in inequality is best measured by looking at the set of people inside a country's borders at one point in time and then comparing it to the set of people inside the country's borders at a later point in time. I propose we reject this premise.... [I]f we seek to measure how people fare, as opposed to how fenced-in national populations fare, the correct measure is what they call "income per natural". On an income-per-natural basis, almost nothing reduces inequality more dramatically than the migration of low-skilled workers from a poorer country to a richer country.
The only reason to make the within-borders population of a nation-state our analytical touchstone is a prior commitment to the idea that the nation-state is the correct unit of normative evaluation... an unacknowledged commitment to moral nationalism.... We are interested in inequality in large part because most of us believe, rightly or wrongly, that levels and trends in inequality function as a rough measure of our society's justice.... [M]oral nationalism... not only blinds us to the way immigration dramatically reduces poverty and inequality, but also creates the illusion that immigration worsens what we assume to be a form of injustice.
Historically, the most vicious forms of inequality and injustice are based on coercive exclusion, and this is precisely what Mr Kaus proposes ramping up....
[Moreover, i]t turns out that low-skilled immigration doesn't actually hurt the native poor. As Francisco D'Amuri and Giovanni Peri write:
Despite popular belief, often based on anecdotes and bodged analysis, there is hardly any evidence that immigrant workers have a negative effect on the wages of native workers (see for instance Card 2009 and Glitz 2007) or that they crowd-out other jobs in the US (Card and Di Nardo 2000) or Europe. On the contrary, some authors emphasise the existence of a potentially positive effect of immigrants on the demand for native workers.
This is admittedly counterintuitive. Here's how Messrs D'Amuri and Peri account for the puzzling pattern found in the data:
Our hypothesis is that immigrants, who often do not speak the language and do not master the culture and norms of the host country, are concentrated in more manual-routine tasks (especially among less educated groups). The inflow of immigrants thus increases the supply of manual skills relative to the supply of abstract skills with two effects:
Due to the complementarity between these types of skills, the increase in the supply of manual tasks boosts relative compensation for complex skills, making them better paid.
Exploiting their comparative advantage, natives move to occupations requiring a relatively higher level of these skills. This positive reallocation and the complementarity of tasks can explain the lack of negative employment effects as well as the potential positive wage effects of immigration on native workers.
So here's how it all shakes out. Low-skilled immigration reduces economic inequality when we set aside nationalist assumptions and focus on people instead of populations. Even if we cling to analytical and moral nationalism, low-skilled immigration doesn't happen to increase measured inequality. On the contrary, complementaries between the skills of migrant and native workers can leave natives better off than they would have been with less immigration.