Planet Money - Do immigrants really take jobs and lower wages?

Episode Date: June 29, 2024

We wade into the heated debate over immigrants' impact on the labor market. When the number of workers in a city increases, does that take away jobs from the people who already live and work there? Does a surge of immigration hurt their wages? The debate within the field of economics often centers on Nobel-prize winner David Card's ground-breaking paper, "The Impact of the Mariel Boatlift on the Miami Labor Market." Today on the show: the fight over that paper, and what it tells us about the debate over immigration. More Listening: - When The Boats Arrive - The Men on the RoofThis episode was hosted by Amanda Aronczyk and Jeff Guo. It was produced by Willa Rubin, edited by Annie Brown, and engineered by Valentina Rodríguez Sánchez. Fact-checking by Sierra Juarez. Alex Goldmark is Planet Money's executive producer.Help support Planet Money and hear our bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Last year, over 20,000 people joined the Body Electric study to change their sedentary screen-filled lives. And guess what? We saw amazing effects! Now you can try NPR's Body Electric Challenge yourself. Listen to updated and new episodes wherever you get your podcasts. This is Planet Money from NPR. It is political rally season again. Former President Donald Trump has been traveling, Michigan, Wisconsin, and recently he made

a stop in Nevada. Did you see we put out a notice saying don't come? So only 20,000 people showed up. And like pretty much every Trump rally. This open border, so many bad things, but this open border situation where you're allowing millions and millions of people to flood our country.

Immigration comes up pretty quickly. Virtually 100% of the new jobs under Biden have also gone to illegal aliens. Did you know that? 100%. To be clear, it is not 100%. But Trump doesn't just claim that immigrants are taking jobs from Americans.

He says they're also making wages go down. Real wages of African Americans and the workers from all over the world that came here legally, they're down 6% under Brooker Joe. Immigration is a huge issue for both parties this election year, as the southern border is overwhelmed with people trying to claim asylum. And here at this rally, Trump is pointing to one of the central arguments of his campaign. I'm sure you've heard this one before, that immigrants are hurting the labor market. Actually, he said it again Thursday night in the first presidential debate.

But politicians aren't the only ones who fight about this. Economists have actually been trying to answer this question for decades. Do immigrants take jobs and lower wages? In fact, it is the subject of one of the most contentious debates in the field of economics. Hello and welcome to Planet Money. I'm Amanda Oronchik. And I'm Jeff Guo. What happens when hundreds or thousands of new workers enter the workforce?

Does it hurt American workers? This question is notoriously difficult to study. Labor markets are these huge, complex systems. And for years, economists had to theorize about immigration's effect. But they struggled to prove anything definitive. Then, almost 45 years ago, something unexpected happened that created a near-perfect experiment to study this very question.

125,000 Cuban immigrants suddenly showed up on the shores of southern Florida, and they started looking for jobs. Today on the show, decades and decades and many academic papers later, the field is still fighting over how those new arrivals changed the economy and what it means for our understanding of immigration today. Black perspectives haven't always been centered in the telling of America's story. Now we're taking center stage, introducing NPR's Black Stories,

Black Truths, a collection of black led stories from NPR's podcasts. Search NPR Black Stories, Black Truths, wherever you get your podcasts. This is my voice. It can tell you a lot about me. And I'm not changing it for anyone. In NPR's Black Stories, Black Truths, you'll find a collection of NPR episodes centered on the Black experience. Search NPR Black Stories, Black Truths, wherever you get podcasts. The story of this natural experiment that completely changed our understanding of immigration's effect on the economy, it begins April 1980 in Cuba. Vidal Castro has been dictator for around two decades, and the promise of the revolution is starting to fade.

The economy is on the decline, people are being sent to prison for all sorts of small infractions, and if you want to leave Cuba, you need an exit visa, which in 1980 was nearly impossible to get. So one way that people were trying to get out of the country was to somehow get inside a foreign embassy and to claim asylum. But the Cuban police would try to stop them. Then one day, a few guys commandeer a bus and ram past security and through the gates of the Peruvian embassy in Havana. And once the gates have been busted down, thousands of other Cubans join them.

In Havana today, the strange story of the embassy of Peru continued. As many as 10,000 Cubans squatting on the embassy lawn, seeking permission to leave. Now Castro, he saw these people as disloyal, not committed to his communist revolution. So he's like, fine, you want to go? Go. He announces that anyone can leave Cuba as long as they can get picked up in a boat at the port of Mariel. Cuba the Bay of Marielle, 25 miles west of Havana. This morning nearly 200 Cubans were being loaded onto four boats bound for Florida.

Over the next few months, hundreds, then thousands of Cubans pile into boats to make the journey to Florida. An event that would come to be known as the Mariel Boat Lift. It is an all too familiar sight. A motley assortment of boats awaiting a turn at dock space, customs, immigration. A hundred and ten thousand crammed aboard anything that will float. By the time the governments of both countries agree to stop the flow of migrants, a hundred and twenty-five thousand Cubans have arrived in Florida. And a lot of them end up in Miami. Most are low-skilled workers with a high school diploma or less. And almost immediately they're allowed to work. Which means that practically overnight,

the workforce in Miami grew by about 8%. That's a huge jump. What economists would call an immigration shock. And one economist in particular saw this shock as an opportunity to answer some fundamental questions about immigration. It's big. It's very quick. It's all over in a couple months. And it was completely unexpected. So that's perfect for, I guess what you would call, a natural experiment.

This is the Nobel Prize-winning economist David Card. He is an emeritus professor at UC Berkeley. And he is one of the people who pioneered the whole idea of using natural experiments to study the economy. One of the tough things about being an economist is that it's really hard to prove that anything really causes anything else. The economy is so complicated that it's tricky to untangle all the correlations in the data. And the economy is so big that you usually can't run what scientists call a randomized control trial.

But what Card and his colleagues had started to notice back in the day was that if you looked closely at what was happening in the world, there would be these big unexpected events. Events that radically shifted the economy in a short period of time. As if some cosmic scientist had set up an experiment just for them to study. I started thinking about immigration in that way and said well maybe the Mariel Boatlift would be a way to think about that approach for studying the effect of immigrants. Card realized if he compared Miami to similar

cities just before and then after the Boatlift, he could maybe answer that central question, how do immigrants impact a labor market? And more specifically, do they make unemployment go up and wages go down? Now the prevailing assumption at the time was that the labor market would follow, you know, the basic rules of supply and demand. So if you increase the supply of one group of workers, everybody in that bucket of workers will probably have their wage reduced somewhat in a very, very simple standard type model. So for example, let's say all of a sudden there are more people in town who want to

work in construction. The assumption is that employers will be able to pay less for construction workers. So wages in that industry are going to fall. And if you assume that the supply of jobs is fixed, then this model would also predict that an influx of immigrants would make some current workers lose their jobs. The most extreme version of it is there's 100 jobs in the labor market. You bring in 10 immigrants, so 10 natives are going to lose their job. So we call that the skating rink model.

The skating rink model, like in ice hockey. David Card is originally from Canada, so am I. We are required to make a reference to hockey. So in hockey, there are six players on the ice. You can swap them out, but you can't have more than six. So the assumption of immigration is that each new immigrant knocks a native off the ice. But David Card wasn't convinced that immigration necessarily followed, you know, the basic

laws of supply and demand. And the Marriott Boat Lift seemed like a perfect way to investigate that. So I thought it was, in many ways, it was kind of ideal. He pulls six years of data from the census, from to 1985 looks at race, education level, hourly wages, compares Miami to four other cities that did not experience any immigration shocks. And what he finds is that the influx of people from the Marriott boatlift has virtually no effect. Wages didn't go down. Unemployment didn't go up. Even when he looked at the group of workers we thought would be most

affected by these new arrivals, workers with high school diplomas or less, he couldn't find an impact on their wages at all. So I concluded that it was pretty hard to show that the boatlift had a big negative effect on natives. And so the answer is nothing. There was no impact. Well, of course, that's not what you would really say if you're writing a scientific paper. What you would say was there's no detectable

effect. Okay, which is kind of equal to nothing. Yeah, people like to sort of make it simple. How would you explain that, that all of these people show up and that there's no detectable effect? Well, it seems like what goes on is the labor market has absorptive capacity. Absorptive capacity, meaning that within a few years the Cubans were just kind of absorbed into the labor market. And it's not totally clear why. But one theory is that when they arrived the Cubans didn't just increase the supply of workers. They were also consumers, right? They increased demand because they needed to buy shoes, get haircuts, rent apartments, and that

created more jobs. It's like the hockey team gets bigger. More people can skate at the same time. Yeah. So, Card finds that the arrival of the Cubans is not depressing wages. They're not stealing jobs, and he sets out to publish his work. He doesn't quite realize how big a deal his findings are. So I wrote the paper up as what you could call a case study. And it's a very short paper. It doesn't have hardly any fancy things in it. And I sent it to a very modest journalist, a specialist labor economics journal. And I knew they might give it a, you know,

a shot. So I sent it there and Of course the referees hated it No kidding referees are the other economists who read and review papers before they publish I've been called all kinds of things in referee reports. Yeah, what did they call you? charlatan among other things at times spoiler alert this Among other things at times. Spoiler alert, this charlatan went on to win the Nobel Prize in economics in part because of this very paper. This small case study in a quote very modest journal has become one of the most cited papers

in immigration economics. Do you remember when you first read David Card's Mario Boatlift paper? Wow, that paper is iconic in that it's referred to in most labor economics textbooks in general. It was one of the cornerstones of a whole movement in research. This is Michael Clemens. He's a professor of economics at George Mason University. And he knows this story very well. We've spent a lot of time discussing, by the way, like, is this the Lady Gaga of papers?

Is it the Taylor Swift of it? Is it Madonna, more iconic, older? I don't know if you have a celebrity comparison. Oh my gosh. I think it's Hans Christian Andersen wrote the Emperor's New Clothes. I'd compare it to that. Yeah, that is not exactly a celebrity icon. I'm guessing Michael doesn't have a subscription to People magazine.

But he has an interesting point. Before David Card's work, most everyone saw the economy the way they were taught to see it, through the basic laws of supply and demand. And they assumed that applied neatly to immigration. They were told the emperor was wearing beautiful clothing, so they saw beautiful clothing. A young child says, wait a minute, the emperor is nude. What Card and his colleagues were doing is something like that. And after Card reveals that no, the emperor is not wearing any clothes, that no, this basic supply demand stuff doesn't always apply to immigration, that starts to become a popular view among economists.

But the most well-known and respected economist looking at immigration at the time disagreed with David Card. His name is George Borjas. Here he is being interviewed on C-SPAN. Our guest today is one of the country's preeminent economists studying the impact of immigration to the United States. Welcome, Professor Borjas.

George Borjas is a professor at Harvard. His papers are heavily cited. He wrote the textbook on immigration economics. How was it that you came to gravitate to this particular subject? Great question to start with. I was born in Cuba, so I'm an immigrant. When David Card published the Mario Boteliff paper,

Borjas had already been studying immigration's effect on the economy for years. And he took issue with the idea that one natural experiment could tell like this whole story. Like, what if just looking at Miami was too narrow? What about all the immigrants who left Miami and took jobs elsewhere? And ultimately, who's to say what happened in Miami would happen in other cities? Yeah, you see, Borjas preferred to look at the big picture, use big nationwide data sets. And in his work, he had found that the basic laws of supply and demand

did apply to immigration, that sometimes immigrants can hurt American workers. Look, there are trade-offs. Immigration is not like manna from heaven. There are going to be winners and losers. Some people are going to win, some people are going to lose. By the way, we asked George Borjas for an interview several times, and he declined. Anyways, he and David Card spend years publicly disagreeing with each other about immigration. And this simmering tension, it culminates in 2015. That is when Borjas decides to investigate the Merrill boatlift himself, crack open the data and look for his own results. So I decided I would actually go back to Mariel.

And that's what actually what I spent all of summer 2015 doing, revisiting the Mariel experiment by looking specifically at high school dropouts. Borjas wanted to do things differently than David Card had. He thought Card had missed something, that he didn't look closely enough at the people who would be most affected by the new arrivals, people who were primarily lower skilled and less educated. So, while Card had lumped high school graduates and dropouts together in his paper, Borjas wanted to look only at the people who hadn't finished high school.

In other words, let's focus on what happened to the economic opportunities of high school dropouts. Remarkably enough, David Cardinal did that, and remarkably enough, nobody else had done that in the last 25 years. And what he found was different. You see a remarkable drop in the wage of high school dropouts in Miami. You find the labor market impact is precisely

what you would expect and what common sense tells you. You get a lot more low-skilled workers. The low-skilled workers in Miami actually did worse off as a result of that. This is not the big fat nothing that David Card found. Borjas says the wage of high school dropouts in Miami collapsed dramatically by 10 to 30 percent. There was a huge negative effect. In Borjas' analysis of the data, immigrants suddenly showing up in a labor market,

they do make wages drop for the lowest skilled workers. Overturning David Card's study and with it, his pro-immigration findings, was bold and controversial. And not just in the field of economics. In fact, this paper, it started to reverberate in the outside world. That's very unusual. Extremely few economics papers get that kind of attention in the public discussion. It was a firestorm.

That is coming up after the break. All that sitting and swiping, your body is adapting to your technology. Learn how and what you can do about it. I really felt like the cloud in my brain kind of dissipated. Once I started realizing what a difference these little breaks were making, there's no turning back for me. Take NPR's Body Electric Challenge. Listen to the series wherever you get your podcasts.

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Listen to NPR's Book of the Day podcast wherever you get your podcasts. After George Borjas publishes his bombshell paper saying that immigration can make wages drop, it gets picked up by all sorts of media. I remember Ann Coulter specifically commenting on this Borjas paper saying that it quote nuked unquote the arguments of the pro-immigration crowd. I don't care how many economists are going to tell me that somehow they've managed to repeal the laws of supply and demand. You have more of something, the price goes down.

Michael Clemens and his colleagues watched as Borjas became kind of the go-to economist for the right. Dr. Borjas at Harvard has written about that. Borjas was also a favorite of Jeff Sessions, who was a U.S. Attorney General under Trump. He's the world's perhaps most effective and knowledgeable scholar, and he says that does happen. Wages can be diminished. Trump was already consulting Borjas about immigration

when he ran for office in 2016. Decades of record immigration have produced lower wages and higher unemployment for our citizens, especially for African- American and Latino workers. Once Trump was in office, when journalists pushed the administration to justify his anti-immigration policies. Cite for me, if you could, one or two studies

with specific numbers that prove the correlation between those two things, because your entire policy is based on that. Trump's advisors, like Stephen Miller, would lean on George Borjas' work. I think the most recent study I would point to is the study from George Borjas that he just did about the Marriott boat lift. Stephen Miller cited it by name from the White House podium.

That's very unusual for an economics paper. It was a sign of the tremendous influence of Borjas. While policymakers and the media were busy talking about Borjas's explosive findings, some economists were skeptical of what Borjas found. I did read the entire paper and I had concerns about the claims of overturning the original results. Jennifer Hunt is a professor of economics at Rutgers University. She's one of the leading economists studying immigration.

And she's primarily an academic, but she also spent two years working for the Obama administration. Around 2016, Jennifer Hunt and Michael Clemens are talking with each other when they realize that they have similar thoughts about Borjas's work on the Marial boat lift. Michael Clemens contacted me to ask what I had thought of this paper and I said that I had concerns and he convinced me that we should write a paper about our concerns. It was the war of the papers. So they team up together to look very closely at what Borjas did, how he interpreted the

Marial data. And their main critique had to do with Borjas' decision to focus on a very narrow subset of people. Because if you look closely at Borjas' paper, it's clear that choosing to look at workers without a high school degree wasn't the only choice that Borjas made. He also narrowed his sample down to some very specific demographic categories. Men who are prime-age workers, basically 20s to 50s and not teenagers, not older workers, who are not just low skill, that is, they

don't have college degrees, but they don't even have high school degrees. And they're not Hispanic. This is the very, very, very small slice of the labor market in Miami that Borjas was looking at. And why carve off people who are Hispanic? That's a great question. This is the most controversial choice that Borjas made, to take out all Hispanic people from the data set.

And the results of all this slicing and dicing of the data was an average sample size of 17 workers per year. Now there are a few ways to understand this because economists are always making these kinds of choices. When they want to make comparisons, they might slice up the data to make things more apples to apples. Borjas argued that he took out Hispanic people to make the cities in his study more comparable. That was a choice.

But Clemens argues that it was not a good choice. If you are analyzing the effects of Hispanic workers flooding into Miami, the very first place you would look would be for effects on other Hispanic workers. That's a universal finding of immigration economics. If there's going to be competition between new immigrants and other workers in any labor market, the very first place you would look at is other immigrants. So they would be the people, so I get it, they would be the people most impacted is other Hispanic workers who are already there? Definitely. So at the very least, if you wanted to write a rigorous and transparent study,

you would start by looking at the effects on Hispanic workers. Clemens and Jennifer Hunt Publish put their stake in the ground. And while there are apparently no chairs flying at conferences or actual fistfights, there are some bad feelings and maybe some reputational harm, which is pretty dramatic for economics. In fact, around this time, a movement was already underway to resolve these disputes within immigration economics. The National Academy of Sciences had decided to bring together the leading experts to try to come to a consensus. George Borjas was invited, as was Jennifer Hunt.

It's exciting because it's a great thing to try to come to consensus. But how does one get to consensus? Like, do you vote? Do you just kind of like debate? Well, you can't, consensus means not voting because it means everyone needs to agree. Right, good point. This group of experts worked together for

more than two and a half years. They read all the most important papers, they debated, they argued, and some of the most contentious stuff, as you might have guessed, was about the impact of immigrants on wages. That was where we had some discussions, shall we say, that were animated, I'll call them. But in the end, the experts, including Borjas, they did actually come to an agreement. The breakthrough in this issue was we came to a consensus that there's little or no impact of immigration to the US on average wages. Okay.

I think that was the big breakthrough. The consensus that they finally arrived at was, quote, the long-term impact of immigration on the wages and employment of native born workers overall is very small, basically a version of what David Card had originally found that big fat on the wages and employment of native-born workers, overall is very small. Basically, a version of what David Card had originally found, that big fat nothing. So you guys did it. You resolved the dispute. We did.

So I'm proud of our work and I'm both honored and happy to have been associated with it. And then the next thing that happened was that Borjas put commentary on his own website. Oh. Yeah. So the day after the report is published, Borjas takes to the internet to give his own take. He says that the consensus report is flawed and takes issue with that core finding. He said that he didn't agree with things that were written in the consensus report. So after all of that, Borjas undermined the consensus. Yes.

How did you, how did that make you feel? Well I was very unhappy because I just told you how happy I was that we had come to consensus. So I was very unhappy about that. That was eight years ago. Since then, economists have continued to poke at these core questions. And they even continue to weigh in on the Merrill boatlift. In fact, just earlier this year, another big time economist used some fancy new methodology and new data to find once again that the arrival of immigrants didn't hurt wages.

And more broadly, over the past few decades, the field of economics has kind of coalesced around this one central idea, which is that, whether you're talking about jobs or wages or growth or productivity, that immigrants are generally good for the economy. In some ways, though, it doesn't quite matter what all of these papers say in the political fight over immigration. Danielle Pletka When I worked in the Obama administration, I noticed that academic work does have an effect which was heartening. But what was less heartening was that I realized it doesn't actually change anyone's minds.

It's just that it serves as support for people whose minds are already made up. They're always citing papers that support what they thought before. Right now, politicians across the country are running on anti-immigration platforms, promising to shut down the border, to limit immigration, to protect your job, protect your wages. And when they're pushed to justify it, they still have a paper frozen in time that they can point to. Today's episode was produced by Willow Rubin and edited by Annie Brown. It was engineered by Valentina Rodriguez Sanchez and fact-checked by Cierra Juarez. Alex Goldmark is our executive producer.

Special thanks this week to Professor Francine Blau, to Professor Joan Monras, to the Wolfson Archives and to Connor O'Neill from NPR's White Lies podcast team. White Lies produced a series about the Marriott Boat Lift. It is a great listen. You should go subscribe. It's amazing. I'm Amanda Aronchik. I'm Jeff Glow. This is NPR. Thanks for listening. For a while now, you've probably been hearing about book bands, how they're gaining momentum everywhere in Texas, in Missouri, Florida, and Pennsylvania. On the Code Switch podcast, we're taking a look at why.

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