Sunday, November 20, 2016

We don't need a wall. The solution to too many immigrants will include more immigrants.

It is ironic that in 2016, it is the anti-immigration candidate who won the surprising election.  Immigration has been dead for a decade.  The unavoidable irony here is that animus toward immigrants will always tend to happen when there aren't many immigrants.  That's because economic stress is the root cause of that animus, and immigrants aren't particularly attracted to places with economic stress.

If you work in a working class industry and live in a town where 2% of the population are immigrants, and the local economy is stagnant, you are apt to see the immigrants as disruptive competition.  If that same town was thriving with an 8% immigrant population, you would be less likely to be concerned.  This is one of many reasons why growth is fundamentally important.

We solved the migration problem in 2008 by killing the economy.  It was a bipartisan effort, and it was very successful.  On one side of the aisle or the other, we made sure that mortgage originators failed, that MBS defaulted, that middle and lower-middle class households didn't have access to mortgages any more.

In any case, we succeeded in killing the economy.  And, we can see the effects from IRS data.  This is data that measures migration and adjusted gross income, from tax returns.  Here, we can see that immigration collapsed after 2008.  (Closed Access cities are California and Northeastern urban centers.  Contagion cities are the "bubble" cities.  Open Access here refers to the rest of the country.)  The concern about immigration that Donald Trump has tapped into is related to this collapse.  The same stresses that have caused migrants to stay away cause the few that remain to especially meet anger.

Here is an estimate of the average incomes of immigrants.  We can see here that the collapse was mainly focused on low income immigration.  High income immigrants still come, especially to the enclaves in California and the northeast.

Dark lines are in-migration.  Light lines are out-migration.
The same has happened within the country too.  In-migration rates tend to be fairly stable, but migration in general has fallen across the country - especially in the Contagion cities.

Until 2006, the rest of the country was building houses for the Closed Access households who had to leave for want of housing.  We closed that avenue down, and it has continued to remain closed down for a decade.

And, here's what has happened to incomes in the meantime.  Between that first graph of immigration levels and this last graph of relative earnings, is there any question about what the true source of stress is regarding feelings about immigration?  The Closed Access areas went for Clinton and most of the other areas went for Trump.

The way to reduce anxiety about immigration is to help all of the parts of the US develop economies that will attract more of them.

I harp a lot on the problems of limited housing in the Closed Access cities.  But, the story these graphs tell says that the damage we have done to ourselves since 2005 is worse than the damage the local Closed Access policies were inflicting on us.  The Closed Access cities imposed deprivation on us, and we responded to that deprivation by adding more.

By analogy, it is like a drought caused rice prices to soar, and we responded by salting the fields in order to prevent greedy new homesteaders from getting in on the rice craze.

None of this requires detailed debates about economic policies or programs.  We get most of the way there simply by not salting the fields.  We need to go back to 2005.  In 2005, we were in the midst of a long-term drought in housing.  If that drought bothered you, then we solve the drought by fixing policy in the Closed Access cities.  In the meantime, let's stop salting the fields in Topeka and Columbus and Charlotte.  The big giant red flag in those cities has been the collapse in mortgages and homebuilding and the collapse in home prices at the bottom half of the market, where they had never really been excessive, in those cities.  Let's stop salting the fields.  If, after we do that you're still bothered by the effects of the drought, then, sure, let's fix that problem.  In the meantime, let's stop salting the fields.

6 comments:

  1. New reader here- Is there a good post for understanding the Closed Access/Contagion/Open Access framework you use in this post?

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    1. Maybe parts 76 and 80 would be a good start. On the blog I've taken a sort of a stream of consciousness approach, so I'm not sure there is a single post or two that encapsulates the idea. But those might help.

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  2. Another good post. I wonder if illegal immigration statistics are reliable.

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    1. This is definitely a partial view. This is only based on tax returns.

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  3. Wait, how does that work?

    GDP/capita in America is $53,000.

    Median household income is about the same.

    And yet, per-capita income in NYC is $41,000?

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    1. My figures here are based on IRS adjusted gross income, which would be lower than GDP.

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