Special Committee Section Inside!
July 2006
Immigration The Great Divide
Also inside: • China’s New Securities Law • Environmental Site Assessments • In Defense of Trial Lawyers
I I Pastime:
The National
Immigration?
by Christopher T. Musillo, Esq.
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CBA member Christopher T. Musillo is a partner with Hammond Law Group LLC. He focuses his practice on business immigration matters, especially in the information technology and healthcare industries. The sources used in the preparation of and cited in this article are available at www.hammondlawfirm.com.
n 1990, 13 percent of all Major League Baseball players were Latino. Not Latino-American, but persons born in Latin American countries. Today, more than a quarter of major leaguers are now from Latino countries. As Major League Baseball recruited more Latinos to play ball, Latin America produced a richer supply of ball players. At first blush, this doesn’t make sense. Shouldn’t the siphoning of talent have resulted in a lesser supply of ball players? The answer is, of course, that the supply of workers is not fixed. As more Latinos came to America to play ball, more Latinos saw baseball as a viable career. Latinos who might not have worked as hard at their skills were now incentivized to train harder. Investors built baseball academies to teach these talented but raw athletes. The supply grew with demand. As a result, America baseball fans now see many more Rodriguezes and Gonzalezes and fewer Smiths and Joneses than they did a generation ago. This summer, as Americans consider the important policy questions raised by this country’s national immigration discussion, it is important to take a step back and survey the various economic consequences of our immigration decisions. These questions will need to be asked again and again, year after year, because immigration is always a very fluid condition. The consequences of choosing wrong answers are enormous, and the consequences of choosing correctly are far greater than just better baseball. A good place to start is to take a look at the Philippine nurse phenomenon. America’s nurse shortage is at a critical juncture. Roughly one out of every nine nursing jobs remains unfilled. This country’s nursing shortage is so bad that the issue is not an American-trained nurse versus a foreign-trained one, but a foreign-trained one versus no nurse at all. In the last five years, America has significantly increased its importation of Philippine nurses. This is undoubtedly good for American patients who would have less care without Philippine nurse importation. Recognizing this, legislators such as Sen. Brownback (R-KS) recently have proposed targeted increased nurse immigration. While this importation of Filipino nurses is surely good for America, is it also good for the Philippines? For years, ethicists have been lamenting the looming healthcare problem in the Philippines.
“Next year,” they say, the Philippines will run out of nurses. And sure enough, next year comes along and the Philippines produces even more nurses. By some accounts, the Philippine university system produces three-to-five times more nurses than it needs.
As Americans consider the important policy questions raised by this country’s national immigration discussion, it is important to take a step back and survey the various economic consequences of our immigration decisions.
What has happened is that the “Christmas tree principle” has trumped the law of diminished supply. During the holidays, many lament the many trees that are felled in the name of Christmas. But it’s important to remember that these are trees that would not have been planted if the demand for Christmas trees wasn’t so deep. Similarly, the Philippine government embraces nurse migration. It has licensed new schools and invested in teaching technology. It has partnered with recruiters to manage immigration flows and established regulatory bodies to weed out unscrupulous poachers. The Philippines now annually produces about 9,000 nurses that come to the United States. All of these nurses have passed U.S. licensing exams and English equivalency exams. Many more migrate to Western Europe and the Gulf countries; yet the Philippines still has more nurses per capita than countries such as the UK. And there is little evidence that this hurts the Philippine healthcare system. Mind you, the Philippine healthcare system surely leaves a lot to be desired, but a shortage of nurses is not the problem. In fact, in recent years, many qualified Philippine nurses have had to turn to allied work in positions such as pharmaceutical drug sales and medical telephone call centers because they cannot find work in Philippine hospitals. The remittances of traveling Philippine nurses help average Filipinos, too. The average nurse in the Philippines
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earns an annual salary of about $2,000. Starting annual U.S. salaries range from $35,000 to $50,000, with some U.S. nurses earning more than $150,000 per year. All of this money that flows back to the Philippines is money that the government doesn’t have to spend on social programs, such as healthcare. The Migration Policy Institute estimates that from 1990 to 2001 official recorded remittances alone averaged 5.2 percent of the country’s gross national product, amounting to one out of every five Filipino export dollars. The Philippine nurse situation mirrors the Indian computer programmer phenomenon of the 1990s. At that time, global leaders of all stripes were nervous that by snatching up all of the best Indian talent, Western countries would exhaust all of the Indian information-technology (IT) talent. In hindsight, these fears look silly; the global migration of Indian IT workers has greatly enhanced the Indian IT industry. In fact, the panic is now in the opposite direction. Instead of fearing an Indian “brain drain,” Americans now fear that highly-trained U.S. IT workers will have to move to Bangalore to find work.
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But this too is likely not true. The U.S. Department of Labor expects that U.S. computer systems analyst positions will grow “much faster than the average for all occupations” through the year 2014, which is their uppermost projection. If a parent wanted to advise a teenager of an occupation that would most likely guarantee the teen lucrative post-college U.S. employment, software analysis would be an extremely smart choice. Of course, the fact that the U.S. IT industry appears to be in good macroeconomic shape is of little consolation to someone whose position has just been offshored. Tempers can run hot at the intersection of economics and immigration. For instance, Butler County Sheriff Richard Jones has made a national name for himself by talking tough on illegal immigration and sending the federal government the bill for housing the undocumented. Sheriff Jones’ experiences aside, in Greater Cincinnati, we haven’t had too much experience with immigration questions as compared to the nation as a whole. Cincinnati has one of the smallest immigrant communities in the country. A
recent Cincinnati Enquirer article noted that Cincinnati’s foreign-born population is 2.7 percent, which is the second-smallest, per capita, of major metropolitan areas in the country. Our native Mexican population is, as a percentage of native-born population, less than one-tenth of the national average. The Cincinnati experience does pose an interesting thought experiment for one of the touchstone economic arguments in favor of liberalized immigration: the argument that immigrants do the work that Americans do not want to do. A simple inspection of Cincinnati’s labor pool should lead one to conclude that this argument falls short. While Cincinnati has a very small immigrant community, our offices are still being cleaned, our golf courses are still being mowed, and our dishes are still being washed. Obviously, someone is doing this work. Less sardonically, the demand for clean offices, mowed fairways and washed dishes is probably being filled in one part by our small immigrant community, one part by traditional laborers, one part by technology, and one part by workers who
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might otherwise be employed in other segments of the economy. In any event, the work is getting done even with our small immigrant workforce. On the other side of the debate comes a related argument: Since liberalized immigration means more workers, it must drive down U.S. workers’ wages. The answer to this one is multi-lateral.
Greater Cincinnati hasn’t had too much experience with immigration questions as compared to the nation as a whole. Cincinnati has one of the smallest immigrant communities in the country.
On one hand, if there were an increase in workers and a static job supply, workers’ wages would unquestionably decrease. That logic is impenetrable. But an observer has to consider the decreasing cost of capital brought on by increased immigration flows. Cheaper capital means more investment. More investment means more jobs for everyone—immigrants and natives alike. More jobs mean an increase in wages. Economists generally conclude that as long as immigrants do not diminish a country’s productivity, the final impact on overall wages should be negligible, provided that the capital is efficiently invested. But that doesn’t mean that the wages are spread evenly. In fact, there is empirical evidence that the wage effect isn’t consistent across skill levels. Generally, the wages of lower-skilled workers are hurt more than those of higher skilled workers, although there is a discrepancy as to how much the effect is. Harvard researcher George Borjas concludes that between 1980 and 2000 immigration inflows dragged down high-school dropouts’ wages by about 5 percent. Other studies, such as one by I. P. Ottaviano, Univerity of Bologna, and Giovanni Peri, University of California, Davis, have expanded on the Borjas research. Ottaviano and Peri found that high school dropouts’ wages only were cut by 0.4 percent. The difference between the research was that the Borjas study presumed very broad employment classes, while the Ottaviano and Peri
study considered that immigrants actually only work in few job classifications, like gardening, housework and construction. The necessary conclusion of the research is that if you are in a field which attracts immigrant labor, your wages have likely been reduced, although perhaps minimally. The other necessary conclusion is that if you’re not in a field which attracts much immigrant labor, then your economic position likely has benefited from increased immigrant labor because of the increased capital inflows into the general economy. But what about the worry that immigrants take a disproportionate percentage of social services? After all, unemployment rates among immigrants tend to be higher than natives. Indeed, the National Research Council (NRC) has found that each U.S. citizen pays about $80 per year in additional taxes because of immigrants’ social services cost. But the NRC admits that it doesn’t look at all the sides to this issue. For instance, the NRC survey notes that immigrants are rarely homeowners and therefore do not directly pay real estate taxes, which fund school districts. But the NRC study doesn’t consider that rental inflows make their way back to school districts in the form of landlords’ property taxes. Likewise, since immigrants are somewhat more likely than natives to be self-employed, they are creating more jobs and tax revenues. But perhaps the biggest immigration question that America ought to consider is the long-term demographic effect. The analysis in this area is actually fairly straightforward. It is well established that as societies get wealthier, their women tend to have fewer and fewer offspring.
Expectedly, there is virtually no population growth attributable to U.S. natives. This has been the case for many years. Immigrants and their offspring are almost entirely responsible for any population growth. Therefore in order for the U.S. to continue to grow, either we will need to continue to open our arms to immigrants or we will need to buck history and convince our women to have more children. Most economists believe that China and India will be the two new economic darlings of the 21st century. In contrast, economists commonly predict that Europe continually will have decreasing economic significance. China and India, of course, have healthy population projections and Europe, which has low birthrates and little immigration, does not. This is not to say that increasing populations alone drive vigorous economic forecasts. For instance, while both Africa and Latin America expect their populations to dramatically increase in the near and long term, very few venture capitalists are funding manufacturing plants in Namibia or Bolivia. But the inverse may be true: Without steady population growth, a country is probably setting itself up for dire long-term economic consequences. The economic issue is just one on the spectrum of issues to consider in the immigration debate. But unlike other issues for which reasonable minds can differ—culture, politics, security—the economic forces are generally definable and understandable. Intentionally or not, Major League Baseball has cast its vote in favor of more immigrant shortstops and sluggers. In the long run, America’s conclusions may be as different as a strikeout and a home run. r
As seen in the July 2006 issue of the Cincinnati Bar Association Report.
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Sources used in “The National Pastime: Immigration” by Christopher T. Musillo Kaegel, Dick, “Baseball Has Become Americas' Game,” The Kansas City Star, http://www.puertorico-herald.org/issues/2003/vol7n17/BaseballHasBecome-en.shtml (last viewed April 12, 2006). The American Organization of Nurse Executives, Policy Statement on Foreign Nurse Recruitment, December 2003. Aiken, et. al., “Trends in International Nurse Migration,” Health Affairs Vol. 23, No. 3 (2004). Korte, Gregory, “Can Immigrants Save the City?” Cincinnati Enquirer, April 12, 2006, Page A-1. Ottaviano, Gianmarco I. P. and Peri, Giovanni, “Rethinking the Gains from Immigration: Theory and Evidence from the US”. January 2006. http://www.econ.ucdavis.edu/faculty/gperi/Papers/perott_aggregate_6.pdf (last viewed April 12, 2006). “Myths and Reality”, The Economist, February 26, 2004, http://www.economist.com/displaystory.cfm?story_id=2460645 (last viewed April 12, 2006). “Myths and Migration: Do Immigrants really hurt worker’s wages?” The Economist, April 8, 2006 p. 76. Commander, Simon, et. al., “Must Skilled Migration Be a Brain Drain? Evidence from the Indian Software Industry,” IZA Discussion Paper (December 2004). “Economic focus: The fruit that Falls far from the tree”, The Economist Nov. 5, 2005, page 86. Dugger, Celia W., “U.S. Plan to Lure Nurses May Hurt Poor Nations,” The New York Times, May 24, 2006. The Department of Labor Occupation Outlook Handbook (2006). The New Americans: Economic, Demographic, and Fiscal Effects of Immigration (1997) National Research Council. (http://darwin.nap.edu/books/0309063566/html, last viewed May 31, 2006). Toussaint-Comeau, Maude, “Self-employed immigrants: An analysis of recent data,” April 2005, No. 213, http://www.chicagofed.org/publications/fedletter/cflapril2005_213.pdf (last viewed June 1, 2006).