Resolved: The United States Should Adopt an Open Border Policy

Immigration benefits the economy Economists have reached a consensus: immigration benefits the economy. Peri argues that increasing immigration would generate “growth, innovation, and labor market efficiency and flexibility,” generating a “substantial economic stimulus.” [1] Roy will focus on low-skilled immigrants. They’re part of the puzzle, but a large number of well-educated immigrants would also enter the US, increasing innovation. Foreign students’ work is cited more by other researchers and they often produce work at a faster rate; limits to the number of student Visas have negative consequences for academic innovation [2]. Other researchers, using patents as a proxy, find similar results. A 1% increase in immigrant college graduates leads to a 6-15% increase in patents per capita [3]. American cities that attract immigrant college-grads have more patents for electronics, pharmacology, machinery, and industrial chemicals; all technology-heavy industries are more innovative when high-skilled immigration increases [4]. Once immigrants graduate, they patent at a higher rate than native-born citizens [5]. Most increases in American living standards has been due to innovation that increases labor and capital productivity [6]. Low-skilled immigrants have higher labor mobility which smooths out local economic fluctuations. US-born workers rarely relocate due to economic shocks [7]. Immigrants are much more willing to relocate. Labor immobility causes market to get clogged up and labor shortages to form. Immigrants fill this void as they move seasonally, for economic fluctuations, or for other reasons [8]. One million immigrants have left the country voluntarily as our economic outlook has been mediocre [9]. The EU, which has open borders between its members, has demonstrated the benefits of a flexible labor market. Up to 25% of a labor shock in the EU would be corrected by immigration within a year [10]. Peri argues that this labor mobility “[serves] to smooth out local booms and busts; by moving away from declining regions and into booming areas, immigrants help stabilize the economy and reduce the “mismatch” between local demand for labor and its supply.”[11] Low-skilled immigrants increase productivity by allowing native-workers to spend more time working rather than staying at home. Well-educated men and women tend to marry one another [12]. For both of them to work outside the home and utilize their skills, they need to hire help in order to care for their yards, children, and homes. Areas with larger influxes of immigrants have lower prices for dry cleaning, gardening, and housekeeping, indicating that these areas have a larger supply of immigrants doing these jobs for a lower price [13]. This makes it cheaper and easier to afford these services, and allows women to participate in the labor force. Research confirms this conclusion [14]. This would increase economic output. Research has found that immigration increases job opportunities. As demand for immigrant-related services increase, so does the variety of services offered. This means for every one immigrant, more than one job can be created due to the increased demand for goods and services [15]. By raising demand, immigrants cause firms to expand, leading to more hiring [16]. The correlation between unemployment and immigration is weak [25]. Peri has argued that between 1990 and 2006, immigration has increased yearly American wages by an $5100 [17]. The following graph shows the employment and income responses to immigration. Immigrants even create their own demand for labor. Immigrants are more likely to start firms than native citizens [18]. One in ten immigrants own a business, and the businesses they create have more startup capital [19]. Although immigrants only make up 12.9% of the population [21], they own one in six small businesses. In 2014, 28.5% of launched businesses were owned by immigrants. Many of these business owners are Latino [22][23][24]. Legalizing immigrants without increasing border security increases GDP three times more than legalization would if we ‘secured’ the border [26]. If the entire world opened their borders, GDP would increase by $65 TRILLION [27]. Research has shown that economic freedom closely correlates with economic growth. The more property rights, the better rule of law, and more business-friendly environments increase economic growth substantially [28]. The following graphs show this [29][30][31]: Cato demonstrated that more immigration leads to more economic freedom [32]. Immigrants have positive impacts on the institutions that lead to a higher economic freedom score [33]. The children of immigrants are also more libertarian/conservative, meaning in the long term their voting patterns would promote pro-market policies [34]. There is a correlation between more immigrants in the US and a smaller government [35]. Even immigration critic George Borjas admits that the net impact of immigration is positive [36]. The notion that mass migration caused by open borders would be detrimental is not borne out by the data. 125,000 Cuban immigrants entered Miami between May and September of 1980, equivalent to a 7% of the labor force. David Card was unable to find any negative effect on native employment or wages due to the arrival of the immigrants [37]. In Israel, immigration led to the population increasing 12% between 1990 and 1994. Rachel Friedberg was unable to find any detrimental effects on natives due to mass migration [38][39]. The effects of immigration are net-positive on both native and migrant workers. Any negative effects were short term and were equal to zero after a few years [40][41]. Long-Term Policy Ramifications By boosting productivity, immigration would increase both short-term growth and the economy’s long-term productive capacity. The theoretical case and empirical case for this is well-documented. Consider a Cobb-Douglas Production Function [42]: Y = F (K,L) = A*k^b * l^(1-b) Where long-run output is a function of total factor productivity (A), the capital stock (k), and the labor stock (l), with the parameter, b, representing capital and labor’s share of income. Perry finds that immigration increases both TFP, with an elasticity of 1.25, and total hours worked, with an elasticity of .12, both of which increase potential output [43]. This is significant because, in the wake of the Great Recession, both productivity and trend output have weakened. Fernald [44] attributes this to waning IT gains, while Wilcox et al. [45] attribute it to the depth and longevity of the downturn due largely to hysteresis, whereby cyclical unemployment turns structural as the skills of long-term unemployed works atrophy; Kroft et al. find evidence for this “negative duration dependence” [46]. Also, labor force growth has lagged, capital investment has waned, and credit standards remain elevated [47]. All else equal, the economy will converge to a “new normal” real rate of growth. Instead of the long-run average of 3 percent growth, we’ll grow about 1.83 percent [48]. Not only will this stifle innovation, inhibit wage increases, and cripple the role of the U.S. abroad, but it will reduce the “normal” level of interest rates, which fluctuate with the fundamentals of the economy. Williams and Laubach find that the equilibrium real interest rate varies one-for-one with changes in trend growth [49]. Following the BOG Staff projections, this corresponds to an equilibrium real interest rate of only 83 basis points. There are two major implications. First, the long-run nominal federal funds rate--the interbank lending rate the Federal Reserve targets to influence economic activity--will only reach 2.83 percent over the long run. This limits the Fed’s ability to respond aggressively to shocks, and may force it to resort to unconventional tools, the effects of which are uncertain and require near-perfect credibility. Second, it will increase risks to financial stability [50]. When interest rates are low--as they will be, especially when “low” is the new normal--investors may underprice risk and “reach for yield” in hope of higher returns, a phenomenon well-documented by Chodorow-Reich [51]. This exacerbates the risk of future financial crises, with dire effects on the real economy. An open-border policy would increase trend growth by increasing the economy’s productive capacity, and push up the equilibrium real rate and safeguarding financial stability. Benefits to the immigrants themselves Migration is one of the most powerful poverty reduction tools [52]. Living in a rich country provides a “place premium”: a worker living in the US would make more than an identical working elsewhere. Regions with higher productivity and technological advancement make workers of identical skills more productive, meaning wages rise simply by moving to a developed country [53][54]. An unskilled 35-year old worker would gain $15,000 in income each year simply by crossing into the US [55][56]. “Guatemalan immigrants raise their real earning power by 200% just by stepping into the US; Filipinos experience a 250% wage increase; Haitian immigrants reap a 680% increase.”[58] On average, immigrants would see their wages double [53]. Migrants also benefit their families back home by sending remittances. A 10% increase in income leads to a 6% increase in remittances. Remittances reduce the amount of child labor, increase the amount of capital accumulation, and increase educational expenditures [57][59]. 43% of Mexicans who have escaped poverty have did so by moving to the US [48][50]. Bryan Caplan thinks that open borders would lead to the “rapid elimination of absolute poverty on earth.”[61] Michael Clemens argues that effects on the US would be minimal. It is an issue of their poverty or their prosperity--the US will stay wealthy regardless [62]. Other researchers agree [63][64][65][66][67][68][69][70]. Sources: [http://tinyurl.com...]