Open Borders? Maybe Not. Immigration According to the Austrian School (Part II)
by Federico N. Fernández *
“Immigrants tend to have especially desirable behavioral characteristics from the economic point of view. Compared to natives, their rate of participation in the labor force is higher, they tend to save more, they apply more effort during working hours, and they have a higher propensity to start new businesses and to be self-employed. They do not have a higher propensity to commit crime or to be unemployed, and (for better or for worse) their fertility rate is not higher”. Julian Simon (1989)
We would like to focus our attention now on Benjamin Powell (2010). Powell posits a fundamental question in economic terms: What is the optimal number of immigrants? His answer: “Absent a market process, there is no way to centrally plan the optimal number and mix of immigrants any more than it was possible for the Soviet Union to centrally plan its markets. Instead of restricting labor flows at arbitrary places where politicians happened to draw lines on maps, we need a free market in labor. That means open borders. Not only would free immigration make the native-born population richer, but also it would be an effective way to help the poor of the world” (Powell 2010). In order to make his case, Powell follows a strategy similar to the one of Ebeling’s –debunking fallacies and misconceptions. Like Ebeling, his analysis have the situation in the US sole concern.
The first fallacy Powell wants to reject is the one that states that immigrants are a drag on the economy. In reality, says Powell, the arrival immigrant workers has two positive outcomes for the US economy.
On the one hand, they boost the overall size of the American economy. Even George Borjas, an academic critic of immigration, concedes that the net benefits immigrants create for the native born is of twenty two billion dollars a year (Powell 2010; Borjas 2009).
On the other, the presence of immigrants frees native-born works to do what is in their comparative advantage. Thus, “the basic economic case for free trade in labor”, says Powell, “really isn’t different than that for trade in goods and services” (Powell 2010).
Powell also concerns himself with the fallacious statement that immigrants take our jobs. The key issue here has to do with what is seen and what is not seen. Though everybody can see when a native loses her job in the hands of an immigrant not everybody can see the positive in job creation when that native-born can be used for more productive purposes. Besides, since 1950 the US workforce has done nothing but grow. The civilian workforce has grown since the fifties from sixty million to one hundred and fifty million. However, there has never been long-term unemployment since that decade. The pattern would be then the more people, the more jobs.
Our third fallacy is the one that affirms that immigrants systematically depress the wages on the natives. Appealing to an empirical argument, Powell takes on this issue an even more radical position than Richard Ebeling. Not only, says Powell, this debate has narrowed down to the effects on wages of high-school drop-outs but also empirical analysis force us to take into consideration the fact that those immigrants who enter the work force demand good and services –which causes the demand for labor to increase. Although the laws of supply and demand would dictate that wages should fall, we must not neglect that other things besides the work force change with the arrival of immigrants.
Non high-school drop-outs can in fact see their wages increased by immigrant workers. This is so for two reasons.
Firstly, immigrants who go to the US in search for work are either highly-skilled or very low skilled. Most Americans are so to speak in the middle. Therefore, these immigrants who possess a different set of skills do not substitute the natives but they complement them. “Many of the immigrants to the United States are either extremely highly-skilled or very low-skilled. Yet most native-born labor falls somewhere in between. The native-born population makes up around one third of adults in the United States without a high school diploma. A large portion of new Ph.D.s is awarded to foreign-born people. To the extent that immigrants are complementing U.S. labor, they can increase, rather than decrease, the wages of the native-born” (Powell 2010).
Secondly, immigrants mean an expansion of the workforce. As Adam Smith realized specialization and division of labor are limited by the extent of the market. A bigger work force allows more specialization and division of labor. Which of course causes a raise in productivity and wages.
Powell also presents replies to some of the most usual concerns and problems regarding immigration. For crime he recommends that an open border policy for immigrants should be complemented with a swift deportation system for criminal immigrants. He notices that not only this will be beneficial for decent immigrants but also will help keep incarceration costs down.
On the problems that large waves of immigrants might pose to the welfare state he pays attention to two questions. Previous government interventions should not be the rationale for new interventions. In fact, this is the perverse logic of interventionism that Ludwig von Mises (1929, 1952) so lucidly described. Instead of advocating for further interventions the goal should be repealing the welfare state. What is more, a growing number of immigrating making use of the “benefits” the welfare state system offers could very well help to put a greater strain on it and eventually suffocate it.
Powell also ask us to try to envision the logical conclusion of this defense of welfarism. If immigrants are not granted entrance due to the danger their presence might imply to the welfare state, then why should native-born individuals be granted the right of having a baby? “After all, children are likely to be a net tax burden for their first 18 years and possibly afterward. The problem is not immigration per se. The real problem is that in the midst of a welfare state, immigration, like having children, lets some people push the costs of their decisions onto others” (Powell 2010).
Finally, Powell helps us introduce a topic that we will expose in detail in the section V. This is the problem of forced integration and freedom of association. In this aspect, Powell refers directly to Hans-Hermann Hoppe and his stance about immigration.
Our author highlights that freedom of association is related both with the right to exclude but also with the right to freely associate. For this reason, restrictions over immigration attenuate the property rights of the individuals who wish to establish a contractual relationship with a foreigner such as renting or selling real estate. Furthermore, if the right of exclusion –in order to avoid forced integration– is left to the state, and the state alone, to exercise the consequences could be terrible from an Austrian point of view. “By advocating restrictions on immigration because of state ownership of roads, they, too, are helping push down the road to socialism” (Powell 2010).
(2009) “Immigration” in The Concise Encyclopedia of Economics, online publication: http://www.econlib.org/library/Enc/Immigration.html
Mises, L. von
(1929) A critique of interventionism, Foundation for Economic Education, Irvington-on-Hudson, 1996
(1952) “Middle of the road policy leads to socialism” in Two essays by Ludwig von Mises, The Ludwig von Mises Institute, Auburn, 1991
(2010) “An economic case for immigration” in Econlog, online publication: http://www.econlib.org/library/Columns/y2010/Powellimmigration.html
(1989) The economic consequences of immigration, online publication: http://www.juliansimon.com/writings/Immigration/
* Federico N. Fernández is President of Fundación Internacional Bases (Rosario, Argentina) and a Senior Fellow with the Austrian Economics Center (Vienna, Austria). He is also the president of the Organizing Committee of the International Conference “The Austrian School of Economics in the 21st Century,” which has taken place every two years since 2006 in Rosario (Argentina).