Prime: Vote - Giovanni Peri Transcript

The Case For Immigration
Giovanni Peri
Professor of Economics
UC Davis, March 2012

International migration to the United States and to other rich countries has been steadily increasing during the last two decades. As of 2010, 10% of the population in developed countries was foreign-born. Here in the US, it was 13 percent. And more than a third of the adult population growth in the last decade was due to immigration.

These trends are driven by the choice of young, often highly educated, individuals who seek better economic opportunities in an increasingly integrated world. And these flows of young people, carrying skills, motivation and ideas are an exceptional benefit for the World and for the US economy.

Still, according to recent surveys, half of Americans perceive immigration as a problem rather than an opportunity. People fear that immigrants may reduce their access to jobs, depress wages or hurt the economy. As a consequence, immigration policies have been rather restrictive. This has kept many highly educated potential immigrants out of the country because of rigid quotas. It has also denied the possibility of legal entry to a large number of manual workers whose services are in high demand by US employers and in short supply from US workers. This has created strong incentives to illegal entries.

Several economists, including myself, have measured the impact of immigrants on the US economy, during the recent decades. Our findings do not support the popular fears.

First of all, recent US immigrants have been younger and better educated than US natives. During the period 2000-2010, 37% of new adult immigrants had a college degree, while for the US-born adults, that percentage was only 27%. Immigration, therefore, has increased the share of college educated in our population.

Second, many of these immigrants work in science, engineering and technology. They have contributed to the innovation and productivity in these sectors – leading to the creation new companies, more jobs and economic growth.

All of this has led to more – not fewer – opportunities for the native born. And the immigrants have produced! While being only 13% of the population, they have accounted for about a third of the U.S. patents since 2000. One quarter of all U.S.-based Nobel laureates of the last fifty years were born overseas. And in the years 1999-2006, immigrants have founded 25% of new high-tech companies with more than one million dollars, generating income and employment for the whole country. Innovation and technological progress are the engines of economic growth. Hence the attraction of human capital and skills is central to the continued economic success.

The less educated immigrants have also served an important role. They were largely specialized in manually-intensive jobs, in agriculture, construction, personal and housekeeping services. Several of those jobs have been in high demand, because they must be performed locally -- you can’t outsource gardening -- and they fulfill the needs of a wealthier and aging US population.

Native workers, because of higher schooling, have progressively moved to more cognitive-intensive type of jobs and shunned, for comparable wages, manual-intensive jobs because of their long hours, inflexible schedules and routine tasks. Immigrant specialization in these occupations has, therefore, filled a void. In fact it has encouraged the upgrading of natives toward more skill-intensive occupations.

In a paper with Chad Sparber of Colgate University, I show that in states with large inflows of less-educated immigrants, natives have been faster in moving up to occupations that use more cognitive-interactive skills and that are better paid. And, in these states, businesses found that they could count on these immigrants to perform manual tasks, allowing them to keep production local and costs low. By specializing in manual tasks, less educated immigrants have helped to expand overall employment for natives who perform supervisory and interactive production roles. I also show that when states absorb immigrants, they increase investments and improve efficiency. And Jim Rauch of UC San Diego has shown that immigrant networks help US firms to access new markets and increase exports.

Overall, most of the recent calculations by economists reveal that while some specific occupations have suffered from competition of immigrants, the occupational mobility of natives has ensured that, as a group, native workers have been positively affected. Moreover immigrants contributed to business expansion, innovation and technological progress and to lower prices of local services.

Finally, as they are younger than natives, immigrants decrease the average age of the population, reducing the dependency ratio, namely the ratio of retired to working people.

In light of these results, I suggest three priorities in reforming immigration laws. First, the number of college-educated immigrants admitted in the country should increase. We should at least double the current quota of 66,000 H1B visas per year to highly skilled immigrants.

Second, we should make it easier for them to stay in the country once their visa expires.

Third, we should introduce the possibility for less educated manual-workers, with a job-offer from a US employer to enter the country and work legally. A program of temporary working visas, with a flexible yearly quota and with the possibility for some of them to be renewed and extended to permanent residence, would serve the immigrants and the native-born in the United States very well.

I’m Giovanni Peri.

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