2019-09-07

Immigration, jobs, and living standards

If I make a scientific prediction e.g. "if I throw this heavy ball and this light ball from this tall building they will both land at the same time" I have to add an infinite list of caveats to make it true (the balls are the same size, have the same surface air resistance, don't contain hidden magnets, .... etc). The fact that this list is infinite is why you can never prove things in science in the sense you can in mathematics or logic. You can, however, try to control for the most likely things that might cause this prediction to fail or, when making the prediction, add the get-out clause "ceteris paribus" - "all other things being equal".

It is relevant - given what I am going to go on to say - that most scientifically illiterate people assume (a priori) that the heaviest ball will hit the ground first. This assumption can be challenged either by performing the experiment or by a thought experiment in which the balls are held together with a wire or chain. Galileo who allegedly performed the actual experiment from the tower in Pisa, first performed that thought experiment.

And now to economics.

Suppose I predict that "increasing immigration will not increase the rate of unemployment or lower living standards". I have the same problems as above ... times one hundred (or more):

  1. These claims are counter intuitive.
  2. Any prediction in economics comes with a list of plausible ceteris paribus clauses so long and so pertinent that they are impossible to control for in real life.

The ceteris are never paribus in economics and this makes even vaguely accurate prediction in particular cases almost impossible. This fact in turn tends to make "real" (natural) scientists feel all sniffy and superior when they consider the work of social scientists like economists.

We can, however, perform thought experiments in economics that exclude the ceteris to a greater or lesser extent. Such thought experiment are what often fill the pages of economics text books. Let us perform one for the case in hand:

Mr Crusoe lives alone on a tropical island. He spends half each day catching/gathering food and half repairing/improving his shack. The tropical winds are not kind to bamboo shacks.

One day an immigrant arrives on the island - Mr Friday. He needs food and shelter. The two men could address this in various ways but they decide that Crusoe will spend every day gathering food and Friday will spend every day fixing shelters. Both are feed and both are fully employed.

And here, we have already exposed that fallacy behind the assumption that immigration - the growth of population - increases unemployment or (in contradictory claims) pressure on the supply of the things (like public services) that employed people supply. Migrants increase both the supply of labour and the demand for labour.

Unless (lots of increasing unlikely things that might cause this claim to fail) immigration will not raise the rate of unemployment.

In fact, migration to the island in our thought experiment has made things better. Both men now have company and the division of labour described might have further advantages - especially if Crusoe is better at gathering than building and Friday is better at building than gathering. But we are trying to keep everything as simple as possible.

So what about living standards?

Let us suppose a third migrant arrives on the island: Ms Thursday. She is good at building too and offers - to Crusoe - to do this work for half the food he is supplying to Friday each day. Various things could then happen, but let us suppose the following scenario initially unfolds:

  • Crusoe continues to spend each day gathering food. He keeps half for himself and gives one quarter to Friday and one quarter to Thursday.
  • Thursday lives on half rations (which is still better than what she was eating on her previous island) and spends 3/4 of each day fixing 1.5 shelters.
  • Friday spends also spends 3/4 of each day fixing 1.5 shelters but has had a drastic reduction in his standard of living.

But what happens next? Thursday and Friday have a 1/4 day each free that they can now spend gathering food. They do this and, very quickly, they are both on full rations.

Now various other scenarios are possible, and we can all think of ways (in real highly complex economies) in which other considerations prevent everything evening out like things do in my simple thought experiment. Some things may happen in one part of the economy and other things in other parts of the economy in a particular country. This is why empirical research into this phenomenon gives conflicting results. But the thought experiment exposes the fallacy that the entry of migrants prepared to accept lower living standards necessarily lowers overall living standards. In other words we can confidently predict:

Unless (lots of increasing unlikely things that might cause this claim to fail) the arrival of migrants with lower expectations of will not cause overall living standards to fall.

The full truth can only ever be established by collecting data from the real world, but there is absolutely no reason to assume a prior (as so many people do) that immigration will either reduce overall job opportunities or wages.

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