The Immigration Debate Studies on the Economic, Demographic, and Fiscal Effects of Immigration (1998) / Chapter Skim
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8 Historical Background to Current Immigration Issues
8 Historical Background to Current Immigration Issues
Pages 289-366
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From page 289... ...
INTRODUCTION As background for the work of the Panel on Demographic and Economic Impacts of Immigration, we present a broad overview of the scholarly literature on the impacts of immigration on American life in the late nineteenth and early twentieth centuries. We emphasize at the outset that this is a formidable undertaking.
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Nevertheless, we believe that it is possible to survey the literature and extract a list of tentative conclusions. These identify rather dramatic differences in the immigrant flows and in immigration' s probable impacts between the earlier era of mass immigration and immigration today.
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The key mechanisms emphasized in the literature are · the high labor force participation rate of immigrants; · immigration-induced capital flows from abroad, particularly from immigrants' countries of origin; · high immigrant saving rates; much of this saving was invested in residential structures and in the capital necessary to operate self-owned businesses; · the role of immigration in stimulating inventive activity; · the role of immigration in allowing the economy to take advantage of economies of scale; and · immigrants' importation of significant stocks of human capital into the United States. Immigration and the American Income Distribution Immigration's impact on American income distribution has been much less emphasized in the scholarship on turn-of-the-century immigration.
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· The children of nineteenth- and early twentieth-century immigrants appear to have assimilated rather quickly into the mainstream of American life. THE MAGNITUDE AND CHARACTER OF IMMIGRANT FLOWS Immigration to the United States has increased steadily in the post-World War II period.
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From page 293... ...
Moreover, if the response to the IRCA can be interpreted as some measure of the "excess supply" of potential immigrants, then the pressure on American borders may have grown much faster than the numbers plotted in Figure 8-1 would suggest. As a direct consequence of the recent increase in immigration, the fraction of the American population that is foreign born has risen dramatically.
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From page 294... ...
This is shown in Figure 8-3, which plots the fraction of the foreignborn population by age at three post-World War II census dates.5 In 1950, and even more so in 1970, the foreign born tended to be older than the average American. These people had migrated to the United States in the early decades of the century when they were in their late teens and early twenties.
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From page 295... ...
Yet it is relatively modest from the perspective of the experience in the period 18801914, the era of "mass immigration." Figure 8-4 displays the numbers of immigrants admitted into the United States over the period 1820-1995. This is the same series as the one displayed in Figure 8-1; Figure 8-4 presents this series over 6These are the "official statistics" of immigration which are the result of the Passenger Act of March 2, 1819, that required the captain of each vessel arriving from abroad to deliver a manifest of all passengers taken on board in a foreign port, with their sex, age, occupation, country of origin, and whether or not they intended to become inhabitants of the United States.
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immigrants arriving at Pacific ports before 1849 and at Confederate ports during the Civil War are excluded, and (5) the data measure gross rather than net immigration.
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and the passage of the Emergency Quota Act in May 1921, only the disruptions of World War I pushed the flow of immigrants relative to the native population to levels below the relatively low levels that we experience today.8 Immigration as a Source of Population Change As a consequence of the large and persistent immigrant flows in the 18451914 period, the foreign born came to comprise a rather large fraction of the total population. Figure 8-6 shows that, in the years between 1860 and 1920, the number of resident Americans born abroad ranged between 13 and 15 percent of the total population (Bureau of the Census, 1975/1997, series Aim.
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From page 298... ...
Some would say the structure is both more complex and less flexible and that labor markets are more segmented. Second, the government is a much larger entity both in terms of the resources it consumes and the fraction of national income it reallocates through tax and transfer mechanisms.
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The sample thus includes all 19071909 immigrants and slightly more than one-fourth of the 1910 arrivals. The 1992-1995 data are based on the March Current Population Surveys, or CPS, of the Bureau of Labor Statistics for 1994 and 1995.
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From page 300... ...
This finding is understandable in terms of the reduced costs of migration but it also reflects a sharp change in the gender composition of imm~grants. In the late nineteenth and early twentieth centuries men were far more likely to come to America than women.
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concentrated its attention on the impact of immigration on the labor market and employment. 10Census Bureau (1975/1997, series C138-C139)
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l lThe Braceros program was established during World War II to relieve wartime shortages in the agricultural labor markets of Southern California and Texas. These migrant workers were allowed to remain in the United States for up to 18 months.
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Another clue regarding the relative importance of sojourners in the earlier immigrant flows is contained in the time series displayed in Figure 8-9. There, .
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the predominance of males among new immigrants declines during periods in which the economy was depressed 1857,1874-1876,1894-1895,1920-1921precisely the same periods when the number of immigrants declined. This cyclical pattern to the male share is consistent with the hypothesis that male immigrants were primarily sojourners whose migration decisions were quite sensitive to economic conditions in the United States.
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In the recent past, immigration flows have increased in almost every year, showing little sensitivity to yearto-year changes in macroeconomic conditions. This is because immigration is today closely regulated and because more wish to migrate than the number of visa slots available.
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by appointment of the American Statistical Association, had the right to attach a dissenting footnote to Jerome's NBER Occasional Paper, correctly, we think, pointed out that the cause of the growth rate in the population should be irrelevant to population growth's impact on the business cycle. Because immigration flows slowed during business downturns, the cyclical movement of immigration can only have helped reduce the magnitude of the unemployment problem.
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In downturns an elastic labor supply can reduce downward pressure on the wage rates earned by the resident population and reduce the drain on public coffers for support of the unemployed. Recently, Hatton and Williamson (1998)
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On the other hand, if immigrants were pulled to the United States by the attractiveness of American opportunities, they are more likely to come from the upper tail of the home country distributional Did Migration Select the Best from Europe? Whether looked at from the point of view of the attributes of the arrivals or the push versus pull controversy, the consensus among economic historians is that, before World War I, America selected immigrants from the upper tail of the 18Historical studies of immigration debate the relative importance of these "push" and "pull" forces.
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A popular textbook in economic history states that "It is probably true that immigrants after 1880 were less skilled and educated than earlier immigrants."20 Historians have sometimes asserted or assumed that the bulk of immigrants were unskilled.21 Handlin (1951/1973:58, 60) in the classic history of immigration to America, The Uprooted, described immigrants as "peasants," people who lacked training for merchandising and the skills to pursue a craft.
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Harris, ea., American Economic History. New York: McGraw-Hill, 1961, table 7: 269.
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Harris, ea., American Economic History.
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"Population and Immigration." In Seymour E Harris, ea., American Economic History.
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For this reason many researchers have examined, not the occupations immigrants reported on arrival, but the occupations actually taken up by immigrants in their new home.23 Occupations of the Foreign Born in the United States The federal census provides data on the occupations of the labor force by the nativity of the worker.
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For those unfamiliar with this literature, it will be helpful to begin with some key definitions and a simple version of the model. Defining Growth There is little doubt that immigration caused the American population and the American labor force to grow more rapidly than it would have in its absence.25 Figure 8-14 shows the contribution of net immigration to American population growth.
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Labor productivity for the economy as a whole is measured by dividing GDP by the number of workers. Thus, if productivity is to grow, GDP must grow faster than the employed labor force.
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Hatton and Williamson test this proposition in their recent book, The Age of Mass Migration: An Economic Analysis.29 They conclude that late nineteenth- and early twentieth-century immigration "significantly retarded the growth of real wages and living standards economy-wide" (Hatton and Williamson, 1998:Chap.
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From page 317... ...
For the most part, however, long-term historical data on wages, income, and wealth are available only for the population as a whole. Scholars are forced to deduce the impact of immigration on the welfare of the resident population (or the native born or the native born of native parents)
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Do immigrants and native born have different savings propensities? Is the macro economy Keynesian or neoclassical?
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If these foreign-born workers were as productive as the native born and if their arrival did not depress the capital-labor ratio (that it did not is commonly supposed in the historical literature) , then immigration would cause per capita income of the resident population to rise more rapidly than it would have in the absence of immigration (Gallman, 1977:30~.33 The first element of the argument that overall per capita incomes tend to rise because of the immigration-induced increase in the labor force participation rateis well established.
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The overall impact of this dilution of capital on the initial resident population is predicted by theory to be positive. Capital owners all of whom are posited to be native born will gain and workers will lose, but the gains of the capital (and land)
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estimates that, as late as 1900, about one-third of the labor force were at the same time owners of land and capital. They were self-employed farm owners and the owners and operators of small retail shops and manufacturing plants.
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Higher returns to capital should, in a dynamic economy, increase the demand for capital, that is shift the demand for investment outward. If the supply of savings is elastic or if the supply of savings shifted outward as a consequence of immigration, then the capital stock would increase, the capital-labor ratio would rise, real wages would rise, and the return to capital would fall.
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From page 323... ...
We note the fact that much of the flow of British investment abroad was directed to economies with a high proportion of English settlers: the United States, Canada, and Australia (Edelstein, 1974; Davis and Gallman, 1973; Davis and Cull, 1994~. Because England was the primary source of international capital flows during the late nineteenth and early twentieth centuries, this gave the United States an important advantage (Cairncross, 1953~.4° Another mechanism that linked immigration to capital formation is the behavior of the immigrants themselves who appear to have been unusually heavy savers and investors in the American economy.
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This figure suggests Rate 0.30 0.25 0.20 0.15 0.10 0.05 o.oo 40-44 2,~30-35 ~/~ 35-39 45-49 ' ' ' ' 1 ' ' 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 l 1 1 0 5 1 0 1 5 20 25 30 35 Years in the United States FIGURE 8-15 Self-employment rates for foreign born, five age cohorts defined by age in 1910, male foreign-born nonfarm labor force.
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From page 325... ...
that newly arrived immigrants, whatever their age, began their American employment careers as wage workers and then moved into self-employment as their tenure in the United States increased. The similarity of the upward movement for men arriving at different ages suggests heavy saving rates in the years following their arrival into the United States.4i The saving rates of immigrants may have been higher than those of the native born.
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We conclude that immigration actually helped stimulate the increase in the capital stock and in the capital-labor ratio.443 Immigration and Inventive Activity America became a world leader in many technologies over the late nineteenth and early twentieth centuries (Mokyr, 1990:268; Wright, 1990~. Rapid immigration may have contributed to this ascendancy by the simple fact that the 42This effect is one of the supposed underlying causes of the strong association between immigration and the `1Ong swings in economic activity, known as Kuznets, cycles (Thomas, 1954/1973)
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From page 327... ...
Thus, it would be a magnet for would-be inventors, scientists, and innovators who would benefit from the working conditions, resources, and venture capital not available in their home country. Immigration and Technological Innovation Invention will have no impact on economic performance unless the new ideas diffuse, are adapted to existing conditions, and transform the capital stock.
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The new, mass-production techniques introduced in the era of mass immigration required new machines and the redesign of the factory itself. Effective use of refrigeration technology required new railroad cars; use of the electric motor to drive machines required the redesign of factories.
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What would such parameters mean for the impact of immigration? If the flow of new immigrants increased the labor force by 4-8 percent over a decade (compare these numbers with those in Table 8-1)
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, it is difficult to exaggerate its importance as a factor in the economic growth of the United States. Since immigration brought in a large labor force, the cost of whose rearing and training was borne elsewhere, it clearly represented an enormous capital investment that dwarfed any capital inflows of the more orthodox type (Kuznets, 1952: 197~.
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To Gallman it appears that the saving that Neal and Uselding calculate would only be present if, in the absence of immigration, Americans chose to increase the native birth rate enough to fill the labor force gap left by the absent immigrants. In that case, America would have had to invest in the child rearing and education for this shadow cohort.
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8) have estimated that the immigration between 1890 and 1913 augmented the labor force in 1910 by 11.8 percent and reduced the real wage in 1913 by between 4.5 and 5.6 percent.
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Because, by assumption, Hatton and Williamson deny any impact of immigration on the capital stock and abstract away from labor market dynamics over the business cycle, they exclude all of the dynamic effects that are hypothesized to generate a positive effect of immigration on real wages and the rate of economic growth. They have not ruled out these positive effects by an examination of the data, the historical record, nor the logic of the arguments.54 At this point it is worth pointing out two facts that are not in dispute.
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In the scholarship on the economic impacts of the earlier mass immigration to the United States the focus is on growth. The potential impacts of immigration on the American income distribution have received much less attention, at least until very recently.
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developed what has become the standard measure of long-term trends in Amencan income inequality during the earlier era of mass immigration to the United States. It is the ratio of the real wage rates of urban skilled workers to those of urban unskilled workers.
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They find that in countries where immigration flows were large relative to the size of the labor force, inequality rose more rapidly than otherwise; "when countries had to accommodate heavy immigration, inegalitarian trends were strong." Goldin (1994b:12) also suggests that immigration increased American income inequality in the early years of this century.
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There is no doubt that their wages in the low-productivity, stagnant, and oppressive South were lower than they would have been in the dynamic and prosperous North in the 50 years between Emancipation and World War I Their failure to migrate in any significant numbers is one of the mysteries of late nineteenth-century American economic history.
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From page 338... ...
The second view, by contrast, suggests that immigrants would soon overcrowd local labor markets and the ethnic neighborhoods that originally attracted them. Their geographic concentration would likely harm the nativeborn workers in these areas, exacerbate income inequality, slow cultural and linguistic assimilation, and retard the economic advancement of the immigrants themselves.
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From page 339... ...
In doing so, they ignore the substantial social redistribution from income earners to retirees through the Social security system and from single young adults to families through the educational system. Because recent immigrants are disproportionately single, young adults, and labor force participants, they are less likely than the native born to use educational services, especially the more expensive higher education services.
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From page 340... ...
But because immigrants are so much more likely than the native born to be concentrated in the wage-earning age groups and to be both labor force participants and income tax payers, it is not clear that immigrants pay a disproportionately low share of taxes compared with the population as a whole. The population as a whole forms the denominator in calculations about relative welfare use, thus the population as a whole is the appropriate reference for evaluating the fiscal contributions of immigrants.
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In the scatter diagram, each point plotted represents one of the 43 cities included in the Immigration Commission study. Along the horizontal axis we map the proportion of household heads who were foreign born, calculated from the IPUMS from the 1910 Census.
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* 1 1 1 1 1 1 20 30 40 50 60 70 1 1 0 10 Foreign-Born as Percent of Households FIGURE 8-19 Foreign born as a percentage of charity seekers and of households, 43 cities, l909-l9lO.
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From page 343... ...
The table displays the fraction of surveyed workers belonging to beneficial societies by nativity. Although the numbers vary from survey to survey, overall we find about a fourth of all workmen belonging to such societies, with the membership rates generally a little higher for the foreign than the native born.
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From page 344... ...
Ransom, Richard Sutch, and Hongcheng Zhao. Codebook and User's Manual: A Survey of 4,918 Agricultural Implement and Ironworkers in Michigan Outside of Detroit, 1890; Reported in the Eighth Annual Report of the Michigan Bureau of Labor and Industrial Statistics.
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From page 345... ...
Because the pension was limited to those who served in the armed forces of the United States during the Civil War, it did not provide support for the bulk of immigrants, most of whom arrived in the United States after that war's end.61 Up to 1935, then, the government-run pension system redistributed income from the foreign born to the native born.62 The first comprehensive public program of old-age support was established by the Social Security Act of 1935 that initiated a pay-as-you-go system in which the elderly are supported by the tax payments of those currently in the labor force.63 Redistribution between the native and foreign born can take place within such a system if the relative proportions of each group in the wage-earning and retirement age groups differ.64 In Figure 8-20 we plot the percentage of the foreign-born population by age at 20-year intervals beginning in 1930, shortly before the Social Security Act was 60For descriptions of the establishment and evolution of this system see Oliver (1917) , Glasson (1902, 1918)
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From page 346... ...
Yet as the age distribution of the foreign born in 1990 reveals, the resumption of immigration in the 1980s reversed the direction of the flow of old-age benefits by raising the relative proportion of foreign born in the working-age groups. Today the Social Security system works to redistribute resources from the foreign born to the native born.
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From page 347... ...
. The native born of this period encouraged school attendance for the children of immigrants.
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according to the nativity of their fathers.67 We then compared this count with the number of homeowners by nativity. We found a higher ratio of school children to home-owning household heads among the foreign born 4.7 school children per property taxpayer for the foreign born as compared with a ratio of 3.7 for the native born.
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From page 349... ...
It is certainly clear that the native born were not as concerned about the possibility of such transfers in the way they are today. IMMIGRATION AND THE CHARACTER AND QUALITY OF AMERICAN LIFE Immigration and Population Growth: The Question of Race Suicide One concern in the previous era of immigration was that immigrants and their children would overwhelm the native stock in the country's population.
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From page 350... ...
Setting the proportion of foreign born in the labor force at the scale of 100, he then calculated the relative proportion of foreignborn workers in each industry. An industry in which the foreign born were underrepresented has an index number below 100, one with a more than proportionate share of foreign-born workers receives an index number greater than 100.
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From page 351... ...
Today, government plays a much larger role in the provision of services and in redistribution among members of the population than was true at the turn of the century. · Fourth, the theoretical approach taken by scholars who analyzed the impacts of the mass migrations in the two decades preceding World War I was
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From page 352... ...
Joseph Ferric and Jeffrey Williamson made available manuscripts of their forthcoming books on the economic history of immigration. Organizations that provided data used in this paper include the Historical Labor Statistics Project at the University of California, the Social History Research Laboratory at the University of Minnesota, and the Inter-university Consortium for Political and Social Research at the University of Michigan.
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From page 353... ...
Abramovitz, Moses 1993 "The Search for Sources of Growth: Areas of Ignorance, Old and New." Journal of Economic History 53:217-243. Abramovitz, Moses, and Paul A
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From page 354... ...
Cain, Louis P., and Donald G Patterson 1986 "Biased Technical Change, Scale, and Factor Substitution in American Industry." Journal of Economic History 46(1)
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From page 355... ...
Galenson 1987 "Chinese Immigration and Contract Labor in the Late Nineteenth Century." Explorations in Economic History 24:22-42. Cohn, Raymond L
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From page 356... ...
De Long, J Bradford 1995 "Late Nineteenth-Century Tariffs and American Economic Growth." Paper presented at the meetings of the Economic History Association, Chicago, September.
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1996 "Mexican Immigrants to the United States: Evidence on Selection and Economic Performance from 1910 to 1990." Paper presented at the Meetings of the Economic History Association, Berkeley, Calif., September. Ferrie, Joseph P
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From page 358... ...
Harris, ea., American Economic History.
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From page 359... ...
New York: Basic Books. Kelley, Allen 1972 "Scale Economies, Inventive Activity, and the Economics of American Population Growth." Explorations in Economic History 10(1)
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From page 360... ...
Kuznets, Simon 1971a "The Contribution of Immigration to the Growth of the Labor Force." In The Reinterpretation of American Economic History, Robert William Fogel and Stanley L Engerman, eds.
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1996 "The Rental Price of Housing in New York City, 1830-1860." Journal of Economic History 56(3)
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Ransom, Roger L., and Richard Sutch 1987 "Tontine Insurance and the Armstrong Commission: A Case of Stifled Innovation in the American Life Insurance Industry." Journal of Economic History 47(2)
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1996 "Was There a National Labor Market at the End of the Nineteenth Century? New Evidence on Earnings in Manufacturing." Journal of Economic History 56(3)
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From page 364... ...
Williamson 1997 "Convergence in the Age of Mass Migration." European Review of Economic History (forthcoming)
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From page 365... ...
Uselding, Paul 1971 "Conjectural Estimates of Gross Human Capital Inflows to the American Economy: 1790 1860." Explorations in Economic History 9(1)
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Williamson, Jeffrey 1995 "The Evolution of Global Labor Markets since 1830: Background Evidence and Hypotheses." Explorations in Economic History 32(2)
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