The long view of economics and immigration (Two Indicators)
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When we asked for your questions right after the election, there were a few that we got again and again. One of those was, how would mash deportation affect the economy? Another was, how do you even measured the economic impact of immigrants and immigration?

Well, we have some answer, some evidence. And IT comes in the form of two stories. Hello, welcome s planet money and daring woods and .

I may dream mom first darian arico host Wilson wong have the story from another time, the U. S. Crackdown on immigration with the express intent of helping the economy. We look at how that worked out.

and then we take twenty years of research and we distill IT into what immigrants contribute to economic growth. And we run the numbers for immigration in the U.

S. Today's aries come from planet mony's daily podcast, the indicator enjoy.

In eighteen eighty, the chinese were the biggest group of immigrants in the western U. S. They accounted for around twenty percent of all immigrants in the region.

This was the time of open borders. Basically, if you had enough money to make the trip, you could come to the U. S.

And chinese immigrants arrived in the west in two big waves, first during the california gold rush of the eighteen fifties, and then to build the transcontinental railroad about a decade later. The new arrivals are mostly working age able body men. Nancy change is a professor of economics at northwestern universities, collogue school of management.

The interesting thing about the chinese is that they were very organized in the way they came to the U. S.

SHE says that most of the chinese immigrants came via U. S. Space companies run by a chinese merchants who spoke english, they recruit workers in china, handled all the paperwork, and hired out teams of labor's to american employers.

They were able to go to very powerful places and be productive. A whole group or a company of men would go to the frontier, or their building road roads, or taking down trees, or reclaiming land. And there would be self sufficient.

For example, the workers figured out their own housing and food.

And so american employers really like working with them. Because you know it's um you pay a Price and then it's it's not much hassle.

But the chinese workers also faced racism and suspicion, Nancy says. Anti chinese sentiment gained momentum. In the eighteen seventies.

There was a recession in the U. S. That hit western states more than eastern words.

When economic opportunities are are less pantile. I think there's there's often and unfortunately, the desire to pin IT on someone.

Lawmakers in western state started to restrict how chinese immigrants could work and live. They were banned from owning farmland or getting access to fishing grounds. State and federal legislation also made IT difficult, if not impossible, for chinese men to enter interaction al marriages or bring over their wives from home.

These policies snowballed into the chinese exclusion act of eighty and eighty two. The low banned all chinese born labret s from entering the U. S.

For ten years, and also prevented chinese already in the U. S. From becoming citizens, and these restrictions were extended and tightened of the time.

The other typical immigrant story from amErica is you come from a country to amErica for Better opportunities. And the chinese exclusion act basically made that impossible to do for the chinese.

The exclusion laws also enabled the atmosphere of targeted racist violence. In what's now iowa mean an organ, White men massacred dozens of chinese labors. So chinese immigrants left the U.

S. In large numbers. And of course, there were a very few new chinese migrants native.

And several researchers recently publish a working paper about the economic impact of the exclusion policies on the western U. S. They calculated that the chinese exclusion act reduced the chinese labor supply by sixty four percent, and remember competition for jobs, so as one of the main justifications for the law.

So then he wanted to study what happened to White U. S. Borne workers in western states.

And, you know, honestly, we thought we would find that they benefited ted. We thought this was going to be a story of winners and losers. But what we ve found was a, this was the story of losers and losers.

Here's what Nancy means. SHE found that the White male labor supply in the west was reduced by twenty eight percent. Basically, in places that chinese immigrants vacated, White workers also left, and they're renn enough new workers moving from eastern states to fill the gap.

A possible reason for the decline and White workers, Nancy says, is that the loss of the chinese immigrants might have drained some towns of their economic vitality.

This chinese got really into services that was on a power, I would tell everyone else there. Everyone slips there. The chinese league, they shut down the motel, shut down the bar, they shut down the restaurant. All of a side near town is a lot less attractive for everyone.

During the chinese exclusion era, one sector where local White workers did appear to swap in for departing chinese workers was mining. But Nancy says that an exception to the broader trend, like take manufacturing there, her paper documents are slow down. And this happened both in terms of output and in the number of businesses overall.

Nancy says the number ers suggests that the chinese exclusion act was a drag on economic growth in the western us until at least nineteen forty. The act wasn't repealed until one thousand forty three that after china joined the allies in world war two, Nancy says her research on the chinese exclusion act shows the danger of enacting wide sweeping policies.

The legislation was an explicitly a deportation program, but IT did lead to chinese immigrants leaving the us. In large numbers. The law had far reaching consequences that Nancy says weren't anticipated .

by lawmakers. Believe in immigration policy is there to serve the economic interest of american citizens. We wanna think through the migrants that we want to ban or that we want to reduce, what are they doing? Is that something that americans value? And if they go, who's onna do the job? And at what Price will they do IT for? And what will americans have to pay for that?

Next up, agent and I talk with zik hernan's about his economic research on immigration. Zigs.

the professor at the university of pensylvania ans warden business school, and he says, amid all the coverage in the political speeches, he's really noticed two narratives about immigrants taking hold.

Immigrants are billions who are here to steal your job and undermine your safety and destroy american culture and our heritage. The other narrative is, is immigrants are the poor, huddled masses who need our compassion, and we must help them. Even if IT costs us, it's either kind of fear or pity.

I'm definitely one of the billion immigrant.

I was not going to say anything. But since you said IT, it's out there in the open now. But you know, ik says this psychology between fear and pity IT distracts us from the larger truth about immigrants coming up. We break out of the binary.

Zik nanas has moved around a lot during his lifetime. He was born in europe, and his family moved from there to various parts of central amErica and eventually to argentina. And there he says he noticed just how different economically countries could be.

I was in the poorest slums of of the city of winner sides. And so you know, when you see old men crying because they can't find work, or women that are that are, you know, totally anxious because they can't feed their kids, that really moves .

you when seek game to the U. S. For college, he became fascinated with the question of why some countries prosper economically and others, again and again, the answer seemed to come down to people.

I realized that if you want to explain the movement of investment ideas, innovation, customers and the just the evolution of economies and markets, you can't separate that from the movement of people.

And IT said zeek has been researching how immigrants shape economies around the world. He recently wrote a book laying out what he's learned called the truth about immigration, why successful societies welcome newcomers.

So the argument i'm making is based on twenty years of research, is that immigrants don't need your fear. They don't need your pity. They are good for you, good for you and your children uh, and that's both economically .

and socially. Zik says the reasons for this can be broken down into five things. Five things, any group of people contribute to economic growth. And because immigrants are people, and he also contribute these things, they are talent, consumption, taxes, investment and innovation. Bits unpack those.

So we'll start with talent, immigrant spring skills and the ability to work, often filled jobs where there aren't enough native form workers willing or able to do them, which could be anything from picking fruit to practicing medicine. But zek says IT would be a mistake to think that in immigrants, labor is the only thing they contribute to an economy.

Yeah, I mean, after they work, they have paychex to spend, right? So the second thing they bring is consumption. In economic terms, when immigrants and turn economy, they increase aggregate demand for good and services.

But that's really just the beginning of IT. The more interesting part is what happens next one is what I call a novelty effect, which is immigrants, just because they have different taste and preferences, right? They grew up like you, I don't know, different foods or different kinds of music, or they use technology a little bit differently or something like that. They are introducing new categories of products and services or brands that they liked.

where they came from. Yes, for example, in dc, where I live, there's a large ethopia, an community you're more likely to see in this area a demand for eat the opium food in restaurants or in a place with lots of korean immigrants. Retailers may be more likely to import korean beauty products. So this is the novelty effect of immigrant .

consumer demand, right? Like I come from the new zealand and there is a fruit I can not find a new york. It's code I of them made a lot of from galaxy a.

What is the task like? It's really tenny sweet ball of perfume and delight. It's it's hard to explain.

Please send them to me. I'm not sure they'll still be good by there. Now the third thing immigrants contribute is taxes. They pay sales taxes, payroll taxes that fund social security. And that's even true of many undocumented immigrants.

Now, in the short run, there is a cost to integrating newer immigrants, which is disproportionate, born by local governments, the cost of public education and social services like food assistance. But in the long term, zik says that these costs are outweighed by the texas immigrants pay. Zik says that the average immigrant makes a net positive contribution of just over a quarter million dollars.

The fourth thing that immigrants contribute to the economy, which sexes is often overlooked, is investment. And this can happen a couple of ways. For one thing, you can have foreign companies investing in the U. S. there.

Research i've done in the U. S, for example, shows that when immigrants increased by one percent as a share of of a state's population, that state becomes fifty percent more likely to get investment from the immigrants home country than that otherwise would have been. If you want to see IT like a contemporary story on this, look no further than boyo computer, which is one of the fastest growing restaurant chains in the united states. And of all places, it's from guardiola.

So you have this guaTamara company over the past couple decades opening U. S. locations. At this point, they have over one hundred of them, and they open them in places where there tend to be a lot of immigrants from central america.

That's what I call the immigration investment jobs triangle, that is, immigrants seto investment follows. Those investments create jobs and not jobs just for immigrants.

And then another way investment can happen is an immigrant to the U. S. Starts a business.

Immigrants are also eighty percent more like with the native warn people to start a business. And that means that they're putting their own cap t at all, their own investment in a new business. Okay, now that eighty percent is at the average for every business from a moment, pub, restaurant to google or zoom or do a lingual, which are immigrant founded firms.

The fifth and final thing, immigrants contribute to economic growth, according to ek, is innovation. They bring ideas. Just take out some of these stats once that estimates that in recent decades, immigrant inventors were responsible for one in three U.

S. patterns. In addition, nearly half of fortune five hundred firms were founded by an immigrant or a child of immigrants.

So that runs out. The five things immigrants contribute to the economy, which, again, any group of people has these five qualities, is just that immigrants bring a different set of skills and different tastes and ideas, which help grow the economy in a way that I could otherwise zik says. This is just as true for people who immigrate to the U. S. Illegally as those who come here legally.

I think the difference is that illegal or undocumented immigrants often, uh, have a ceiling on how much of those five things they can contribute because of their legal status. I'll tell you a short story on this. Um my barber is really good, and we've become good friends over time.

He confess to me, after years of getting to know each other, that he is an undocumented immigrant. He is not in the country legally. He also told me that his lifelong has been to start his own barber shop, and he has two hundred thousand dollars saved in cash ready to start this business.

Which one was knocked me my chairs? Like you have how much money yeah um and I was like, wow okay and I said, well, why don't you do this and he said I I can't because of my legal status. So the the real tragedy of illegal immigration when IT comes to the economy is that we don't get as money of of the five things that immigrants spring as we could if they were here illegally.

Now he wants to be clear, he's not advocating for illegal immigration, but he isn't favor of more legal pathways.

To put in another way, there hasn't been a major update to U. S. Immigration policy in over three decades.

And because of that, xe argues that the U. S. Economy is missing out. Today's story's first air on our other podcast of the indicator from planet money IT comes up five days a week and is always ten minutes or less. Check IT out on your your podcasting.

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