Posted on April 17, 2020

Immigration and Inequality

Christopher Caldwell, Quillette, April 6, 2020

A big problem with the mass immigration that began in the United States in the 1970s was that it bred inequality. Its role in creating the highly stratified American social structure of the twenty-first century was as significant as that of other factors more commonly blamed: information technology, world trade, tax cuts. In 1995, the economist George Borjas, writing in the Journal of Economic Perspectives, modeled the actual effects of immigration on Americans. He found that while immigration might have caused an increase in economic activity of $2.1 trillion, virtually all of those gains—98 percent—went to the immigrants themselves. When economists talk about “gains” from immigration to the receiving country, they are talking about the remaining 2 percent—about $50 billion. This $50 billion “surplus” disguises an extraordinary transfer of income and wealth: Native capitalists gain $566 billion. Native workers lose $516 billion.

One way of describing mass immigration is as a verdict on the pay structure that had arisen in the West by the 1970s: on trade unions, prevailing-wage laws, defined-benefit pension plans, long vacations, and the power workers had accumulated against their bosses more generally. These had long been, in most people’s minds, excellent things. But Republicans argued that private business, alas, could not afford them, and by the 1980s they had won the argument. Immigration, like outsourcing and tighter regulation of unions, allowed employers to pay less for many kinds of labor. But immigrants came with other huge costs: new schools, new roads, translation (formal and informal), and health care for those who could not afford it. Those externalities were absorbed by the public, not the businessmen who benefited from immigration.

Naturally businessmen preferred this arrangement to the old one, which had involved paying expensive benefits to an entitled, querulous, native-born, and sometimes unionized workforce. Investment bankers preferred it, too. Their decisions on what to fund and what not to fund added impetus to the transformation of the economy. Sectors in which low-wage newcomers dominated (restaurants, landscaping, construction) began to crowd out sectors in which they did not (mostly manufacturing and local retail). Now immigration was the economy.

It was an extraordinary subsidy. Extraordinary things were done with it. For the class of people in the lee of immigrant competition—a class to which, at the time, virtually all politicians, business owners, financiers, and journalists belonged—the changes brought by low-cost service labor and low-cost imported goods seemed like an outright miracle. Immigrants caused a revolution in the way Americans ate—more because of the new savings that could be had from immigrant labor than because of the cuisines immigrants brought. (That is, Starbucks is as much a creation of the immigrant economy as El Taco Rico.) Inexpensive landscape gardeners made possible an explosion of golf courses and an extraordinary beautification of the country’s suburbs. The drab lawns of the 1970s, treeless and bordered by cracked cement driveways and boxy, scratchy hedges—these were now replaced, even in middle-class neighborhoods, by bowers of shady willow and laurel, hydrangea bushes in half a dozen colors, and thousands of varieties of daylilies.

Outsourcing was a similar windfall. Sending manufacturing jobs abroad offered consumers all the advantages of heavy industry and none of the pollution. Americans could now have blue herons plashing and pecking in their streams and hawks swooping off their rooftops as if the Industrial Revolution had never happened—and no one would have to give up the power mower in his garage. Pollution continued at the same rate, of course: It just involved deforesting Brazil instead of pouring bilge into Lake Erie. And it would be years before people began paying attention to the cost of permanent underemployment outside the country’s globalized cities.

The country outsourced repression along with jobs. Americans could get goods from authoritarian China more cheaply than from Western societies, with their trade unions and wage laws and workplace regulations. Many of the so-called developing countries did handsomely under globalization.

If we were judging open immigration and outsourcing not as economic policies but as U.S. aid programs for the world’s poor, we might consider them successes. But we are not. The cultural change, the race-based constitutional demotion of natives relative to newcomers, the weakening democratic grip of the public on its government as power disappeared into back rooms and courtrooms, the staggeringly large redistributions of wealth—all these things ensured that immigration would poison American politics right down until the presidential election of 2016.


Excerpted with permission from The Age of Entitlement: America Since the Sixties, by Christopher Caldwell. Copyright © 2020 by Christopher Caldwell, and published by Simon & Schuster. All rights reserved.