Nativists Are Ganging Up on Their Fellow Citizens When They Ban Immigration

Immigrants offer citizens new wealth and opportunities that sweeping entry restrictions deny

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On May 17, Shikha Dalmia, editor of The UnPopulist and Mercatus Center Resident Fellow, hosted “If Nativists Have Their Way,” a Mercatus Center webinar with three world-renowned experts on the question of what strict immigration restrictions would mean for Western countries. These speakers included Mercatus Center Senior Fellow Jack Goldstone, Virginia E. and John T. Hazel, Jr. Chair Professor of Public Policy at George Mason University, who discussed the demographic impacts of immigration; and Chandran Kukathas, Dean of Political Science at the School of Social Sciences at Singapore Management University, who discussed the effect of nativist policies on the liberties and political rights of a country’s own citizens.

The third expert that day was Michael Clemens, director of migration, displacement and humanitarian policy at the Center for Global Development. Clemens examined research on the impact of immigration on a country’s economy and public coffers.

The following is a transcript of Clemens’ comments, lightly edited for length, clarity and readability. We’ll publish similar transcripts of Kukathas’ and Goldstone’s remarks in the days to come. You can watch the entire panel discussion here, including a substantive question-and-answer session that begins at around the 62-minute mark.

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Remarks by Michael Clemens:

I’m going to dig into just a couple of points about the economic aspects of populist immigration restrictions. And I have to ask for your indulgence because nothing I’m going to say will make any sense until we get extremely clear about the very basics of this discussion: What is an immigration restriction, and what is populism? I’m going to take just a couple of minutes for that before talking about a few of the economic studies that I think are relevant.

Defining Immigration Restrictions

Just to be extremely clear from the beginning, economically an immigration restriction is a government ban on a wide variety of economic activities by natives. I just want to repeat that: An immigration restriction is a wide-ranging government ban on economic activities by natives of the country of migrant destination. This is something that’s not often appreciated, but it’s not really a perspective; it’s just a fact about how the economy works. An economy is a vast array of voluntary exchanges that are all two-sided—every single one of them. There are people who want 10 more Chicken McNuggets more than they want four more dollars; there are other people who want four more dollars more than they want 10 more Chicken McNuggets; and McDonald’s is a forum in which those two groups of people meet and exchange for mutual benefit. Literally every economic transaction that is voluntary has that nature.

Now, an immigrant participating in an economy enters into countless transactions like that. Most of those transactions have natives on the other side of the transaction. An immigrant who buys a product, who sells a service, who rents an apartment, who deposits a check, who starts a business, or who does anything at all in the economy is making someone on the other side of each transaction better off by definition, and the vast majority of those people are natives. So an immigration restriction that bars a foreign-born person from being present at all is a government ban on almost all of those transactions (a few of them can be conducted remotely; most of them can’t). And every immigrant forcibly excluded from an economy is of course a government ban on a constellation of natives who would have otherwise transacted with them to the benefit of those natives.

That’s not saying those restrictions are good or bad. I’m just characterizing them in the way that a bear is a mammal: This is a fact about a restriction on immigrants’ presence, which necessarily—if they are economic actors, and essentially all of them are—involves banning interactions with natives.

Now, this really flies in the face of a kind of homespun narrative about what immigration restrictions are. A lot of people refer to them as equivalent to defending one’s home. Essentially the idea is that a nation is like a house, and the sovereignty to exclude people from a country for any reason at any time equates to the sovereignty to exclude people from the land you own. If you lack that ability to exclude for any reason, according to whatever preference you might have about whom to transact with and whom to be near, then you really don’t have ownership of your house, and nations that cannot do that do not have ownership of their own land, and thus don’t really exist as nations. This is a frequent trope of [former White House Senior Advisor] Stephen Miller and many other people.

But once we recognize that restrictions on immigration involve two-sided transactions with natives on the one side, it’s hard to believe in absolute sovereignty. We don’t believe in the absolute sovereignty of whoever controls the government to do whatever they want to the rest of the country’s citizens, such as deprive them arbitrarily of life, liberty and property. There are restrictions on that ability.

Now to be sure, citizens frequently use the government to ban all kinds of economic activity by other citizens. If someone here goes home tonight to set up a small business for import-export of enriched uranium, government agents will soon appear to physically lock that person in a facility to prevent those transactions. I personally am glad that the government would do that, because there’s a clear and present danger to all Americans from such a business and an undisputable public interest in blocking it. I’m just pointing out that total sovereignty to restrict a vast array of economic interactions by other natives is difficult to justify.

Defining Populism

Now to that second point: What is populism? People define it differently, but populism is often defined as a political movement claiming to represent and defend the interests of “the people“—real people, ordinary people, pure people, virtuous people, original people.

So whom are they representing? Well, not immigrants typically, who are very rarely considered to be the original people or the pure people or ordinary people. Immigrants are typically not ordinary. Almost everywhere and at all times, they are minorities—and often small minorities—of the population.

And the populist movements are certainly not representing all natives either, for the reason I just pointed out. A wide array of natives are interacting with immigrants because they benefit from that, and their interests cannot possibly overlap with the interests of a group of populists who seek to exclude all of those people; otherwise, there would be no need for the populist movement. Populists are therefore representing a subset of natives—a subset of citizens who are willing and interested in barring transactions by others.

And yes, of course, immigration restrictions are bars on foreigners too, but I don’t think there’s any populist immigration restriction movement in the world that is offended by the fact that Anna Louisa from Honduras provides child care somewhere in the world, or even that she makes a lot of money doing that and provides opportunities for her children doing that. They might favor that thing. What they’re bothered by specifically is that a fellow citizen wants to hire her instead of hiring the person that the people in the populist movement prefer that they hire.

The Economic Evidence: Specialization, Dynamism and Fiscal Benefits

Now I can get to some of the economic evidence, which makes a lot more sense in light of this understanding of what an immigration restriction is. Think of what happens to economic activity in general if a large group of citizens claims the sovereignty to place unlimited arbitrary restrictions on a wide variety of economic activity by another large group of citizens. For example, suppose that men controlling national, state and local governments assert the ability to bar economic transactions of various kinds by women.

This is not hypothetical at all. This happened for much of U.S. history at the federal, state and local level. Various states barred women from being lawyers, barred them from enforcing contracts, barred them from filing patents. What happens when groups of people other than those women assert the right to control women’s economic activities in those ways? We understand intuitively that it’s going to mean less specialization by women in various occupations in which they add value to the economy and massively benefit both themselves and other women and men.

And exactly the same thing happens when immigration restrictions bar, by government diktat, broad classes of transactions by broad classes of people: less specialization in the economy and reduced income per capita for natives.

You can see it in macroeconomic data. There’s a remarkable study by Hippolyte d’Albis and coauthors at the Paris School of Economics, where they put together macroeconomic data for all Western European countries over a 30-year period and watched what happened to macroeconomic indicators when there were downturns in asylum-seeker inflows or immigrant inflows more generally. Those downturns were followed on average by reductions in gross domestic product per capita—not just reductions in GDP, but reductions in the average income of people in the migrant destination country—as well as higher unemployment of natives in the destination country and less net fiscal revenue.

How does that happen? In a million ways, but one of them is illustrated by a remarkable study by Patricia Cortés of Boston University. She shows that areas of the United States that have experienced more less-skilled immigration in recent years have, all else being equal, higher rates of labor-force participation by highly skilled women.

What does that mean? It means that when elder care and child care are more available, women tend to specialize more in things other than child care and elder care. Since many women are naturally suited to do things other than child care and elder care, that availability expands the economy and creates all kinds of opportunities for women and for men.

Second, and this is quite separate, it means less dynamism in the economy. Now by specialization, I mean there is a certain structure of the economy—certain firms, certain kinds of organization of the economy, people living in certain places, using certain technologies—and if none of those change, people allocating themselves between different activities can grow the economy. But another thing that can grow the economy is for all of that structure to change. That’s what I mean by dynamism. I mean new firms, new technologies, people living in new places, changing the fundamental structure of how the economy works.

This is something that is very strongly associated with immigration. Ben Jones of Northwestern University and his collaborators have shown that immigrants are overrepresented among entrepreneurs at all levels of firm size—not just little shops and magazine stands, though certainly in those businesses, but all the way up to the largest firms. Most famously, around 45% of the Fortune 500 firms in America were co-founded by immigrants or the children of immigrants. A gigantic expansion of the range of activities going on in the economy is due to immigrants.

A lot of this arises through their effects on others. This is an indirect effect that I want to harp on because it’s less discussed. Rebecca Diamond of Stanford and her colleagues have this incredible study where they track what happens to patenting by groups of people and measure the effects of immigrants among those groups by seeing what happens when there is an unexpected death of the immigrant. When the immigrant is no longer around, what happens to the patenting by the group? Not only did they find that about 30% of aggregate U.S. innovation since 1976 has been caused by immigrants, but even more remarkably, that more than two-thirds of that effect came from their spillover effects on others. Among groups of people who patented innovations together, when the immigrant died unexpectedly, the other people, including natives, became less likely to go on to patent other things—a really crushing effect on the dynamism of the economy.

And the third and final effect I want to mention is more tax revenues—that is, immigrants tend to fill public coffers. The National Academy of Sciences brought together a blue-ribbon panel of some of the best economists and other social scientists who study immigration in the country to come up with a consensus statement about the effects of immigration on the American economy. Their estimate for the average immigrant to the U.S. over the previous five years to that study was that this average immigrant would add on net $257,000 to public coffers at the federal, state and local level over a 75-year period—basically, over a lifetime.

That is, this average immigrant would be paying in $257,000 more than the benefits they received, even with the widest possible accounting of benefits to include not just welfare payments and that sort of thing, but costs like emergency room congestion, police congestion and incarceration expenses. Translating that to the effect on natives, it means that every immigrant barred from coming requires additional taxation of natives to get the same benefits for natives. It means the elimination of a direct subsidy to all of those taxpayers by the exclusion of that immigrant.

Now, I do want to emphasize that none of this means that immigration restrictions are bad in any way. Obviously, there are all kinds of reasons people support various public policies other than their economic effects.

The points I want to make are just two, really. First, thinking clearly about what the economy is and what immigration restrictions are, they are restrictions on natives. For that reason, it is incorrect to claim an unlimited sovereignty for some citizens over others, because we don’t believe in that in any other sphere. There are limits on my sovereignty as a citizen to get together with my fellow citizens and arbitrarily restrict the activities of other citizens. This certainly applies to immigration restrictions, since they are restrictions on natives’ activities.

Second, immigration restrictions constitute a real economic harm to typical people, to average workers, to the people that populists claim to represent. Now, that doesn’t mean that noneconomic concerns have no weight, and it’s not asserting that there should be any particular level of immigration. My claim is just that the populist claim to represent the real, normal, ordinary people is contradicted by serious economic research and basic economic reasoning.

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