Economics, Trumpism and Migration (crosspost from Crooked Timber)

It’s obvious enough by now that support for Trumpism in the US and elsewhere is motivated primarily by racial and cultural animus, and not (or at least not in any direct way) by economic concerns. Still, to the extent that Trumpism has any economic policy content it’s the idea that a package of immigration restrictions and corporate tax cuts[1] will make workers better off by reducing competition from migrants and increasing labor demand from corporations. The second part of this claim has been pretty thoroughly demolished, so I want to look mainly at the first. However, as we will see, the corporate tax cuts remain central to the argument.

For this purpose, I’m going to start with estimates presented to the US Senate by the restrictionist Centre for Immigration Studies, which draw mainly on the work of George Borjas at Harvard. These estimates have been the subject of vigorous criticism, but, AFAIK, no-one has suggested that they overstate the benefits of migration. So, for the sake of argument, it makes sense to start here.

The CIS estimates that the effect of migration is ” In short, the winners from immigration gain $594 billion and the losers lose $531 billion, for a net gain for $63 billion.” The winners in this estimate are business while the losers are native-born workers. The losses in the estimate are concentrated on low income workers, while some of the benefits probably go to high income workers like finance professionals (whose incomes will generally be correlated with profits). All gains and losses are in terms of annual income.

As would be expected, the CIS calculation disregards benefits to non-native born workers and their families, whether they are naturalized US citizens, legal residents or undocumented. In the CIS view, if you weren’t born in the US, you don’t count for anything.

To understand what’s going on here, it’s critical to observe that the discussion isn’t about migration flows but about the cumulative effect of migration, represented by the entire non-native population. That is, up to a first approximation[fn1], the CIS is comparing the current situation to one in which immigration had been held to zero throughout the lifetime of the current workforce (say, since the 1950s).

Now let’s look at the Trump corporate tax cuts. They benefit companies and high income earners to the tune of $2.3 trillion over 10 years or about $230 billion a year. That’s nearly half the amount transferred from workers to capital from all the immigration in living memory, as estimated by the CIS. And, of course, Trump’s tax cuts come on top of a string of tax cuts and other policies all of which have harmed labour and helped capital.

On the other side of the coin, suppose that Trump succeeded in deporting all undocumented workers and banning new immigration altogether. The estimates I’ve seen suggest that about 20 per cent of non-native workers are undocumented and that legal immigration (around one million per year) is equal to about 1.3 per cent of the current non-native population (around 60 million). Relying on the CIS estimates, it would take 20 years of such draconian policies just to offset the Trump tax cuts.

In practice, nothing like that is likely to happen. Anyone who voted for Trump on the basis of economic concerns about migration, or globalization more generally, has been taken for a ride. The same is true of voters for Brexit and for the anti-migrant forces that are now taking over, or marginalizing, old-style hard neoliberal parties on the political right around the world.

Turning the argument around, the CIS estimates suggest that immigration is hugely beneficial to corporations operating in the US. That implies that a combination of expanded immigration and higher corporate tax rates, along with higher minimum wages, would leave corporations better off, while also benefiting workers and allowing for higher public expenditure. The usual arguments about capital mobility don’t apply here. The only way corporations can benefit from migration to the US is to operate in the US.

I don’t suppose arguments of this kind will make a lot of difference given the prevalence of overt racism on the right. But, to the extent that racial appeals are being used to divide the working class, it’s important to be clear about the fact that, economically, the common interests of native-born and immigrant workers far outweigh the potential competition between them. This is an argument that the left has had to make repeatedly throughout the history of capitalism, and that we will probably have to make again in the future.

1. This doesn’t take account of the US-born children of immigrants. However, given that US immigration peaked around 2000, most children of immigrants are still too young to be in the workforce, while representing sources of demand for goods and services produced by US workers.

18 thoughts on “Economics, Trumpism and Migration (crosspost from Crooked Timber)

  1. “It’s obvious enough by now that support for Trumpism in the US and elsewhere is motivated primarily by racial and cultural animus, and not (or at least not in any direct way) by economic concerns. ”

    Isnt one of the main economic concerns for Trump/Brexit voters about immigration and the effect on jobs? It might look racist, but dismissing it as such seems to be missing the point. Indeed the rest of you post is about it so the first line seems to be out of place.

  2. Thanks for the article, interesting as usual. While I agree those on low income voting for Trump were sold a deceitful pup, I’d note important parts of his economic sales package was a protectionist trade deal approach, and climate denialist policy approach with promises to rebuild coal and expand gas industries. Dems failed to effectively counter all four elements of this expanded package – distracted by the chaos of Trump negatives – while he narrow casted to various subgroups In the election. The election result was in part because of failure of both major parties to address economic concerns. This Is important because Unless Dems realise this , I fear he could sneak another win, despite all the chaos.

  3. Agree Duncan E.

    The Prof draws too long a bow as to this. The anxious response of blue collar people across the western world over the last generation has been more related to 1) busting the labor market and unions, 2) withdrawing social infrastructure to do with, particularly, treatment of the unemployed,

    As people like myself have said for a long time, these are LEGITIMATE concerns and any tendency to resentment of foreign workers comes from the use of offshore labour for purposes above mentioned and from fear engendered by wedge campaigns devised by conservatives and media/press to wedge the Left. For most of the blue collar western world the issue not firstly about “racism” but about bad politics.

    Personally, had hoped for a) a late article on Adani and reef pollution, and whether this relates to Turnbull’s half-billion so-called foundation grant and how that might work, or not, since no one seems to to be able to describe it or its imp[lication yet ( including if it is an IPA policy bubble))
    b) the banking royal commission latest.
    Rather than more doubling down vis a vis the false, browbeating charge of “racism” we should be including a more dispassionate view involving working class anxiety concerning labour market flooding and dismemberment of social infrastructure.

    No doubt I run the risk of censorship for running a variant or corrective viewpoint, if it turns out to be the case, so be it. If blocking is to be resorted to for want of a good counter argument I will live easily since it only can infer that others lack of a certain courage of conviction causes hesitancy instead in the provision of a decent counter-argument.

  4. Wouldn’t Trump’s tax cuts, which according to the thread yield a net benefit to ‘business’, benefit all foreign shareholders? Furthermore, wouldn’t China be keen on selling US treasuries and buy US shares?

    I can’t see why a foreign corporation has to operate in the USA to get a slice of the US tax cuts. The treasury departments of large corporations tend to hold shares and other financial securities that could be issued anywhere. Similarly pension funds hold internationally diversified portfolios of financial securities.

    Trumps wants other countries to spend more on military. It seems to me he does know (or he picked it by chance) that one of the US many economic problems that are reflected in the income and wealth inequality measures is their expenditure on the military.

  5. Sorry, Donald’s sir name is Trump and not Trumps as I have written by mistake.

  6. Congrats Ernestine Gross for the monumentally relevant comment re US tax… with IPA style globalisation the rich get richer and the poor get the picture, sort of what Marx was pointing out a hundred and fifty years ago.

  7. An important feature of the Brexit Leave vote was the alleged impact of immigration on public services, especially the NHS. Simon Wren-Lewis posted a striking survey report highlighting thus. The concern was crowding out of natives by immigrants in NHS queues. It’s entirely bogus, and rests on a “lump of health” fallacy (the lump having been shrunk by a decade of Tory austerity). In reality immigrants are younger and healthier than the native population mean, and their taxes subsidise the natives. In addition, immigrants comprise a large share of the NHS workforce.

    This is a peculiarly British twist; but it illustrates how racist bad- faith arguments can get a hold.

  8. To various comments above, read the data instead of relying on impressionistic reports. Trump voters were mostly Romney voters and weren’t particularly insecure. Nevertheless, the point of the post is to show that, even Trump voters who were motivated by economic concerns were duped (except for corporates and the 1 per cent).

  9. I did look at the referenced article. Regarding data in the CIS study, I noticed they use the age group 16 to 65 as the working age population. Given the graph in the paper, this category is quite important for their analysis and conclusion. I would suggest this definition of ‘working age population’ is not a good foundation for their analysis. What if a larger proportion of the ‘native'[1] population enters the work force (ie has a job or looks for one) at a much later age than the ‘immigrant population’ due to higher education or training in the former? It could also be the other way around. I don’t know. But I do know the CIS study assumes there is no difference.

    My point goes towards the possibility that the combination of reducing immigration and corporate tax cuts may enrich both, the wealthy in say Mexico and in the USA (via the financial markets), while making the relatively poor in the USA poorer (via the labour markets). The immigrant workers are likely to learn about the existence of different local relative prices.

    [1] What a strange term. A more cynically inclined reader might reach the conclusion that the study hints at the costs to the original population of the Americas due to immigrants since colonialism.

  10. Prof Quiggin, I wonder if the Trump-ites were insecure, especially blue-collar ones, which made them dupe-able for want of a better word if psychologically massaged in the right way…they have always struck me as insecure and the higher level WASP types also rather insecure due to red state cultural Stepfording making it impossible to grasp reality sufficiently enough to avoid voting for Trump and Tea Party exceptionalist//nativist nonsenses.

    Many religious and denialist, these folk were well enough dealt with by the likes of Marcuse fifty years during the Vietnam disaster and I don’t get any sense of much having changed as to the character of these unfortunates, but it is sad to witness the effects of cultural toxicity.

    I guess I shoot down some of my own ideas, to a Martian perhaps Australians could be more “racist” than we would see ourselves, but gee, I just don’t see myself massacring aborigines or wearing a sheet and pointy hat like they do in Alabama.

    Then again, I suppose even members of the SS did not think themselves odd in the way people of this era might. Anyway, will give it all a second read and see where I went “wrong”, if it makes folk happy.

  11. Hi John — appreciate this post and the attempt to engage the restrictionists’ arguments in a less-politicized manner. It’s a noble impulse!

    I’m concerned, however, that you have cited CIS’s figures without including any information about that groups political history, political affiliations, and widely proven shoddy research. They routinely post outlandishly misleading and downright false claims in the press and through their website and spokespeople, much of which has made its way into White House briefing rooms and the mouth of the Attorney General. Perhaps you weren’t aware of the source and were citing with legitimacy because of their being included in Senate numbers, but it’s actually a jarring sign of how effective they have been in their propagandizing over the past several years that they are uncritically cited by the mainstream press.

    They are a bit of a pet irritation of mine so whenever I see someone citing them I like to share a few links about their history, funding sources, and controversies in the hopes that people will stop citing them or at least cite them with much clearer description of who they are.

    Links below, thanks for all your writing. (take the SPLC with a grain of salt of course, but they have compiled much research on the Tanton network that is useful for understanding where this “scholarship” comes from)

  12. “Trump voters who were motivated by economic concerns were duped”

    Well that is true. The issue is what the Democrats are proposing as their alternatives to Trumps immigration, trade and tax policies?

    “To various comments above, read the data instead of relying on impressionistic reports. ”

    Its my understanding the data indicates that Hillary lost Michigan, Pennsylvania, Wisconsin. In those states Trump got same votes as Romney, but Hillary got much less than Obama. The Democrats either voted Green or didnt vote. In other words Trump didnt win, Hillary lost.

  13. @Duncan Clinton’s policies were reasonably good, but her campaign barely mentioned them, instead going after Trump’s character on the mistaken assumption that millions of decent Republican Romney voters would change sides. In fact, the set of decent Republicans has turned out to be virtually empty.

    At least on policy, the Democrats are doing a much better job now. Nearly all serious candidates are pushing a $15 minimum wage, pro-union policies, free or much cheaper college and some version of single-payer health insurance.

  14. “Clinton’s policies were reasonably good, but her campaign barely mentioned them”

    She couldn’t talk about them. Her Wall street donors would have gone nuts.

    “Nearly all serious candidates are pushing a $15 minimum wage, pro-union policies, free or much cheaper college and some version of single-payer health insurance.”

    Leaving aside the min wage and union ones (as I dont think they are vote winners and those wall streat types really hate them)…

    The cheaper college thing seems to just be 2 years TAFE equivalent from what I understand of the American system. That doesn’t seem like a good fix? I think Americans are expecting free Harvard. It seems to be something is wrong with the student loans structure?

    Medicare for all is probably the best they put forward, but it doesn’t help they have just tried Obamacare. And again I think Americans are thinking that they can just take their Medicare for over 65s and give it to everyone. Our Australian Medicare for all is vastly different (read has wait times and limits). As an example they would need to remove the provision that stops Medicare negotiating on price… Democrat political donors will never let that happen.

  15. “instead going after Trump’s character on the mistaken assumption that millions of decent Republican Romney voters would change sides. In fact, the set of decent Republicans has turned out to be virtually empty.”

    I guess my point is even if this is true (and not just name calling) that wasn’t the reason Hillary lost. It wasn’t that decent Republicans voted against her… Its that decent Democrats did.

    The same is true of Labor here.

  16. So, whatever, Hillary Clinton did not connect with (often unemployed) blue collar workers in rust belt states. John Quiggin is very sharp on precisely the impression I had, which involved things like hobnobbing at flash dinners with Wall Streeters, which was exactly the sort of thing that alienated blue collar people in the rust belt. This is where NAFTA, something partly ascribed by popular myth-making, rightly or wrongly, to Bill Clinton rather than Bush the elder, was blamed for massive unemployment in the Midwest industrial regions, against a backdrop of blue-collar resentment of identity politics tapped into by the wily Trump.

    Duncan understands the basics of it, so there seems no real quarrel, but it surely is yet another example of how badly change has been managed in Western countries since Thatcher and Reagan as opportunists have sought to parasite off initiatives to facilitate fair change from leftists, rational progressives and even centrists.

    Clinton left the US economy in at least some sort of reasonable condition and Trump has got busy shearing off the juicy bits of Obama’s repair of that economy, from the Bush and Cheney era. These for reprehensible reasons did a similar thing with the post-Clinton economy.

    In Australia there have been parallels of course, with Howard, then Abbott and Turnbull trying to harvest the Australian economy, or Cameron and Osborne ransacking Britain after the Meltdown.

  17. @robertjackgross I was using the CIS numbers for the sake of argument, to show that, even with their own numbers, the restrictionist case fails. But at least one restrictionist commenter at CT took me as endorsing them, so obviously I was too subtle for my own good. Thanks for your useful links and apologies for the delay in posting – the spam filter doesn’t like lots of links.

  18. There is nothing remotely racist about wanting to restrict immigration.

    Do the non-restrictionists really want to see 50 million people living in each of Sydney and Melbourne? Is everybody going to be eating seaweed and grasshoppers? Will every last forest be cut down and “wild nature” be reduced to some token, postage stamp sized parks?

    Australia has no moral obligation to accept so much as a single migrant. I do not see why we should allow our population to grow as if it were a metastasising cancer.

    I see gumballs like Adam Creighton, economics editor at “The Australian” pushing this idea that Australia can easily fit in a few zillion people and wouldn’t it be great for the economy. I think we should leave such ideas to the neoliberals and the right libertarians.

    It is also way past time that those on the Left who said maritime asylum seeker arrivals was all (or nearly all) about push rather than pull factors admitted they were wrong.

    Australia can meet its moral obligation to improve the lot of non-citizens in less fortunate circumstances via foreign aid and foreign policy.

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