The Immigration Conundrum

When I re-read the column by Simon Johnson that I quoted yesterday, the paragraphs before the one I quoted jumped out at me:

Excessive consumer debt is an outcome of prolonged inequality – in trying to remain middle class, too many people borrowed too much, while unscrupulous lenders were only too willing to take advantage of such people.

Raghu Rajan, the former chief economist at the International Monetary Fund, and Robert Reich, the former Labor Secretary, also have new books with related themes that link persistent inequality of income to the onset of financial crisis through various mechanisms. Mr. Rajan’s “Fault Lines” is more about the global economy (and overspending at the level of the American economy); Mr. Reich’s “Aftershock” focuses on the social and political impact of the crisis (and why, without addressing inequality, our financial problems will recur).

The distribution of income in the United States is undoubtedly becoming more unequal. Specifically, over recent decades, it has become harder for people with only a high-school education to build a secure middle-class future for their families.

There’s something in this statement that I wonder if Dr. Johnson appreciates. When you strip out the qualifiers and subordinate clauses, he’s attributing the financial crisis to immigration.

That may seem like a stretch but here’s how the chain of reasoning works. Income inequality induced people to borrow too much. Lack of education is a driver of income inequality. An astonishing proportion of those with high-school educations only (or less) are immigrants. If, by waving a magic wand, you could remove immigrants with high-school education only or less from the equation, whatever problem lack of higher education causes would be cut nearly in half. More, since although the effects of immigrants on wages are ambiguous, the effects of immigrants on wages in the lowest income quintile is indisputable. The reasonable conclusion then is that the financial crisis was caused by immigration.

To be honest I think a lot of that reasoning is actually inside out. [I just chopped out an expansion on this thought I spent an hour on as unintelligible.] Rather than wander off into the weeds let me leave you with a link on public sector educational attainment levels and point out that

• By law GS workers must be American citizens.
• According to all resources I’ve been able to identify a minority of immigrants are legal permanent residents.
• The naturalization rate among LPRs is around 50%.

Based on that, I suspect that a lot of native-born Americans who have high-school only are working for the government at one level or another. Here in Chicago, for example, a lot of police officers and firefighters have high-school only. That may skew the results a bit.