Capitalisn’t: Shattering Immigration Myths—Data Beyond Borders

Leah Boustan: As we’ve improved our technological access to data, we’ve improved what we can say. So, this idea of following an individual over the course of their life and, you know, you might see an immigrant who’s been in the US for three or four years, and then find them again 10 years later and then 20 years later to trace out their trajectory. And when we did that, we really were blown away by how many of our own myths were overturned by looking into the data.

Bethany: I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Luigi: One of the issues that we are trying to analyze in this podcast is the interaction between democracy and capitalism. Now, if democracy is really a social contract, why don’t we allow everybody who is willing to sign it to sign it? Why don’t we have open borders for immigration? And while this might seem preposterous to a lot of people, I think a lot of economists are in favor of it. So, we decided that we wanted to start to analyze this question and to start discussing the benefits and costs of immigration.

We decided to invite Leah Boustan, who not only is a professor of economics at Princeton, but she’s a coauthor of a book, Streets of Gold: America’s Untold Story of Immigrant Success. The central argument of the book is that, for the first time in history, we have the data to analyze not only what happens to immigrants but what happened to immigrants’ children. And so, to see systematically whether immigrants struggle, whether they will succeed, and how their children do vis-à-vis the rest of the population. And I think if there is one bottom line, it is that immigrants do fine. In fact, they do better than similar natives with the same level of income distribution.

Let’s start from an obvious point for you, but not for many of our listeners, with the kind of data and work you have done to document, for the first time, the history of immigration in America. Because most of our listeners have no idea what is possible today, and how much sweat and pain there are behind each one of those pictures.

Leah Boustan: Well, that’s right. We have two major waves of immigration to the US. One is during the Ellis Island period, roughly 1880 to 1920, and then one is in recent years. So, if someone’s captured in the 1900, 1910, and 1920 Census, and their life is changing in some way—maybe they’re moving around the country, maybe they’re changing their occupation—that’s something that we can pick up in the Census data, but we need to know who’s who and try to follow people over time.

Like being a curious grandchild who goes to ancestry.com to look up their own grandparents, we really began our research by going to the website ancestry.com and typing in names, and then, realizing that we could do this for a hundred families or a thousand families, but just multiply that process by millions, to the point that the Ancestry lawyers eventually contacted us and said we had been driving much of the rise in traffic to their site. Now, they have a research partnership with us and with other academics.

In the modern data, it’s in a way much easier, because we have a data state at this point. So, our data comes from the IRS tax records, and that’s going to cover much of the workforce and allow us to follow people over time through different tax filings, but also, follow their kids from a childhood household, when they’re listed as a tax dependent, into adulthood, when they will be going into the workforce themselves.

Bethany: I’m always fascinated by storytelling and by myth-making. And as you looked at this and thought about this, do you have a view on which of our myths about immigration have been helpful, broadly speaking? And which of our myths about immigration have been hurtful, broadly speaking?

Leah Boustan: Well, I think the myth that’s been hurtful lately and that needed to be excavated a little bit by this work is really an implicit comparison between immigrants a hundred years ago and immigrants today. Sometimes, that really doesn’t come to the surface when we hear what politicians and policymakers are talking about. But it really came to a point after the famous closed-door meeting when President Trump was alleged to have said, “We don’t want immigrants coming here from s——e countries. We want immigrants from Norway.” It was really hearkening back to this earlier era when our migrants primarily came from Europe.

A hundred years ago, 90 percent of the foreign-born living in the US were from European countries, and implicit in this statement of President Trump is somehow an idea that those immigrants were better able to economically and culturally assimilate into the country. Oftentimes, we hear this kind of implicit comparison from both sides of the aisle. It’s not only from Republicans who are saying, “Well, it was better back then, when our migrants came from Europe.”

We also hear it from the left when there are claims that immigrants these days are coming from a more diverse set of countries and therefore facing barriers in the labor market because of skin color, because of stereotypes about ethnic background. So, we turned to the data and found again and again, whether you’re talking about second-generation children and how much they earn, or whether you’re talking about different measures of cultural assimilation, what we found again and again was that these two waves of migration, one from Europe a hundred years ago and one from around the world today, looked very similar. We just kept having our minds blown again and again. And I think that’s the core harmful myth about immigration these days.

Luigi: But, Leah, while Trump was wrong on which are the “good” countries or the “bad” countries, I think that one thing that your book shows is that there is an enormous cross-sectional variation. And, actually, I’m very proud to report that when you look at Figure 6, where you talk about the countries of origin in 1880, Italians do extremely well—and actually much better, I’m sorry to report, Bethany—than people from Scotland or Wales. And that’s very remarkable, because they don’t speak the same language. They were heavily discriminated against.

Even in the 1980 wave, you see that there is an enormous variation. If you come from Haiti, I’m sorry to report, you don’t do very well, but the same is true if you come from Norway, ironically. On the other hand, if you come from Hong Kong, you do extremely well, and Italians still do OK.

Now, in the 1980s, you divide between boys and girls. There’s a very different performance between Italian girls and Italian boys. Italian boys seem to be doing well in 1980, Italian girls, much less so. How can you explain that?

Leah Boustan: Well, I’m glad you pointed out the gender differences, because they were really startling to us. So, you mentioned that if your parents come from Haiti, you don’t do that well. That’s true for sons, and that’s also true if your parents come from Jamaica or Trinidad and Tobago. So, you would start to think, maybe this is a race story, that these are immigrants who come from majority-Black countries. But, wait a second, the daughters of immigrants from those three countries—Haiti, Jamaica, and Trinidad and Tobago—do very well. And the opposite pattern is true for European immigrants in recent years. The sons of European immigrants are doing well, the daughters not as well.

And so, in the case of the Caribbean, we have turned to sociologists to ask, does this make sense to you? Does it make sense that the daughters of Caribbean parents would be doing well, and the sons would not be doing so well? And they said, yes, because there’s very different parenting practices by gender. Daughters are often required to come home right after school and not allowed to go out into the neighborhoods. The neighborhoods that Caribbean families live in are often dangerous. They have a large police presence, and some of the sons then get caught up in the criminal-justice system, but much less so the daughters.

Luigi: But I think that Bethany and I more or less have the same skin color. I think that, by most standards, I think we are on the same scale, but why have my ancestors done so much better than Bethany’s ancestors? Do you have an explanation for that?

Leah Boustan: The data point that you’re talking about is kids who are raised in families with similar incomes and resources, households that are all at the 25th percentile of the income distribution when the children are at home. And then, the question is, how are the kids doing 30 years later? Those kids who are from Italian, Irish, Portuguese households are reaching higher levels of income than those children whose parents are from Scotland, et cetera. And the parents from Scotland are reaching higher income levels than US-born parents.

I don’t have a single, overarching explanation that would account for that cross-country heterogeneity. And there’s only around 15 data points to play with for the past and around 45 data points to play with for today, given that we’re talking about country-of-origin differences. So, I think you start to run into some degrees-of-freedom problems with your favorite explanation there, but it’s just important to point out that exactly those groups that politicians would point to historically as saying, “They’re never going to contribute”—that would be the Italian, the Irish, the Portuguese—it was those groups where the children were doing the best.

So, we don’t necessarily have a good intuition for which country-of-origin groups are going to have the greatest success in the US, and it’s not always the ones that you think. So, you might take a look at the pattern with the sons today and say, “Oh, of course, it makes sense that sons from Haiti, Jamaica, and Trinidad and Tobago are not doing that well. But, wait a second, how about the daughters?” So, I think a lot of our simplistic intuition gets punctured when we start to look deeply into the different elements of the heterogeneity there.

Bethany: Why do you think that is? Why do you think the political discourse is so disassociated from the underlying data in many of these cases?

Leah Boustan: Well, it’s powerful to compare households that are at the same level of resources. When we look out into the world around us, we’re often not doing that implicit controlled experi-ment. Instead, what we see is that it’s more likely for households where the parents came from Haiti to be at the 25th percentile, and it’s more likely for households whose parents came from Hong Kong to be at the 75th percentile of the income distribution. And then, if we see that the kids are doing better or worse, we might associate that to the country-of-origin differences. And so, let’s take a look at the kids where the parents are doing a similar set of jobs, they’re earning a similar amount, but we have country-of-origin differences, and that really focuses the eye.

Some of the countries like Guatemala, Honduras, El Salvador, that are often under discussion these days as contributing to the “crisis at the southern border,” those are country-of-origin groups that tend to have households with low income levels. But now, we can compare them to other households with similarly low income levels, and we see that the children whose parents came from Central America are actually doing quite well. They’re right in the middle of the pack.

Luigi: I want to come back to the differences, because I understand that race explanations are completely wrong, but the cultural explanation seems to have some power. I’m sure you know that there is a paper by Paola Sapienza and Paola Giuliano looking at children in Florida and looking at their performance in school. People coming from countries with what they call a long-term orientation—that means that they value the future a lot—do perform much better in school. And those are the countries like Italy, Portugal—and, I’m sorry to say, Bethany’s has a very short-term orientation.

But jokes aside, there seems to be some cultural value. My favorite explanation is actually the family eating at the common table at night. Countries that have the tradition of eating around the table—and the Chinese are first, and the southern Europeans are second—do very well. Why? Because there is a lot of transmission of culture within the family. And, I’m sorry to report, many Americans don’t eat together. They graze in the refrigerator, and in the process, they don’t transmit culture from one generation to the next.

Leah Boustan: Well, let me start by the main explanation that accounts for the data historically. We know almost everything there is to know about these families. We know where they’re living, father’s occupation, who they’re married to, et cetera. And what we find historically is that geography explains much of the difference between children of immigrants and children of US-born. So, if you are going to compare children who are living next door to each other, one has a US-born father, one has a foreign-born father, we actually don’t see much of an immigrant advantage there.

Instead, the immigrant advantage comes from the fact that, first of all, immigrants avoided the South. The South at the time, circa 1910, was an agricultural region, a cotton-growing area, and not a place of high upward mobility for anyone. So, I don’t think there’s much room for cultural explanation left over, given how powerful geography was historically.

But, today, at least as best as we can tell . . . and there really have to be pretty strong caveats, on this, because we don’t have the micro data in the millions today . . . geography matters, but it’s less important now than it was in the past. So, that gives a lot more scope for your favorite cultural explanation, Luigi, today than it does in the past.

If you take a look at where the kids who are based in the 25th percentile are ending up in adulthood now, you can’t fail to notice that a set of Asian countries—Hong Kong, China, India, Vietnam—are at the very top of the list. And so, perhaps part of what’s going on there is a cultural explanation today. I just don’t think there’s much room left over historically, but now, it’s an open question. It’s not that I want to shy away from that explanation, it’s just that I don’t have really good evidence either in favor of it or against it.

Luigi: Now, your book has a very powerful and optimistic message about immigration that this is good, that immigrants are very effective, and in addition, they don’t seem to subtract anything from the natives. And, so, can you explain anti-immigration sentiments, because it’s a fact that there is some anti-immigration sentiment—and given your data, it’s hard to imagine why there is. Can you maybe explain it based on the fact that the Americans feel that the children of immigrants are overtaking some important positions in society ahead of them, and they feel left behind?

Leah Boustan: Well, I think that’s possible. When we put out the findings that, controlling for household income, children of immigrants move farther up the income distribution than children of US-born, we did get that kind of response and that pushback from people on social media saying, “Well, see? There are opportunities that our kids would have had if not for immigration.”

But I can almost guarantee you that if we had put out the opposite findings, if that’s the way the data had turned out, that somehow the children of immigrants were not able to move up as quickly, then we would have heard pushback in the other direction saying, “Hey, take a look at this. Immigrant parents don’t earn very much because they come from lesser-developed countries, but now even their kids aren’t able to make it. And so, the fiscal burden of these low-skilled immigrants is now falling on the rest of us, with this group not paying much in taxes and expecting social services in response.” So, it’s like a damned if you do, damned if you don’t, that you can take a look at that pattern and you can find reasons to be anti-immigration.

But I would argue that the relevant question is not, let’s start a race with everyone who was raised at the 25th percentile and see how far they get. The relevant question is, when immigrants move into the country, what happens to the wages and jobs of the US-born? Because it’s not like when we’re up for a job, we’re competing with only other people who were raised at the same income level that we were. We’re not just siloed into groups of 25th-percentile households. OK, now, you all have to compete, and if one of you gets a job, the other one won’t. So, I’m not personally sure that that finding really speaks to the question of, do immigrants harm natives or not, though I take your point that it was certainly read that way by some people.

Instead, I’ve been very inspired by the work in economics on that question directly. When immigrants arrive, what happens to the US-born? And I noticed something recently that I think is interesting and I just want to raise, which is, we’ve been spending so much time talking about what happens when immigrants arrive to the wages of competing US-born workers, and very little time talking about what happens when immigrants arrive to prices. And an important price is housing prices or rents in the area in which immigrants arrive. And there are a couple of studies that show that when immigrants arrive in the local area, housing prices and rents go up, using a very similar research design to the studies that end up finding that when immigrants arrive in an area, wages don’t change. That’s been lost in the discussion of the literature, I think. And I recently started thinking about it more, because inflation is more in the news these days.

Let’s say immigrants did compete with the US-born, and one US-born or two US-born people lost work. That would be a very heavy burden on those one or two people. And the rest of the population may not pay attention to that, whereas housing prices are something that everyone thinks about in the local area. So, when immigrants move in, if Albert’s work and others’ work is right that rents go up, that could start to explain some of the resistance to immigration. You may not hear as much about wages and unemployment. Instead, you may hear about things like, “My town is getting crowded. There’s more traffic. There are more kids in school. It’s too expensive for my own kids to buy a house in town, because housing prices have gone up.” And so, when you start to think about those concerns as tied into immigration and rising population, that’s a new way of thinking about where some of this resistance might come from.

Bethany: One of the implicit arguments of your book is that these narrow relative comparisons are all well and good, but maybe they are too narrow, because if immigrants contribute to the growth of the economy overall, then you have more pie for everybody, even if everybody’s piece of it might be marginally less. But I think what you’re saying is that even if that does happen, even if the pie is larger, there can still be resistance along the way, because the pie getting larger can manifest in things like, “Oh, my home prices are going up, and my neighborhood is crowded,” instead of it manifesting in a way that feels intuitively good. Does that make sense?

Leah Boustan: That makes perfect sense. The reaction to immigrants is always going to depend on how quickly we respond to these new people and new workers with new capital. We need to take a look at how responsive we are to these changes. Is there a restriction and resistance to new construction? For example, in an area when population grows for any reason, one of the reasons being immigration, are our firms and workforce too slow to respond to new workers coming in? And so, therefore, for a while, when immigrants increase the workforce, the capital stock may not respond quickly.

And lately, with some of the work that we’ve been doing on analyzing the Congressional Record and trying to understand stated political attitudes towards immigration, we’ve noticed that, certainly, there’s a rising polarization or political partisanship around immigration. Democrats are more likely to say positive things about immigrants, and Republicans are more likely to say negative things.

But when you take a look at the topics under consideration, Democrats and Republicans are equally likely to talk about labor markets, equally likely to talk about fiscal burden. Where they differ is really on these, you might say, more cultural topics, or more public-safety and threat types of topics. I’m not sure if you would refer to that as cultural, or if there might be something real there, but Republican speeches about immigration are much more likely to be about crime, terrorism, and issues around legality. So, are immigrants sort of jumping the queue or crossing the border? Whereas speeches by Democrats are much more likely to be about family and immigrants who face persecution, refugee issues. Economics does not seem to be the main driving force behind polarization or resistance to immigration.

Luigi: So, if you were queen for a day or for a year, whatever, and you could design the immigration policy, what would be your optimal immigration policy?

Leah Boustan: My answer is going to be very boring, because I think of our book as a very status-quo-oriented book. It’s not that we would like to radically change the immigration system, but first of all, we want to work towards preserving it and maintaining it.

So, if I was queen for a day, it would be really boring. It would probably just be to try to preserve what we have, marginally increase the number of slots to keep pace with population and economic growth, and orient those new slots towards high-skilled immigration, but really not to start changing the current system, which has a lot of low-skilled entry, and not try to choke off low-skilled entry, given our needs in the labor market, in agriculture, construction, childcare, elder care, restaurant work.

Luigi: OK, thank you very much.

Leah Boustan: Thank you both for your very probing and interesting questions. I really enjoyed the conversation.

Bethany: I thought at first, what an absolutely wonderful project, and how important to bring data to this topic that is driven by emotion—not just presently but has been driven by emotion through history. And if you bring data and facts to this topic, maybe you can move the discourse.

I started to think as she talked that that was too optimistic, and that the data is never going to sway the discourse, in part because the data itself doesn’t make sense when you think about the two . . . Not the data itself, but the complaints themselves don’t make sense. It cannot be true that immigrants can both be coming here and destroying our social fabric because they eat up too much of the social services, and that they are coming here and taking American jobs and decreasing Americans’ standard of living. Those things can’t be true simultaneously. I mean, they can be in different parts of the country, perhaps, but they can’t both be, broadly writ, true.

And yet, those two narratives still grab hold. And so, I started to wonder if, for some reason, the narratives about immigration that drive political decisions can ever be driven by fact, or if it’s a misguided quest, in the sense that there seems to be something so emotional about this topic. And maybe it just is, per some of the things we’ve talked about, that the facts only matter on a very micro level. So, even if you talk about the facts on a macro level, they may not be what people in a given community are experiencing. If the facts on a macro level don’t resonate with what’s happening in their micro community, then the facts also feel irrelevant to the emotion. Does that make sense?

Luigi: It does, but I think it’s a little bit too pessimistic, in my view—

Bethany: Me? Pessimistic? No.

Luigi: First of all, I think the facts are not just economic facts, but they are also social and cultural facts. I think that people don’t react just to immigrants stealing their jobs or allegedly stealing their jobs. They also react to basically seeing some of the values that they cherish being completely overturned and changed. And I think that we economists are guilty as charged in ignoring those factors that are politically very important. And, for many towns, this is not a choice. People who live in cities are much more friendly to immigration, in part because they chose to live in places that are very diverse.

Immigration finds a lot of resistance when it hits little towns of people who didn’t want to have anything to do with it. They wanted to live in their town the way it was since their great-grandfathers came there, and they don’t want change, and they are forced to confront change without a lot of economic benefits, because I think that if you gain a lot, you are more willing to make compromises on your cultural and moral issues.

But if you are not gaining a lot or possibly actively losing . . . I thought that what she said about rents is fascinating and very important and underestimated in the political debate. So, I am a relatively poor person living in town and I rent, and there is this flow of immigrants, and I’m priced out of what I can afford, and I’m forced to move. I didn’t choose to move and I’m resentful—which, by the way, has a very easy and simple solution; if you want more immigration, you also have to have more permission to build more houses. So, the perfect solution would be to have an immigration bill linked to, build in my neighborhood. You know the NIMBYs, not in my backyard? Force the NIMBYs to say, If you want immigration, you have to give up your restrictions on building in the area.

Bethany: I do think that you’re raising a really important question that is important to discuss, which is, then, what policies do you do in addition to immigration? In other words, an immigration policy alone is not enough. It needs to be part of a broader package. Just like when we think about globalization, our conversation with Glenn Hubbard about bridges and walls, when you think about globalization, his argument would be . . . whether we agree with his specific strategies or not, we didn’t . . . but his argument would be, you need to think about what you do in addition to this. And I think the same thing would be true of immigration. It’s a yes-and. And I think that’s really interesting, because her analysis does point to the fact that it has to be a yes-and. It can’t just be a yes and a free for all.

Luigi: But the answer is that we don’t really have a sensible big answer to the big question. So, if you ask an economist, generally economists are not shy to pontificate on everything, right? So, if you ask an economist, what is the optimal amount of immigration? Most economists will say open borders. They don’t say that because they know that they look crazy. But that’s the implication. If you look at her results, the book is very positive about immigration in every possible form and shape. And from this to conclude, we need to maybe increase an epsilon? You have a policy that seems to be working extremely well. Why don’t you at least suggest that you double up or you triple up?

One of the things that she said that was super interesting is that when you look at the historical record, there was opposition all the time, and it is actually more at the presidential level. So, if you look at the country overall, you want more immigration, but again, not in your backyard.

Bethany: Yeah, I found that fascinating. I guess it reflects some of my ignorance, but I hadn’t realized that we went from this open-border policy to this much more restrictive policy. I think I vaguely knew about the 1882 Chinese Exclusion Act, and I knew obviously about some of the resistance to Catholicism, but I didn’t know that there was this whole movement in the 1920s about how Catholicism was incompatible, basically, with democracy. And that, suddenly, we began banning nine out of 10 people who had been able to come to this country beforehand. And she alludes to this very interesting question, which is fascinating to think about, but just how much this somewhat random immigration policy has shaped the look of the United States today, because it has. And yet, it’s been this policy that was lurching from one extreme to another and based on racism and all sorts of ugly underlying things. And that’s the country we’ve got today. And I know you can say that about lots of things, but it is pretty fascinating to think about that, right? How different the country could look.

Luigi: Yeah. But also, how things are slowly changing. An interesting factoid, my wife’s family has been here forever. It is very hard to tell when they came in, and they grew up in Indiana, at least that part of the family. And this grandmother, when her mother reached dating age, said, “You cannot bring home a Catholic,” because she grew up in the ’20s. And then, my wife, the first husband was Italian-American, and the second husband is Italian-American. And when we were engaged, the grandmother sent her a gift, saying, “It worked well with the first one, good luck with the second.” So, she turned around in a lifetime to believe that, actually, Catholics were fine. I think that’s a hope that in the long term, these differences might be overcome.

Bethany: I like that, and I agree with you, and I hope you’re right. But at the same time, as we’ve talked about in other episodes of this podcast, once upon a time, you might have been able to bring home a Republican, and now, you can’t bring home a Republican if you’re in a Democratic family. So, the dividing lines have just changed, but there’s every bit as much hatred toward differences as there ever was. It’s just taken on a different form. Sorry, I guess I am the pessimist today, aren’t I?

Luigi: I think that she seems to be reluctant in analyzing the cultural component and the human-capital component and also, some selection. One of the moving stories I remember is, I immigrated to this country in 1988, and I bought a TV for $50 that was microscopic, and I was watching every program to try to get better in English, with not much success.

One of the first things that came in the summer of ’88 was the Republican National Convention, where Ronald Reagan gave what I think was the last speech he gave. One of the things he said that stuck in my memory, 34 years later, “God put America with two oceans on the sides, so that only the bravest and the best will arrive here.” Which, of course, is true for the immigrants who came by boat. If you take a plane, it doesn’t take a lot of effort.

But I think that the most substantive point is there is a selection on the people who decide to take on adversity and move. And particularly, when you look at countries that are more disadvantaged, I think that the ones who move tend to be probably the best of the crop. So, what is the impact that immigration does to the country that people immigrate from?

The United States benefited tremendously from a lot of scientists and people who were educated in other countries who came here. Now, in some cases, they came here because they were chased away from their country of origin. Think about all the Jewish scientists from Nazi Germany, but in other cases, they were attracted simply because this is a better place to work. And while this is great for the United States, I’m not so sure it’s great for the home country. Nigerian kids are really doing very well in the United States. But if you think about Nigeria, the damage that the immigration from Nigeria does to Nigeria is probably enormous.

Bethany: It’s a really interesting question. She has that stunning statistic in her book, which I’m going to get directionally right, but specifically wrong, that 70 percent or 80 percent of the people from India who come here have an advanced degree, whereas only 8 percent of those in the country do. And if you just extrapolate that broadly and think about what more advanced degrees might do in India, you can raise some interesting questions about what impact this has on the rest of the world.

Then again, in most other areas, we don’t really play fair with other countries. We don’t do what’s best for other countries. We do what’s best for the United States. And so, in a weird way, to ask that question about immigration or to put that onus on immigration that it has to be good for the world, not just good for the United States, is not something we do in any other facet of economics.

Luigi: No, that’s fair. But if you want to think in global terms, I think that’s an interesting question to ask. And it’s not just the economic damage. I think there is also political damage as well, in the sense that immigrants are the people that probably are more likely to stand up to problems. If you think about reforming a corrupt system or improving democracy, if all the more-motivated people leave the country, who is left to make a change?