18/8/19: Migration Policy vs the Law of Unintended Consequences

President Trump's policies are a rich field for sowing evidence on the application of the law of unintended consequence in economic policies. Take his Trade War with China that so far resulted in ca USD20 billion in fiscal receipts and USD26 billion payouts in subsidies to U.S. farmers, netting a fiscal loss of USD 6 billion (https://trueeconomics.blogspot.com/2019/06/17619-lose-lose-and-lose-some-more.html), while generating gains for European exporters (https://trueeconomics.blogspot.com/2019/08/15819-winning-trade-wars-round-3.html) and shrinking net real exports for the U.S. economy (https://trueeconomics.blogspot.com/2019/08/1919-losin-spectacularly-trump-trade.html) and driving losses to the U.S. exporters (https://trueeconomics.blogspot.com/2019/07/31719-fed-rate-cut-wont-move-needle-on.html). Another example, the never-ending rhetorical and regulatory war against skilled (and other) migration.

On the latter, we have plenty of evidence drawn from Mr. Trump's predecessors that conclusively shows the costs of severely restrictive application of the skills-based migration quotas. And, thanks to Mayda, A M, F Ortega, G Peri, K Shih, and C Sparber 2017 paper, titled “The Effect of the H-1B Quota on Employment and Selection of Foreign-Born Labor” (NBER Working Paper No. w23902, https://www.nber.org/papers/w23902.pdf), we now have an in-depth analysis of the mechanics by which unintended consequences of restricting skilled migration impose these economic losses on the U.S.

The authors looked at how changes in H-1B policy, enacted over the years, affect the characteristics of migrants entering the U.S. and how these changes alter U.S.-wide productivity and wages.

Per authors, "The economic intuition [behind the study] is simple. Firms across the globe compete to hire highly skilled workers. The strict quota and the lottery allocation generate uncertainty in acquiring the legal right to work in the US even after securing a job offer. Hence, talented foreign nationals might elect to work elsewhere. Similarly, US firms face uncertainty over whether they will be allowed to employ the top job candidates they have identified. Some firms might elect to forgo this uncertainty altogether by turning to alternative labour sources."

"First, we examine H-1B quality. ... ...H-1B restrictions have particularly hindered the employment of the highest ability foreign-born workers. Anyone who believes immigration policy should be designed to attract ‘the best and brightest’ workers to the country should be troubled by the discovery that restrictions to aggregate inflows generate the opposite effect. Quantitatively, the number of new H-1B workers from the highest wage quintile is nearly 50% lower than it would have been in the absence of H-1B restrictions, but the number of new H-1B workers in the median wage quintile is unchanged." In other words, if wages are a proxy for talent, skills and productivity, reducing H1B quotas appears to reduce availability of more skilled, more talented and more productive foreign workers, while having zero impact on availability of mid-range skills, talents and productivity workers.

Worse, reduced H1B quotas also increased concentration of H1B attaining firms (or reduced the pool of employers with a meaningful access to H1B workers). Authors conclude that "It is possible that when faced with the uncertainty and costs of the H-1B hiring process, economies of scale and network externalities arise that favour firms specialising in H-1B employment and workers with specialised knowledge about the legal hiring process." Or put differently, H1B quotas restriction may be fuelling increase in the share of foreign talent brought into the U.S. by outsourcing agencies and a handful of very larger employers. This selection bias does not appear to be linked to higher productivity and is, therefore, welfare reducing as compared to a system where firms that can generate higher productivity increases by employing foreign workers gain better access to H1B via markets.

In summary, "we presume that by reducing the H-1B cap from 195,000 in 2001-2003 to 85,000 today, policymakers intended to reduce new H-1B employment at for-profit firms and possibly increase employment of competing US-born workers. The policy achieved the first but not the second goal. Moreover, the cap restriction also generated consequences that were likely unintended. The policy change has particularly deterred workers with the highest earnings potential from entering the US labour market. Given the potential for productivity-enhancing technological gains generated by H-1B workers, this loss could reverberate throughout the economy. Other important effects are distributional and favour computer-related occupations and firms that use the H-1B programme heavily."

Consequences. A lesson for MAGA crowd from their predecessors.

14/6/19: The Real U.S. Migration Crisis is Not at the Border, but at Home

I recently wrote about the new data from the U.S. Customs and Border Patrol on crime amongst the illegal and legal immigrants in the U.S. here: https://trueeconomics.blogspot.com/2019/06/3619-what-customs-and-border-protection.html. The key conclusion from this earlier post is that there is no evidence (based on arrests) of a large scale crime wave perpetrated by the legal and illegal aliens in the U.S.

New research from the Pew Research published this week shows that, just as with the migrant crime rates, there is no new migration crisis at the U.S. borders. However, there is a crisis in the U.S. migration, a crisis of different nature.

Take the headline figure:

Number of unauthorised immigrants in the U.S. has fallen 14 percent from the peak in 2007. While the overall numbers remain elevated at close to, but below, 2004 levels, the numbers are not consistent with the claim of a 'crisis on the border'.

However, the real crisis in the U.S. immigration system is the one related to policy and legislation:

Over the years, there has been a steady increase in illegal immigrants with long term U.S. residence. In fact, the increase has been shockingly unchecked. Currently, estimated 66 percent of all illegal aliens in the U.S. have been resident here for more than 10 years. Which exposes the simple fact of life: the U.S. system does not have functional avenues for long term illegal aliens - people who have higher chances of being assimilated into the American society, establishing family roots in the country and forming families in their place of residence - to legalise their status. In fact, Pew Research data shows that the median years of U.S. residence for the unauthorised adult immigrants has risen from 7.2 in 2000 to 15.1 today.

The very purpose of a well-functioning migration system is to encourage and support integration of migrants into the host society. By failing to create a functioning, effective and efficient pathways for illegal migrants with long term tenure in the country to legalise their status, the U.S. immigration system is actively preventing millions of well-integrated residents from securing their future in the place they called home for 15 years or more.

Full Pew Research note is available here: https://www.pewresearch.org/fact-tank/2019/06/12/us-unauthorized-immigrant-population-2017/.

29/12/18: It pains me to no end to see America being reduced to this...

I am not a psychologist or psychiatrist. I am not even a sociologist. So my comments below are based simply on my observations as a human being.

In literature - from Arendt to Kafka, from Levi to Bulgakov, from Platonov to Solzhenitsyn, from Shalamov to Gogol, from Ionesco to Kundera, from Klima to Marquez, from Kinckaid to Coetzee, from Brodsky to Walcott, and so on - a license of power awarded to one by a title or a job, by the state or the sovereign policy, by order or diktat is commonly associated with dehumanization of the awarded. In more common media and popular studies, see https://www.npr.org/2011/03/29/134956180/criminals-see-their-victims-as-less-than-human and https://www.npr.org/2011/03/29/134956180/criminals-see-their-victims-as-less-than-human the notion of a sadistic bureaucrat / soldier / officer / office holder is commonly associated with the license for violence promoted by the State.

With this in mind, in a case of our modern liberal democracies, when such violence / sadism does arise, the dehumanization of its victims and the dehumanization of the officials involved in these acts reinforce each other. Repeated on a rare occasion, such violence and dehuamization of its victims by the officials simply erodes our social trust. Repeated systemically, it risks dehumanizes our entire society, potentially creating systemic racism, xenophobia and debasement of core human values.

With a good part of the last two decades associated with a new - in nature, although not, necessarily in levels - degrees of violence the American society has inflicted onto other states (via numerous regime changes, direct wars, indirect/proxy wars, bombings, drone attacks, etc), and within its own borders on its own people (police violence, police shootings, snooping & spying on its own citizens, mass surveillance, state violence against whistleblowers and so on), the dehumanization of the American society has been growing at a frightening pace. As the result, xenophobia, anti-immigrant sentiments, white supremacism, ant-semitism, Russophobia, political polarization, and other forms of general incivility have been pushed from the extreme fringes of the American society toward its center. The values the Americans still espouse in verbal and propagandistic discourses - those of the freedom of speech, of family, of the land of opportunity, of social mobility, of competition, of private enterprise, and so on - are now coming under the pressure when tested against empirical reality.

And, as of late, we have entered yet another, even more worrying turn of this vicious spiral downward: the dehumanization of our security apparatus. This worries me. A lot. The brutality with which we are treating people, families, kids arriving at our borders with a legitimate claim to an asylum and a legitimate hope (subject to testing) for better lives is contrary to the basic foundations of the American society: its openness to others, its support for the family, its willingness to extend opportunity for betterment of self, its basic humanity.

Last night, this prompted a twitter thread from me that some of you asked me to reproduce in one place. Here it is:

I have travelled to the U.S. for 28 years now. As a Green Card holder, as a Russian and an Irish citizen, as a GC holder again. In ALL my personal interactions with Border Control, I never witnessed any non-professional, non-courteous behavior toward myself or others around. +

+ The accounts from the treatment of asylum seekers, illegal migrants, and the Dreamers are - to me - one of the core pieces evidence of how America’s institutions are changing and have changed over the years from being a melting pot of colures and ethnicities, a land of +

+ opportunity for millions of newcomers, a place where family and children are treasured to a heartless, callous, amoral regime. Here are the facts (via nymag.com/intelligencer/… @NYMag ): +

“A. Portillo, …was taken into custody by CBP in California… her 5-month-old was sick. [Portillo] was giving her baby an antibiotic but said she wasn’t allowed to keep the medication after she was detained. Her baby got sicker as they were held in “freezing” cells — iceboxes — +

+ In a different case, “the seven-year-old Guatemalan girl died of a combination of septic shock, fever, and dehydration, just hours after she was taken into CBP custody.” +

+ Yet “another young girl who fell dangerously ill while in CBP custody. The girl, whose mother told officials her daughter had a preexisting medical condition, went into cardiac arrest but eventually made a full recovery.” +

+ These are not the acts of a civilized law enforcement. These are acts of barbaric power-drunk abusers of the basic principles of humanity. That we endow them with jobs, salaries, pensions, respect & even veneration is beyond the pale for a 21st century ‘liberal democracy’. +

+ These are not even the acts of law enforcement consistent with the principles of the rule of law, for it treats legal asylum seekers - those who have a legal RIGHT to apply for asylum - as sub-human subjects. +

+ If you doubt my judgement on this, here are U.S. Congress legislators on the subject: "New Mexico representative Ben Ray Luján said the holding cells where children and adults are held are “inhumane.” +

+ Texas representative Al Green said what he saw was “unbelievable and unconscionable.” “The [ASPCA] would not allow animals to be treated the way human beings are being treated in this facility,” Green said. “To tolerate what I have seen is unthinkable.”

+ We are empowering this behavior by those representing us at the borders. Just as we are empowering the behavior of police abusers who kill innocent people with zero consequences. We are empowering them by idolizing the brutality of coercion the state licenses out to them. +

+ We are empowering them by voting for the lawmakers who can note - on the record, in the media - the inhumanity of our regime, yet do absolutely NOTHING to stop it. We are empowering them by believing that Putin, Xi, Iran, whoever else you can imagine are causing our problems. +

+ We are empowering them by mistreating migrants, including those who are undocumented, who live and work around us. Before it is too late, before we’ve lost all remnants of civility, decency, honour, compassion, we must stop. Stop ourselves, first.

And the thread link: https://twitter.com/GTCost/status/1078875912253276161, with a link to the source article: http://nymag.com/intelligencer/2018/12/migrant-baby-got-pneumonia-after-days-in-freezing-cell.html

I am pained by the fact that the American society has grown to tolerate such abuses of power, without demanding better from their lawmakers, their executive, their officers of the State. We are marching toward the inevitable and unenviable collapse of civility as long as we tolerate such abuses to be perpetrated in our names, in the name of the law. 

23/2/18: Ireland's Migration Policies are Working Well

How to do immigration policy right? Ireland's CSO has published some new data on educational attainment in Ireland, covering 2017 results. The data is available here: http://www.cso.ie/en/releasesandpublications/er/eda/educationalattainmentthematicreport2017/. One table stands out on the issue of migration:

Click on the image to enlarge

Despite the report itself focusing on 3rd level attainment as a 'catch all' category, what really matters in terms of future quality of the workforce is more advanced education. And in this area, Irish migration system shines. Both, EU15 ex-Ireland & UK and non-EU migration pathways are working to enhance the stock of human capital in the country when it comes to honours tertiary degrees and post-tertiary education.

This is amazing, because the two pathways are distinct in terms of regulations covering mobility (access for immigrants). And both seem to be working well.

Of course, other factors contribute, beyond policy / regulatory facilitation, including Ireland's amazingly open society, welcoming people and social networks that support easy integration of those who want to integrate. But Ireland's policymakers and civil servants, who often act as the early contributors to this mobility also deserve credit. While problems and bottlenecks remain and need addressing, credit should be given where credit is due.

28/9/17: Irish Migration: Some Good News in 2017

While headline figures for net migration to Ieland paint an overall positive picture in the annual data (provided on April-April basis) for 2017, there are some creases on the canvas, both good and bad.

Top line numbers are good: net inward migration posted a print of 19,800 in 2017, up on 16,200 in 2016 and 5,900 in 2015. This marks the third year of positive inflows. However, on a cumulative basis, the last three years are still falling short of offsetting massive outflows recorded in 2010-2014. Cumulatively, between 2010 and 2017, the overall net migration stands at -65,900. Taking last two years’ average net inward immigration, it will take Ireland almost 4 years to cover the shortfall. Worse, on pre-crisis trend (omitting peak inward migration years of 2005-2007), we should be seeing inward net migration of around 27,100, well above the current rate. And on a cumulative basis, were the pre-crisis trends to remain unbroken, we would have added 487,600 residents between 2000 and 2017, instead of the actual addition of 394,500 over the same period. 

So things are improving and getting toward healthy, but we are not quite there, yet.

And there are other points of concern. Primary one is the fact that net inward migration remains negative for Irish nationals: in 2017, net outflow of Irish nationals fell to 3,400 from 8,700 in 2016. However, the figures continue to record net outflows for 8th year in a row. Over the period of 2010-2017, Ireland lost net 139,800 nationals.

On a positive side, there is net inflow of all other nationalities into Ireland, with non-EU nationals inflows jumping (net basis) to 15,7000 in 2017, the highest levels on record (albeit records only start from 2006). It is impossible to tell from CSO figures which nationalities are driving these numbers - a crucial point when it comes to assessing the nature of inflows.

Final point worth making is a positive one: in 2017, Ireland recorded another year or growth in - already strong - net inflows of skills and human capital as reflected both in age demographics and educational attainment. By educational attainment, third level graduates and higher category of net inflows posted another historical record in 2017 at 23,600, topping 2016 record of 20,800. Since 2009, including the years of the acute crisis of 2010-2012, Ireland added net 61,000 new immigrants and returned migrants with third level and higher education. This is consistent with continued recovery in human capital-intensive sectors of the economy and is a huge net positive for Ireland.

Hence, overall, the figures for migration are on the balance positive, although some pockets of weaknesses continue to remain and pose a challenge to the arguments about the breadth and depth of the recovery to-date.

21/4/17: Any evidence that immigrants are undermining welfare of the natives?

Given current debates surrounding the impact of migrant labour on native (and previously arriving migrants) wages, jobs security, career prospects and other major motivations behind a wide range of migration regimes reforms proposed across a number of countries, including the U.S., it is worth revisiting research done by Giovanni Peri of University of California, Davis, USA, and IZA, Germany back in 2014.

Titled “Do immigrant workers depress the wages of native workers?” and published by IZA World of Labor 2014: 42 in May 2014, https://wol.iza.org/articles/do-immigrant-workers-depress-the-wages-of-native-workers/long, the paper reviews 27 original studies published between 1982 and 2013, covering the topic of immigration impact on wages of the natives. Chart below summarises:

In the above, the “values report the effects of a 1 percentage point increase in the share of immigrants in a labor market (whether a city, state, country, or a skill group within one of these areas) on the average wage of native workers in the same market.

For example, an estimated effect of 0.1 means that a 1 percentage point increase in immigrants in a labor market raises the average wage paid to native workers in that labor market by 0.1 percentage point. These studies used a variety of reduced-form estimation and structural estimation methods; all the estimates were converted into the elasticity described here.”

Here’s the summary of Peri’s findings and conclusions:

25/5/15: Immigration and Entrepreneurship: Major Unknowns

A recent CESIfo study looked at the role of immigrants in driving entrepreneurship.

Per authors: "Immigrants are widely perceived as being highly entrepreneurial and important for economic growth and innovation. This is reflected in immigration policies and many developed countries have created special visas and entry requirements in an attempt to attract immigrant entrepreneurs. Not surprisingly, a large body of research on immigrant entrepreneurship has developed over the years."

Couple of interesting statistical summaries:

 Striking feature of the above data is low level of entrepreneurship within Indian and Philippines diasporas.

Key conclusions are: "Overall, much of the existing research points towards positive net contributions by immigrant entrepreneurs. The emerging literature on these contributions as measured by innovations represents the most convincing evidence so far."

Interestingly, distribution of entrepreneurship across educational categories, as exemplified above, is rather uniform, although this does not adjust for quality of entrepreneurship.

Caveats are: "First, there is little evidence in the literature on how much immigrant-owned businesses contribute to job growth. Although data exists on employment among immigrant-owned businesses no data are available showing the dynamics of employment among these firms."

Second, "...immigrant business owners are more likely to export, but we know little about how much they export in total dollars and how many jobs are created by these expanded markets for selling goods and services."

Lastly, there is indeterminacy as to the "....the contribution of immigrant businesses to diversity. Although the contribution of immigrant firms to diverse restaurants, merchandise and services is apparent in any visit to a major U.S. city, we know less about the contribution to diversity in manufacturing and design of innovative products."

Full paper can be read here: Fairlie, Robert W. and Lofstrom, Magnus, Immigration and Entrepreneurship (April 23, 2015). CESifo Working Paper Series No. 5298: http://ssrn.com/abstract=2597992

25/12/2014: Skilled Immigration and Employment in the U.S.

There is a persistent debate in economics about the effects of migration of the highly-skilled workers on employment prospects and careers of the natives. Here is one interesting study looking at such effects within the context of the targeted immigration programme based on skills within the particular set of sectors - the STEM, or more commonly, Science and Technology.

Kerr, Sari Pekkala and Kerr, William R. and Lincoln, William Fabius, Skilled Immigration and the Employment Structures of U.S. Firms (see arvard Business School Entrepreneurial Management Working Paper No. 14-040: http://ssrn.com/abstract=2354963) "study the impact of skilled immigrants on the employment structures of U.S. firms … [accounting for] the fact that many skilled immigrant admissions are driven by firms themselves (e.g., the H-1B visa)." The authors "find rising overall employment of skilled workers with increased skilled immigrant employment by firm. Employment expansion is greater for younger natives than their older counterparts, and departure rates for older workers appear higher for those in STEM occupations compared to younger worker."

From the point of view of countries, like Ireland, relatively open to immigration of skilled workers, but without a specific skills-based 'filter' (Irish system is open to migrants on the basis of nationality, rather than skills, but has strong selection biases into skills-based immigration due to lack of jobs creation outside the STEM categories of jobs), the above suggests that skills depreciation in the STEM sector can be a problem for the natives. As supply of younger STEM employees from abroad rises, there can be a tendency for displacement of older workers, premature termination or flattening out of careers and, subsequently, lower supply of pensions and income provisions in later years of life.

7/3/2014: How are cohorts of immigrants changing?.. 2002-2012 data

This week, CSO published 2012 data on PPSN numbers and employment status of immigrants. The data is telling, makes for uncomfortable reading, and you can explore all the details here: http://www.cso.ie/en/releasesandpublications/er/fnaes/foreignnationalsppsnallocationsemploymentandsocialwelfareactivity2012/#.UxhZ6PTV9bs

Not to run repeats of the CSO own analysis (which is excellent), here are couple of my own insights:

Chart below shows all foreign individuals age 15+ that are either in employment or in social welfare activity, irrespective of their entry year. To strip out any possible y/y volatility, I took averages roughly corresponding to the following periods:
1) Period prior to EU Accession of EU15-25 states (2002-2004)
2) Period of the pre-crisis bubble following Accession (2005-2008) and
3) Period since the onset of the crisis (2009-2012).

I then computed share of each 'nationality' in activity as percent of the total number of nationals of this group in the country at the time.

To control for effects of the overall employment trends, I then took difference for each nationality percentage in activity to the total foreign population percentage in activity.

The result is plotted in the chart.

Arrows in the chart above show overall changes in relative activity in each group/'nationality' over the three periods, relative to overall foreign population activity rates.

For example, EU15 ex Irish and UK nationals group data shows that in 2002-2004, this group was 19.1 percentage points less likely to have been employed or have social welfare activity compared to the all foreign nationals. By 2005-2008 period this number fell to 2.7 percentage points. Over 2009-2012 this group was 8.2 percentage points more likely to have registered employment or social welfare activity than the overall foreign nationals population.

What does this show?

- Across all cohorts (by date of entry), most active engagement in 2002-2012 has been associated with the nationals of EU15-EU25 states.
- Between 2002 and 2012, the largest increase in engagement took place amongst the EU-15 ex-Irish and UK nationals
- Non-2004 Accession EU states (EU25-EU27) had a massive deterioration in activity between 2002 and 2012.
- There was also deterioration in activity for 'Other', although 2009-2012 average is -1.2, which is not far away from the average.
- Americans consistently ranked the worst in terms of overall low activity in all periods.

For a second exercise, I took same year as entry performance for each entry cohort and then once again took difference to the total. Chart below shows the results.

As measured by activity rates, only one cohort showed significant improvement over time: EU15 ex-Irish and UK nationals. Marked deterioration in quality of cohorts (by year of entry) over time is recorded for EU25-EU27 group, UK and 'Other'.

There are many caveats to interpreting the data, so the above should not be deemed reflective of some real values and qualities. When I say 'quality' in the context of data, I simply reference the extent of engagement. Not actual quality of human capital or work performance etc.

My concern, however, is that we are seeing rather predictable, steady deterioration in activity rates for all groups of foreigners, excluding EU15 ex-Irish and UK nationals.

Chart below summarises.

26/10/2012: Few interesting links

Some links on recent studies of interest

Two hugely important studies from the Kauffman Foundation on the role of immigration in entrepreneurship and human capital as a driver of future economic growth.

Iceland's assessment of financial stability for 2012 Q1 covering in detail household debt dynamics (from page 23) and detailing the success of the Iceland's systemic debt restructuring arrangements.

Economics 07/02/2010: Human Capital, Immigrants and Social safety Nets

A very interesting piece of research that tends to support my view that higher minimum wages and more extensive welfare nets / social services nets are acting to reduce overall levels of productivity amongst the immigrants.

One paper, published this week, titled Indian Entrepreneurial Success in the US, Canada and the UK, by Robert W. Fairlie - University of California, Santa Cruz, Harry Krashinsky - University of Toronto, Julie Zissimopoulos – RAND and Krishna B. Kumar – RAND (available here) takes a look at the differences in entrepreneurship (incidence and outcomes) and education amongst one large sub-group of immigrants to the US, UK and Canada. Having a culturally homogenous and relatively large group of immigrants allows the authors to set aside the need for measuring sending country attributes, thus improving substantially the accuracy of their results.

What they found is pretty interesting.

Indian immigrants in the US and other wealthy countries are successful in entrepreneurship. But how successful these entrepreneurs are once they reach different countries and encounter different social systems, and what are the sources of their success?

The study finds that “in the US Indian entrepreneurs have average business income that is substantially higher than the national average and is higher than any other immigrant group. High levels of education among Indian immigrants in the US are responsible for nearly half of the higher level of entrepreneurial earnings while industry differences explain an additional 10 percent. In Canada, Indian entrepreneurs have average earnings slightly below the national average but they are more likely to hire employees, as are their counterparts in the US and UK. The Indian educational advantage is smaller in Canada and the UK contributing less to their entrepreneurial success.”

Hmmm… why so, you might ask?

Immigrants are most likely to enter both the US and UK as ‘family sponsored.’ Since the 1960s U.S. immigration policy has strongly favored family reunification. The UK’s immigration policies over the past four decades have shifted towards emphasizing family reunification and employment. On the other hand, Canada's point-based system which awards immigration admission points based on education, language ability (English or French), years of experience in a managerial, professional or technical occupation, age, arranged employment in Canada, and other factors leads to more skilled immigrants compared to the US.

So far so good – Canada has longer lasting and much more selective immigration policies than the US and UK.

Because of the point-based system, in Canada, roughly half of all immigrants are admitted through employment-based preferences. In contrast, slightly more than 10 percent of immigrants in the US are admitted under this classification.

Again, sounds like Canada should be really the land of entrepreneurial and higher quality immigrants.

The related category of employment creation or investors who face minimum net worth and business experience requirements, and self-employed immigrants who must have relevant experience in occupations. A larger (but still relatively small – just 7%) share of immigrants in Canada are admitted under these policies than in the US (0.1%) and UK (2.4%).

So, ex-ante data analysis, it is pretty clear that “Canada's point-based immigration system results in a higher share of employment-based immigrants compared to the US and UK. On the other hand, the UK admits a much higher share of immigrants under its refugee and asylee programs than the US or Canada. All else equal, we would expect skill levels of immigrants to be the highest in Canada and the lowest in the UK.” (emphasis is mine)

In other words: the authors “find some evidence that the educational advantage of Asian immigrants compared to the national average is lower in the UK than in the US, [consistent with differences in immigration policies]. But, we also find that the educational advantage in the US is higher than it is in Canada, which runs counter to the greater emphasis of Canada's immigration policy on rewarding points for the general skill level of immigrants.”


Why? “A more generous redistribution system, more egalitarian earnings, and other institutional and structural factors, however, may make Canada less attractive to higher skilled immigrants such as Indian immigrants.”

Boy, this is some statement – especially considering the EU policies to achieve ‘Social’ economy – economy based on greater earnings equality, greater rights-based outcomes equalization and maintaining a very generous welfare and redistribution systems. And this is serious, folks. Canada, US and UK are much younger – demographically – societies than EU-core states. This means that in general, the EU has a much more acute need to import younger entrepreneurial talent and skills in order to pay even comparable welfare rates to those in Canada, US and UK. Let alone to afford a more generous system of benefits. The prospects of this happening are not that good, folks.


Let us get back to the study, though:

“We find that Indian entrepreneurs are much more successful than the national average in the US. Indian businesses also perform well in Canada and the UK, but the evidence is not as strong. In the US, Indian entrepreneurs earn 60 percent more than white entrepreneurs and have the highest average business income of any immigrant group.”

No, wait – income inequality is actually favoring ethnic minorities in the US? Without an EU-styled rights legislation that polices allocations of income to specific ethnic groups? Who would have thought that to be possible!

“Estimates from business-level data sources also indicate that Indian firms have higher profits, hire more employees, and have lower failure rates than the average for all U.S. firms.”

Ouch - higher profits = hire more workers + have lower failure rates? And all without help of SIPTU/ICTU/etc to protect the interests of workers and to curb profiteering? Who could have thought?


But what drives such astounding results?

“To explain to relative success of Indian entrepreneurs we focus on the role of human capital. ...We test the hypothesis that a highly-educated Indian entrepreneurial-force is responsible for their superior performance in business. Indian immigrants in all three countries have education levels that are higher than the national average, and in the US the education levels of Indian immigrants are particularly high relative to the entire population. In the US, 68 percent of Indian entrepreneurs have a college education which is twice the rate for whites or the national average. Some of the variation in the education of Indian immigrants across the US, Canada and UK is likely due to immigration policy. Another possibility is that the higher returns to education in the US result in a more selective immigrant pool in the US compared to Canada and the UK.”

Bu wait – ‘higher returns to education’ = greater income inequality between educated and non-educated. Again, who could have thought that this might be a good thing, especially for a ‘knowledge economy’?

“When we examine business income, we find large, positive effects of education in the US and Canada. We also find large positive effects of education on employment in Canada, but smaller positive effects in the UK. The findings for education imply that the relatively high levels of education among Indian entrepreneurs have a large effect on business performance at least in the US and Canada. Decomposition estimates provide exact estimates of the contribution of higher levels of education among Indian entrepreneurs to their higher business incomes and employment levels.

• In the US, higher levels of education among Indian entrepreneurs result in a business income advantage of 21 log points, which represents 43.9 percent of the gap.
• High levels of education also contribute substantially to why Indian entrepreneurs earn more in Canada (12.5 log points), but the difference is not as large as in the US.
• “The combination of the larger education advantage held by Indian entrepreneurs and the larger return to education is responsible for the increased importance of education as an explanatory factor in the US compared to Canada.
• “In contrast to these results, the smaller educational advantage and lower returns to education in the UK result in less explanatory power in the UK.”
  

But sectoral and cultural decompositions also matter: “Lower concentrations of Indian entrepreneurs in agriculture and construction, lower female share*, higher marriage rates, and favorable regional distributions also generally contribute to why Indian businesses perform better than white businesses or the national average.”

Again, give it a thought, folks. The above says that Indian entrepreneurs are so spectacularly successful in all three countries because they avoid investing in ‘losing’ sectors and regions. So where does it put state-led efforts to pump money into such ‘losing’ sectors as, for example, agriculture? And where does this leave Ireland’s ‘National Spatial Development Plans’ that reallocate cash to ‘losing’ regions/areas? In the category of ‘luxury goods’ – an affordable (in certain times) cost of keeping at bay social discontent amongst those who are falling behind?

And it also says that higher marriage rates are positively associated with higher returns to entrepreneurship. Who could have thought?


Some food for thought for our immigration policy bureaucrats and our national development authorities, then…



*[Aside - the issue of lower female share of entrepreneurship is, in my view, a simple statistical legacy. Women entrepreneurs tend to run businesses that are on average younger than those for men, hence, some increased risk in statistical measures. Over time, I would expect as female entrepreneurship gains fully similar footing in types of business, sources of financing etc as male entrepreneurship, this difference will disappear completely.]

A foreigner? We are not too welcoming in our Public Sector...

Few months back I was invited to a presentation by the Immigrant Council of Ireland, attended amongst others by a senior civil servant in charge of one of our core Government Departments. During a lively discussion about racism and discrimination in Ireland, our brave Public Sector employee professed to be concerned about discrimination in the private sector employment. I, somewhat rhetorically, asked him if he perceived a disproportionately small number of foreign nationals employed in the public sector (inclusive of our state enterprises), as compared against their much stronger presence in the private sectors to be a sign of something dodgy going on in the state employment. He flared white with indignation.

Hmmm… figures from CSO’s Foreign Nationals: PPSN Allocations and Employment, 2007 (here) released on January 8 give my concern a strong backing.

Table below lists employment (per CSO) by sector (including foreign share of employment) of foreign nationals in Ireland in 2007.
Note: PS stands for ‘Public Sector’, while NPS denotes ‘Non-Public Sector’. * marks percentages reflective of a slightly different categorization used by CSO in listing various time series.

The share of non-Irish nationals in overall employment in the economy in 2007 was ca 20.1%, with foreign national comprising 30.6% of employment in the broadly defined private sector economy and 6.5% of employment in the public sectors.

Setting aside two public sectors with significant contribution by foreign non-nationals: Education and Health, the rest of public sectors had only 1.4% of their entire employment pool covered by the foreign nationals.

For a foreign national residing in Ireland, the probability of ending up in Public Sector employment ranged from 11.1% in Health & Social Work, to 3.9% in Education, to ca 2.2% in our semi-state companies and 1.6% in Public Administration. In other words, a foreigner is 19 times (!) more likely to gain a job in our private economy than in the most insulated and unions-protected Irish Public Administration sector!

It is also worth noting that within the Education category, only 663 foreign staff were employed in secondary education (heaviest unionization), the rest were working in either primary (1,068 – virtually un-unionized) or tertiary education (less unionized). In Transport, only 98 were in Transport via railways (unionized), while the largest share were employed (6,844) in less unionized Other Land Transport.

At the same time, there is absolutely no sign of lower level of skills amongst the foreigners as compared to Irish workers.

Why wouldn’t our workers’ rights defenders, like SIPTU, ICTU, Impact etc, take up the case of finding out what is going on inside our state-controlled employment?