An Economist Changes His Mind: Immigration Does Contribute to Inequality

Immigration contributes to inequality. America has a special obligation to our citizens. And America’s economy is not working for the majority of citizens today. Those are three of Sir Angus Deaton’s – recipient of the 2015 Nobel Prize in Economics – boat-rocking conclusions in his recently published article, “Rethinking My Economics,” on the International Monetary Fund’s website.

On immigration, the Princeton professor writes:

“I used to subscribe to the near consensus among economists that immigration to the US was a good thing, with great benefits to the migrants and little or no cost to domestic low-skilled workers. I no longer think so. Economists’ beliefs are not unanimous on this but are shaped by econometric designs that may be credible but often rest on short-term outcomes. Longer-term analysis over the past century and a half tells a different story. Inequality was high when America was open, was much lower when the borders were closed, and rose again post Hart-Celler (the Immigration and Nationality Act of 1965) as the fraction of foreign-born people rose back to its levels in the Gilded Age. It has also been plausibly argued that the Great Migration of millions of African Americans from the rural South to the factories in the North would not have happened if factory owners had been able to hire the European migrants they preferred.”

Deaton’s observations will be familiar to you in the sensible immigration movement. NumbersUSA’s founder, Roy Beck, detailed that history in Back of the Hiring Line – A 200-year history of immigration surges, employer bias, and the depression of Black wealth:

“The economic and societal changes that followed the curtailment of immigration “made possible the success of the civil rights revolution of the 1950s and 1960s,” according to Stanford economic historian Gavin Wright. Without the immigration reduction, the Great Migration of Black southerners to the North and West would not have occurred as it did, and the civil rights movement would never have progressed as it did. The Great Migration and the resulting rapid rise in Black incomes spurred the increased enrollment at Historic Black Colleges and the elevated numbers of Black lawyers, physicians, clergy, and other professionals whose ranks produced the leaders of the civil rights movement. Without the Great Migration and the Great Leveling, it is difficult to imagine the civil rights movement successes in the 1950s and 1960s.

“If the trends in Black progress during the 1940s, 1950s and 1960s had continued, America would be a far different society today. 

“But progress for the average Black wage earner stalled in the 1970s.”

Economists have much to learn from histories like Back of the Hiring Line. In Deaton’s view, historians “often do a better job than economists of identifying important mechanisms that are plausible, interesting, and worth thinking about.”

A license for plunder

Modern economics lacks an ethical dimension in Deaton’s diagnosis. A commitment to the efficiency of markets is not enough. 

“Efficiency is important,” Deaton writes, “but we valorize it over other ends.” And “when efficiency comes with upward redistribution—frequently though not inevitably—our recommendations become little more than a license for plunder.”

This is precisely how mass immigration operates in our economic system. As a tool to grow the economy, immigration is incredibly efficient. Legacy media outlets have spilled multiple tankers-worth of proverbial ink on how the border crisis has been “a gift to the economy.” But growing the economy is only one of three true outcomes of mass immigration. The other two are 1) redistributing wealth from workers who compete with immigrants to people who use immigrants; and 2) passing the costs of immigration on to U.S. taxpayers.

Understanding the three true outcomes of mass immigration is the key to understanding the political and power dynamics behind the immigration debate. Mass immigration creates winners and losers.

Send a message to your elected officials: Nobel Prize Winner Concludes Immigration Contributes to Inequality

Power to change the rules of the game

In Deaton’s analysis, immigration policy is one of several policy areas that economists should take a second look at. He describes a downward spiral in which policies based on “a (perhaps nebulous) mainstream” economic ideology “change the rules of the game,” depriving the majority of Americans first of their economic power; and ultimately their political power to reverse the trend. As he puts it in a recent interview:

“In American [sic] today, mortality is falling as it should for the educated minority, but rising for those without a four-year college degree, something that was true before the pandemic. The less educated minority has not done well over the last half century, even in material terms, and even if the last year or two look pretty good, they hardly make up for decades of exclusion, not just in economic terms, but in loss of power…”

This is a recipe for instability. Mass immigration is a key ingredient. In order to change the outcome, Deaton breaks with libertarian economists who wed a fealty to markets with a globalization ethic that condemns the prioritization of the national community over citizens of other countries. Deaton’s approach is rather similar to Barbara Jordan’s, who said “it is both a right and a responsibility to manage immigration in the national interest.”

“We certainly have a duty to aid those in distress,” Deaton writes, “but we have additional obligations to our fellow citizens that we do not have to others.”

Do You Agree? Visit your Action Board.

Explore: Economic Challenges, Hiring Line Initiative

Deaton vs. Krugman

Deaton isn’t the first or the last economist to have second thoughts about immigration. Paul Krugman (also a winner of the Nobel Prize) has almost famously reversed course on immigration and in the opposite direction of Deaton. In 2006, Krugman wrote: “Unfortunately, low-skill immigrants don’t pay enough taxes to cover the cost of the benefits they receive.” In 2024, Krugman says “this seems like a good time to point out that negative views of the economics of immigration are all wrong.” Michael Lind’s “Krugman vs. Krugman” compares and contrasts the New York Times columnist’s current statements with his previous analysis. You can be the judge of which Krugman makes the better case.

Interestingly, Deaton and Krugman will meet on stage on Mar 20, 2024 to discuss the role of economists in today’s political landscape. The event is open to the public in person or by livestream.