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Immigration and Median Income

February 1, 2011, 10:42 am

I have hypothesized that immigration may have an effect on median income -- not because it is bad for the economy per se but just form the fact of adding millions of new people in the bottom quartiles would tend to shift the median downwards (just the pure math of the thing).

I have only given them a quick glance at this point, but Tyler Cowen links several studies that tend to say my hypothesis is false.

Also, here is an interesting discussion about the median income stagnation hypothesis itself and how sensitive it is to the end point, pointing out in particular that most folks start their analysis from a point within Nixon's wage and price controls, which skew the data - shifting the start point forward even a couple of years makes most of the stagnation go away.  He builds on a post by Brink Lindsey showing historic median income growth over a longer time frame, implying the aberration may have been the boom of the 1950s and 1960s rather than the lower growth rates of today.

I would normally find this a fascinating debate if it weren't for the dark cloud behind it that half the folks arguing the point wish to use it as a justification for further reductions in economic liberties.

Tags: , , ,
Category: Economics
  • Don

    Actually, I always thought the opposite. It's been my experience that those who come here to work (which is the majority of immigrants, whether from India, Mexico, or Canada - legal or illegal) and they tend to work long hours, look harder for opportunities, and take greater chances (hell they took a big one just coming here!) so that makes them more successful in the long run.

    Additionally, for those who come here illegally, they'd largely not be counted, and the results of their labor will show up as an IMPROVEMENT in income levels for those who hire them (lower your costs, raise your profits).

    And I can prove that those "in the know" would agree with this assessment simply by the fact that there's really no serious effort to get them out of the country, just a lot of grand standing publicity. It reminds me of the DEA showing the one tractor trailer load of weed they found but not mentioning the other 19 that were right behind it that got through.

  • dovh49

    Regardless, of the median. If we are getting services for cheaper than you have to factor in deflation due to a cheaper workforce. So a smaller paycheck does not necessarily equate to a lower standard of living.

  • Dr. T

    Most of the studies that report median income stagnation in the USA are flawed because they fail to include employment-related benefits such as matching 401k contributions and health insurance (that are worth more now than they were decades ago); government transfers to lower income people via Medicaid, SNAP (formerly Food Stamps), the oxymoronically named Earned Income Credit, etc.; and investment income (that has become a much larger percentage of spendable money because of our aging population).

    One economist with a blog (Mark Perry at Carpe Diem) has suggested the concept of ethics standards for economists. Ironically, he violates such standards continually with his biased reporting of our economy.

    I put economists in the same category as climatologists: Both groups have access to reams of data with much of the data being flawed, both groups use statistics and models to draw conclusions and make predictions but often incorporate their biases or pet theories into the models, both groups pretend that they are scientists despite rarely using the scientific method, and both groups can support diametrically opposed theories or models (such as Keynesianism vs. consumerism and anthropogenic global warming vs. climate changes driven by solar energy cycles).