Better check out Japan.

Photographer: Andrew Harrer/Bloomberg

Scott Walker, Labor Market Protectionist

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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Many people who take a hard line on immigration will be quick to tell you that it’s only illegal immigration they oppose. The rule of law must be upheld, they argue, and amnesty only rewards lawbreakers. Immigration boosters, including me, have always suspected that this professed concern for the law masks a deeper opposition to all immigration. 

Now Wisconsin Governor and potential presidential candidate Scott Walker has given ammo to the skeptics. In an interview with Glenn Beck, he strongly implied that he wants to limit legal immigration, in order to protect American jobs:

In terms of legal immigration…the next president and the next congress need to make decisions about a legal immigration system that's based on, first and foremost, protecting American workers and American wages, because the more I've talked to folks, I've talked to Senator Sessions and others out there — but it is a fundamentally lost issue by many in elected positions today — is what is this doing for American workers looking for jobs, what is this doing to wages, and we need to have that be at the forefront of our discussion going forward.

In other words, Walker may have accidentally given away the game -- many immigration opponents are simply labor protectionists. They’re not going to stop at enforcing the rule of law -- they want to reduce the inflow of legal immigrants as well.

This is a bad idea.

The first reason it’s a bad idea is that limiting the inflow of immigrants won’t actually do much to protect American jobs or wages. Yes, if you look, you can find studies saying that immigration reduces wages for native-born workers (just Google “George Borjas”). But the preponderance of evidence -- see here and here, for example -- finds little effect.

And a number of studies find that immigration actually increases wages for the native-born. Economists Giovanni Peri, Kevin Shih, and Chad Sparber have a new study out in which they find that immigrants boost native-born people’s wages by allowing them to go into higher-skilled positions. Essentially, the native-born become managers for the immigrants.

But none of these studies are able to take into account the long-term effects that result from capital mobility. We live in a world in which it’s very easy for capital to move across borders -- an American company can fairly easily set up a factory, or a call center or even a research center in India. If we restrict immigration, the Indian people whom Microsoft wants to hire in Seattle will instead be hired in India. Those workers, instead of spending their paychecks in Seattle restaurants and Seattle gas stations, will spend their paychecks in India.

This is called the idea of local multipliers. It basically means that companies are going to hire those Indian people one way or another. Either they get hired in the U.S., or they get hired in some other country. Yes, some American workers will be competing with those workers. But in today’s globalized world, Americans are going to be competing with them whether they’re over here or over there. And it’s better to hire them here, and compete with them here.

But this might not even be the biggest reason to want more immigration. Over time, we want the U.S. to stay at the center of the world economy. As China develops, its large population combined with its new wealth will make companies from all over the world want to relocate there, in order to be close to the vast Chinese market. In order to keep economic activity in the U.S., we will need to maintain a large market of our own. In the past, the U.S. did that by being a lot richer than China. In the future, the wealth gap will narrow, so the U.S. will need more people in order to remain the place where companies want to invest.

 If you want to see a country that has long gone down the Scott Walker path, take a look at Japan. Japan has remained mostly closed to legal immigration in the modern age. As a result, it is aging dramatically and its population is shrinking. Its own companies are investing elsewhere -- given the shrinking Japanese market, they have no choice if they want to thrive. Nor has protectionism shielded Japanese wages, which have fallen for decades, propelled by the drought of investment.

Of course, Japan isn't the U.S. It isn't as good as the U.S. is at assimilating new immigrants. The U.S. ability to absorb newcomers is unique, and it gives America a chance to escape Japan’s fate. If we listen to Scott Walker and other immigration restrictionists, however, the U.S. will be throwing away one of its biggest advantages. Don’t fall for it.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net