One Economist Makes the Case for Expanding Immigration

DAN RICHARDS: From the Watson Institute at Brown University, this is Trending Globally. I'm Dan Richards.

In the world right now, there are over 25 million people living as refugees. Some are trying to escape violence like in Ukraine, others are fleeing from poverty like in Venezuela. It's a human tragedy. And we don't seem to have a good plan to solve it.

Part of the reason for this is because the act of accepting refugees brings with it fraught politics in much of the world. And in the US at least, we're not just talking about the political fringes, stoking fear, and resentment of outsiders. There's also a widespread belief that large amounts of immigration can diminish the prospects of native born people. That there are serious trade offs when it comes to opening our doors to more immigrants.

It's a belief that's helping to keep millions of people from finding safety and security around the world. It's also, according to Watson Economist Dany Bahar, simply not true. As he and a growing collection of scholars are finding--

DANY BAHAR: Immigrants and refugees tend to create businesses at higher rates than natives. Tend to integrate into the labor force often at higher rates. Subsequently create many more jobs that natives tend to integrate into the labor force often at higher rates. These are all facts. It's not an opinion.

DAN RICHARDS: And as he sees it, changing this narrative matters not just for immigrants and refugees but for all of us.

DANY BAHAR: Without immigrants, America is not going to be able to remain the strongest or the most important or the richest or the most competitive nation on Earth.

DAN RICHARDS: On this episode, Dany Bahar on what the data actually reveal about the benefits of immigration. And why it's more important than ever that we set the record straight.

Before Dany ever started researching the economics of immigration, he like so many people was already on some level aware of its power.

DANY BAHAR: Immigration has been very central to my family. My grandparents were Holocaust survivors and were refugees. My grandmother was born in today's Poland, my grandfather was born in today the Republic of Northern Macedonia, back then Yugoslavia. And they both ended up in Venezuela after the war. Most of their families were murdered by the Nazis and they survived and they ended up in Venezuela because it was the only country that let them in.

DAN RICHARDS: And that's because.

DANY BAHAR: Venezuela at the time was one of the arms of the Americas. One of the few ones that really had an open door policy. It was part of their development strategy to bring in immigrants and also refugees to develop the country.

DAN RICHARDS: Dany was raised in Caracas, the capital of Venezuela. But as he got older, he decided to try calling a new place home.

DANY BAHAR: And I developed a very deep interest and connection to Israel. And I decided to immigrate to Israel after college and lived here. I am actually here right now in Israel for teaching in the University for a few years and then I decided to immigrate again to the US to continue my studies. And that's where I got a PhD. And yeah, I think it's hard to think that maybe my own personal history. Didn't really lead me into studying all these topics, of course it played a big role.

DAN RICHARDS: Dany's research has explored the economic impact of different types of immigration around the world. Immigration of people with advanced degrees of refugees with no degrees, immigration into rich countries, immigration into developing countries. And while the exact effects, of course, vary depending on context, Dany's research and that of many others has started to show that by and large, the long term economic impacts of immigration on a country or community are beneficial. And yet.

DANY BAHAR: There is a big discrepancy between these findings and kind of the public perception.

DAN RICHARDS: Before we get into that discrepancy and why it exists, let's look at why according to Dany immigrants are so very good for a country's economy. And actually just before we get to that, let's clarify one thing. When we talk about immigrants in this episode, we're referring to both people who move to another country by choice, and to people who do so out of economic or physical necessity. That latter group are what we call refugees, but they fit under the broader category of immigrants as well. So let's get into it.

There are a bunch of different ways that immigration helps a host country's economy. Some might be obvious others not so much. To start, immigrants create businesses at higher rates than Native born people.

DANY BAHAR: A third of all the Fortune 500 companies were founded by immigrants. 20% or 30% of all patents in the US are being patented by either immigrants or children of immigrants.

DAN RICHARDS: This is when people might point to Elon Musk, Jeff Bezos, Sergey Brin, Steve Jobs, they are all tech entrepreneurs and are either all the children of immigrants or immigrants themselves. But this isn't just a phenomenon in the tech industry and not just a phenomenon in Fortune 500 companies.

DANY BAHAR: There's so many examples of that. But my favorite is the Sriracha sauce that we serve that in many, many tables in restaurants and homes. I don't know if you know the story. So the famous one, the brand being Hugh Fong was founded by a refugee, a Vietnamese refugee who arrived to California in the late '70s. And Hugh found what the name of the vessel that brought him. And that firm creates, I mean not only creates delicious sauce, but also create jobs and value to the economy.

DAN RICHARDS: You might be wondering, why do immigrants and children of immigrants have this disproportionate level of entrepreneurialism? Well it's hard to say for certain, but here's what Dany suggests.

DANY BAHAR: I'm going to give you an answer but let me tell you why the answer it might not be fully legal Just because sometimes there are things that are hard to measure. Culture for lack of a better word or like behavior, those things are hard to measure or like what are we thinking holiday like if immigrants have different attitudes than natives, those are hard to measure. However, one thing that I do believe that is a wide accepted answer to your question is the risk-taking approach that immigrants usually have, which is the same approach that entrepreneurs have.

So like immigrants tend to be much more tolerant of risk. And that's what economists call a self-selection thing. Because the act of migrating itself, we said, it's a very risky act. People sometimes undermine how difficult it is to migrate. Even if it's plan, you're moving to plays often with a different language, you don't really have as big of a network if at all, as you used to have in your previous country. The act of migrating is an act of risk-taking because to some extent you are jumping into a pool and not knowing exactly what's expected for you.

DAN RICHARDS: A higher risk tolerance an ability to handle uncertainty, ambition, these are all traits that are essential to people who start businesses. And they're not just helpful for entrepreneurs.

DANY BAHAR: So I think that those characteristics are very typical on people who excel in their profession even as employees trying to think out of the box, trying to move up the ladder.

DAN RICHARDS: One example of this from colleagues of Dany's.

DANY BAHAR: There's some studies out there by Ran Abramitzky and Leah Boustan, who are at Stanford and Princeton, respectively. And they just they just have a new book called The Promised Land. In which they're actually looking at immigration historically in the US since then eighteen-hundreds.

And one of their findings in one of the recent papers and I'm sure it's something that you will also see in the book, is that the "American dream" quote unquote is more alive. It's much more alive among immigrants in Americans. Like the immigrants they tend to go up in this occupation ladder much faster than the average American. And it's not because they're better, it's not because they're more prepared, it's probably because of these risk-taking attitudes that it's very salient on immigrants.

DAN RICHARDS: It's relatively easy to make the case that if immigrants tend to start more businesses, that will be good for the economy. Many Americans across the political spectrum can agree on that. The same is true of immigrants with advanced educational degrees, who are able to fill roles that US firms desperately need. And there have actually been bipartisan efforts to allow for more immigration of highly educated quote "high skilled workers" into the United States.

But what about immigrants who don't start businesses and who don't have advanced degrees? What some people might call quote "law skilled workers" but who Dany refers to as fundamental workers. This is where you get into more contentious debates around immigration.

DANY BAHAR: When it comes to fundamental workers or people without college degrees or even less, I think the perception is much more alive. That there are-- "we don't want them" quote unquote.

DAN RICHARDS: Part of the reason for this is because many people have a model in their mind that goes something like this. More immigrants into a country means more people seeking low paying jobs in that country, which leads to more competition with Native born people for those jobs which leads to even lower wages. In other words.

DANY BAHAR: Supply and demand.

DAN RICHARDS: The supply of workers goes up. The price of labor aka wages goes down. People with this model in their head might say that out of a desire to help people fleeing places like Ukraine or Afghanistan and bringing them to the US. We are diminishing job prospects for native-born people. But according to Dany.

DANY BAHAR: Empirically that's hardly the evidence we see.

DAN RICHARDS: As he explains, when it comes to immigration and labor markets, the concept of supply and demand is usually understood way too simplistically.

DANY BAHAR: And here I usually rely on research by Giovanni Peri who's a professor at UC Davis. And he has a very beautiful study in Denmark where he's really looking at what happens with the inflow of tens of thousands of more of refugees coming from different countries-- Yugoslavia, Afghanistan, and Syria, et cetera.

And about 70% of them don't have a college degree. So this is the population that the question is about. And when you find in that study, is that when these people come into the economy, they will take jobs that natives are maybe not so willing to take or they actually want to move away from and but the dynamics of the market are such that they're stuck there. And what you end up seeing is that the locals actually move towards better jobs once the immigrants come.

DAN RICHARDS: One theoretical example of this.

DANY BAHAR: You are in California and you are a farmer picking fruits in the camps. And then you have immigrants coming from Mexico who are also willing to do the job. Well, maybe that allows the American worker in this case to take more of a managing role. Also the American worker will typically have comparative advantage in some things such as language or such as maybe knowing the market more closely.

So it even creates a bit of a "more efficient market" quote-unquote in very economic terms in which every person will be focusing on what their comparative advantage is. And that makes everybody better off.

DAN RICHARDS: Another reason it makes everyone better off, is that no matter what jobs people are filling.

DANY BAHAR: Immigrants also eat and also wear clothes, and also go and buy things and they also consume. So they also increase demand for workers.

DAN RICHARDS: In other words.

DANY BAHAR: Jobs turn on like an apple, that we only have one and either you eat it or not. I mean, the pie grows and there's no reason to think that pie is not going to grow when you bring more people.

DAN RICHARDS: A casual supply and demand analysis does not take this into account.

DANY BAHAR: The model assumes that one unit of work is the same whether it's you or me. And that you and me are completely substitutes. And the truth is that I'm an immigrant, but you are very good at doing podcasts. And if I were-- I can't take your job. I'm going to be very bad at it. You're much better. And we're not competing with each other.

On the contrary, I want to argue this is not going to be very humble. But the fact that I'm here as an immigrant, I'm actually helping you have another episode. And that helps you in your job. So we are complements, we're not substitutes.

So just assuming that an immigrant in an eighty for two immigrants or two natives are just two units of labor that are like fighting with each other for one job, it's just like-- it's a very, very simplistic view of the world and that view unfortunately has really taken on a lot of the perception definitely sometimes among politicians but also among people. So it is our job to come and say that may be the model but the model is very simplistic when you actually look at the data that's not what's happening.

DAN RICHARDS: Which is all to say.

DANY BAHAR: The idea that we don't need any immigrants who are fundamental workers, it's just a contradiction with how America wants its economy to be.

DAN RICHARDS: Dany and other scholars are working to show that immigration offers host countries tremendous opportunities for growth and prosperity. But Dany's research doesn't end there. Because as he and others have found, in order for host countries to fully realize the potential benefits of immigration, they need to enact certain policies. Without them, all the benefits we've been discussing can be stifled.

What are those policies? There's one particular case study Dany used to explain them to me. A case study that is unfortunately very close to Dany's heart, Venezuela.

In the early twenty-tens, a series of overlapping economic and political crises hit the country. Government efforts to solve the situation often ended up making things worse leading to widespread shortages of food and medicine to hyperinflation and to skyrocketing unemployment. This all led to a massive exodus out of the country.

For many people, that meant crossing the border into Colombia. When Danny first learned of this crisis, he did something unusual for an academic economist.

DANY BAHAR: He probably sounded crazy at the time, but I literally decided to travel and go to the border and see by myself what was happening.

DAN RICHARDS: He didn't have a plan or a research grant. Danny just went.

DANY BAHAR: I thought it was important to go and understand the stories.

DAN RICHARDS: If part of the draw was personal, it was also academic. You see, Columbia did not have policies in place at the time to handle a refugee crisis of this size. Few countries do. So their response to this crisis represented a unique opportunity to analyze the effect of immigration policies in real time. So they found themselves are really trying to think how to design these policies. And I had the fortune of being involved from an academic side and trying to understand the effectiveness of these policies.

His work combined with research from economists exploring similar issues around the world has helped confirm some of the policies that are essential for making immigration the win-win enterprise it has the potential to be. The first policy.

DANY BAHAR: Let them work.

DAN RICHARDS: As in legally work.

DANY BAHAR: Don't keep people away from their labor markets because they are going to work anyway, they're going to work in the Black market in areas where you have a lot of your vulnerable population also working. Perhaps in industries that are not productive.

DAN RICHARDS: Once people are living in your country, there's no good reason to keep them from legally working.

DANY BAHAR: From a fiscal point of view, why would you want them to work in a Black market and not pay income tax?

DAN RICHARDS: Once people are working in a stable legal way, they can start to contribute in all those ways Dany and other researchers have enumerated. They start businesses, hire people, work in fundamental jobs support other businesses as consumers. They pay taxes. This is something that Colombian government figured out pretty quickly.

DANY BAHAR: Even to those who actually came in undocumented, they put forward a huge amnesty project to give them a visa to everybody with the right to work and the right to education and the right to health, et cetera. And we're doing a lot of studies there to really evaluate that. And so far, we've found that didn't have any negative effects on the local labor markets, which is the very short term thing that you can look at. And we're working very hard with the Colombian government and thinking about what's the best way to integrate people in the labor markets.

I mean, given the right word doesn't mean that people are going to find a job. Finding a job is hard. But you still have to give them the chance to do that.

DAN RICHARDS: This might seem obvious if you're a country accepting large numbers of immigrants and refugees, but this policy doesn't always get put into practice.

DANY BAHAR: In the case of Turkey with millions of Syrian refugees, it took Turkey about, I'm simplifying the story here a little bit. But it took about five years since they started arriving to actually give them a job permit. But by then, it was too late. I mean everybody who was maybe working in the informal sector, which is already big to begin with, in many developing countries, the informal sector is very large. So it does draw a lot of people.

And you lost like a lot of time on trying to get people to integrate. So you really want people to integrate as much as you can. There's no downside to that.

DAN RICHARDS: Allowing for legal work permits is only part of the solution.

DANY BAHAR: You also want to give people enough time so that they have a long term horizon. In this case, I mean, the Colombia gave to Venezuelans a two year visa originally and now they're giving them a 10 year visa because I think they understood the importance of a long term perspective.

DAN RICHARDS: This is important not just for immigrants themselves who benefit from being able to make long term plans and feel invested in their new community. It's also important for the people who might potentially employ them.

DANY BAHAR: Even if you have a super pride doctor engineer that you want to hire, you might think twice if you want to hire somebody that can only work for two years for a year or two. So without giving them an upfront horizon for them to settle and for them to invest themselves and for the firm to invest in the workers, you're not off to a good start.

DAN RICHARDS: It turns out that even for those risk-taking, proactive, future entrepreneurs we discussed earlier, this type of stability still is very helpful.

DANY BAHAR: We have a study going on also in Colombia in which we find that after the undocumented workers get visas that allow them-- gave them a longer horizon, they started registering new firms in the country. So they became entrepreneurs at much higher rates even by a factor of 10, which is a huge effect.

DAN RICHARDS: Dany isn't just studying the effects of these policies in Colombia, he's actually helping to shape them.

DANY BAHAR: I've been putting forward white papers and policy papers to hopefully and humbly to try to inform or maybe give some ideas to policy makers on a good path forward. My grandparents were welcomed by Venezuela as refugees when nobody else wanted them. So it, of course, is very moving to me that I'm-- at a very, very, very, very, very, very small scale. It's now me really trying to help my country mates. From my corner as a researcher, but still trying to pay back the opening they gave to my family.

DAN RICHARDS: What Dany's finding in Colombia.

DANY BAHAR: Can easily be replicated to other areas like Poland with the Ukrainians or Moldova or other countries in Latin America like experiencing large influence.

DAN RICHARDS: So if the evidence supporting these types of policies is overwhelming, why aren't these policies being enacted everywhere?

DANY BAHAR: And that's a big enigma or maybe a big reason to blame us economies. We haven't been able to translate this into the general public.

DAN RICHARDS: Now, you can't blame it all on economists and policymakers for not selling it well enough. And that's because immigration is not just another policy problem, it's an emotionally charged issue in the US and around the world. And in this moment of rising ethnonationalism in countries ranging from the United States to India, more and more people are being taught to think that immigrants are a threat to their financial future and maybe also to their way of life.

It's a fear that's been stoked and sometimes ignited in the first place by politicians and activists who see an upside in turning citizens against some imaginary outsider. It's come to play a key role in so many toxic political movements today. And it of course can't just be solved with data proving otherwise. But it probably can't be solved without good data either.

DANY BAHAR: That's part of what I try from my corner to answer but I think there's a huge challenge as many other challenges in this country. But that's, I think, one of the biggest ones to understand the reality of it and not to let those demagoguery take center stage in our thought and our planning.

DAN RICHARDS: If we aren't able to do that soon, it'll be bad not just for people seeking safety and opportunity in new countries around the world, it'll be bad for all of us and the countries we all call home.

DANY BAHAR: Without immigrants America is not going to be able to remain the strongest or the most important or the richest or the most competitive nation on Earth. It made it so far, thanks to immigrants. And the damage that these very toxic conversations that happened over the past presidency and some of that we're still seeing it like in politics is going to be detrimental to the American economy over the next decades in ways that are not going to be fixed by anything else.

The missing immigrants, missing entrepreneurs, which are missing innovators, which are missing fundamental workers that are helping the innovators and entrepreneurs. If they don't come to America, they're going to go somewhere else. So if the long term strategy of this country is to remain the country that Americans are so proud of, of being the leader of the free world and being the strongest economy in the world and the leading economy in the world, those things can vanish very easily. The more these countries the closest star to immigration.

DAN RICHARDS: It's an economic, political, cultural, and historical project to create a widespread understanding that immigration is far from being something we should fear. It's a national resource and an opportunity to embrace. Once we understand that, I think the rest is going to be very easy to fix.

[MUSIC PLAYING]

This episode was produced by me, Dan Richards, and Kate Dario. Our theme music is by Henry Bloomfield. Additional music by the Blue Dot Sessions. You can learn more about Trending Globally and all of Watson's podcasts on our website. We'll put a link in the show notes.

And if you haven't already, please subscribe to Trending Globally. You can find it wherever you listen to podcasts. We'll be back in two weeks with another episode. Thanks.