Fear + Econ Theory = Reaganism = Wrong

The Tea Party is basically a group of Americans who believe in Reaganist dogma with absolute faith. Much of that dogma consists of economic nonsense used to cover appeals to the self interest of white oligarchs and the racism of Southerners. But some of it is pretty standard econ of the Freshwater variety. It's all incorrect as a matter of empirical reality. 

Immigration is a fascinating issue in Tea Party dynamics because Reagan himself, Californian and paid spokesman for labor dependant General Electric, is famously heretical on the topic.

An example of economic nonsense is the claim is that immigrants "take" more in welfare benefits than they provide in tax revenue. This is just plain stupid for several obvious reasons including the high percentage of government expenditures funded by sales tax and the reality that a fake Social Security number will allow you to pay payroll taxes while a genuine Social Security Number is required to receive the fruits of those taxes. 

On the other hand, plenty of highly educated economists paid out of our tuition and tax dollars will tell you that it's just a fact that low skilled immigrants depress wages. Because supply and demand. Duh! 

For a long time this was so obvious that no one bothered to look at the data. Of course, workers, even low wage ones, are consumers. And the things they consume are produced by people working at jobs. But nevermind, because, economics! Seriously! Double duh!

The first survey of studies didn't happen until the 1994 paper The Economics of Immigration and that survey only finds a tiny smattering of published work before 1990!

Now that economists have gotten around to checking it turns out (drumroll)... immigrants do not depress wages!

ECONOMIC IMPACTS OF IMMIGRATION: A SURVEY, January 2011, by Sari Pekkala Kerr and William R. Kerr.  The theory:

Immigration affects the wages of the host country in several ways. Abstracting from lower participation rates, immigration increases the labor force of the receiving country. This growth in labor supply affects average wages in the economy if other factors of production like capital are fixed due to changes in relative scarcities. Even if other factors of production adjust, this labor growth directly affects the average wage due to simple composition effects if the distribution of educations and skills of immigrants differs from the native population. For most European economies, this composition effect has reduced the average wage as immigrants were of loweraverage skill than native workers. More interestingly, immigrants are also expected to lower the relative wages or employment of natives for whom they are close substitutes. This decline is due to a change in the relative supply of worker types. On the other hand, wages and employment of complementary workers or factors of production may increase. These predictions follow directly from a standard labor supply-demand framework. They are short-run predictions absent any changes in capital stocks, industry mixes, and similar. Hence, the welfare of certain populations in the host country may deteriorate even if the aggregate impact of immigration is positive.


The reality:

The displacement literature is vast, and this paper has only touched on major points. The large majority of studies suggest that immigration does not exert significant effects on native labor market outcomes. Even large, sudden inflows of immigrants were not found to reduce native wages or employment significantly. Effects that do exist tend to be relatively small and concentrated among natives or past immigrants that are close substitutes.