Imagine Chuck Schumer and Kevin McCarthy deciding for businesses how many semiconductor chips they can import annually. The outcry from Right AND Left would be massive, and with good reason. The future is opaque, and on the matter of commerce it’s much more than opaque. How dare politicians insert themselves as planners?
In particular, how dare politicians ascribe to themselves the planning of an import so central to production? How dare they, indeed.
What’s confusing about all of this is that while semiconductors and (name your imported input) are surely essential, nothing measures up to the importance of human capital. People drive all economic progress, and since they do, people are at the top of any economic pyramid. Nothing else comes close.
Despite this, it’s popularly asserted that the simple, universal solution to immigration in the United States is to regulate the inflow of people based on skills and one’s ability to afford a family in the U.S. “Skills-based immigration” is the buzzword for those who think deeply on the matter of immigration, and who want to solve it. Count Manhattan Institute president Reihan Salam as one of those very thoughtful individuals eager to improve immigration via an accent on what would-be Americans would bring to the U.S. In his words from a recent Wall Street Journal essay, “There is rough agreement that the U.S. should generally welcome newcomers who are well-positioned to provide for themselves and their families.” Skills-based immigration all over again, which is the problem.
No doubt Salam means well, but it’s not unreasonable to suggest that his solution would actually amount to the worst of all immigration worlds while never solving what it purports to. Figure that markets always speak no matter the central plan, and immigration is a market phenomenon.
On the matter of central planning, it sounds so wise for politicians to devise an immigration reform that would account for skills needed. Except that such a reform fails in a number of ways. For one, a lot of immigrants are coming to the U.S. precisely because they lack skills and want to attain them. For politicians, bureaucrats or a combination of the two to plan who is worthy and who isn’t ignores that the U.S. has long been where strivers who lack skills acquire them.
For two, Nick Schulz and Arnold Kling long ago made the crucial point that the minute an immigrant walks onto U.S. soil, that individual becomes exponentially more valuable to employers. Why is that? It is because the U.S. is a magnet for global capital (some, including yours truly, would argue that the inflow of people is related to the inflow of capital), and as such, a great deal of investment finds its way to production. Basically, a willing worker in the U.S. is able to produce quite a bit more per hour than one in Guatemala. It’s a reminder that an ability to provide for one’s family is directly related to getting to the United States.
For three, workers learn by doing. Cliched as it may sound, it’s true. The tired and hungry who arrive here without skills are arguably arriving with an attribute that is miles more important than past work experience: a desperate desire for something better.
After which, what do the well-intentioned mean by desirable skills in the first place? The question is not rhetorical or flippant. Instead, it’s rooted in the simple truth that as evidenced by the extraordinary dynamism of the U.S. economy, the nature of work is constantly changing. This is important to contemplate with Salam’s call for politicians and/or bureaucrats to pick the immigrants with the “right” skills. Salam surely knows that politicians and those in the government’s employ are constrained by the known, while capitalism is all about leaps to the unknown. What’s needed today isn’t necessarily needed tomorrow.
Which brings us back to the previously mentioned truth that we would never trust Schumer and McCarthy to plan how many semiconductor chips we should import. To say the latter would be a fool’s errand brings new meaning to understatement. And if they couldn’t credibly plan microchips, why would we expect them to plan human inputs?
All of which brings us to the aforementioned reality that markets always and everywhere speak. And immigration is yet again a market phenomenon. That’s why so many are massed at the U.S. border, and so few at the borders of Venezuela, Peru, and Haiti.
Where individual human beings take their talents, ambition, or both, is easily the purest market signal of all. They go to where there’s opportunity. That immigrants routinely risk everything to get to the United States is a rather bullish signal about the U.S. economy. When the U.S. is booming everyone wants to be here. Please think about this with Salam’s solution top of mind.
Assuming Congress were to ever pass some kind of skills-based or ability-to-provide based immigration reform plan, reality would still intrude on the presumed Utopia. Stated simply, those we imagine to be unworthy of admission wouldn’t suddenly lack ambition, a desire to better themselves, or a desperate need to feed their families. Yes, the tired and hungry would continue risking it all to get to the United States.
One senses Salam realizes the above truth. You can’t legislate away human nature. Which means if we want to fix immigration we either need to legalize work (the market solution), or crush the economy so much that the ambitious stop coming here.