I have been appalled recently by the low quality of the debate on immigration from politicians throughout the political spectrum. Immigration defenders have claimed that immigrants do jobs Americans don’t – as if cities with few immigrants did not have garbage men. Immigration critics have said that immigrants steal American jobs. They seem to believe that the number of jobs in the economy is fixed and that one person must be getting the job at the expense of the other.

This is the lump of labor fallacy – the number of jobs in the economy is not fixed! By coming to a country immigrants increase the supply of labor and hence reduce wages. In turn, cheaper labor increases the potential return to employers to build new factories or expand their operations. In so doing, they create extra demand for workers.

The Mariel boatlift where 125,000 Cubans ended up in Miami between April 15 and October 31, 1980 provides an interesting opportunity to study the impact of a large number of immigrants on a city. A study by David Card of Berkeley showed no increase in the unemployment rate in Miami over the time period of the assimilation of the immigrants in the labor force. The Miami economy responded to influx of new labor by creating jobs to take advantage of that labor.

Inversely, when French politicians mandated a 35 hour work-week believing it would mean that companies would need more people to keep the total hours worked constant thus reducing unemployment – companies decreased the overall number of hours worked. Unemployment did not decrease.

That is not to say that immigration does not potentially have potential negative impact on certain segments of the population. Over the past 25 years wage equality has decreased in the U.S. and immigration could be partly to blame. Immigrants to the U.S. are mostly low-skilled and thus potentially pushing down the relative wages of low-skilled Americans.

David Card compared wage trends in cities with lots of immigrants such as Los Angeles, with those in places with only a few, such as Indianapolis. If immigration had a big effect on relative pay, you would expect this to be reflected in differences between wage trends. Mr. Card’s research suggests that immigrants had no significant effect on low-skilled workers’ pay. Mr. Card also tested the idea that perhaps low-skilled natives leave cities with lots of immigrants rather than compete with them for jobs, so that immigration indirectly pushes up the supply of low-skilled workers elsewhere and pushes down their wages but found no evidence that it does.

Given my personal value judgment in favor of equality of opportunity and my admiration for those willing to bear the huge fixed costs of immigration – leaving their family behind, coming to a new culture in an uncertain environment – to pursue the American dream in the land of opportunity, I am happy that empirical evidence disproves the claims that immigration is negative for this country.

For full disclosure, I am an immigrant on an H1B visa and David Card was my thesis advisor at Princeton 🙂

There is something highly ironic about seeing hundreds of thousands of students in France demonstrate against the CPE “contrat de première embauche”, a more flexible labor contract for those under the age of 26 with more flexible redundancy rules for two years after which full job protection kicks in.

In the past student demonstrations have been a force for social change (e.g.; 1968 demonstrations); however, now the students are demonstrating to preserve the status quo. The revolutionaries have become conservative! It would be partly understandable if the status quo was worth preserving, but a society that has 23% unemployment rate for people below the age of 26 and unemployment rate as high as 50% for the youth in the urban ghettos “les banlieues” is not creating opportunity for its people and itself!

By fighting the CPE, most students believe they are fighting against institutionalizing insecurity and to preserve the full time job for life that rightfully awaits them upon graduation. Unfortunately, the ideal of the “job for life” that the students are fighting for is an illusion that has not existed in decades whose mirage survives only in certain parts of the public sector. In a competitive environment where companies continually adjust to demand and changing conditions, expecting them to have a fixed labor size is incongruous. Even Japan had to shed its policy during the deflationary period of the 1990s.

As a result, the students are really demonstrating to preserve an extremely unjust society where the insiders – those who get jobs – are protected at the expense of a large numbers of outsiders who can’t get jobs.

That is not to say that the CPE cannot be criticized. The, unelected, prime minister pushed it by decree without parliamentary debate – a highly undemocratic process that gives the impression that the idea would not stand debate and scrutiny. If anything it’s about time France had a real debate about where it is and where it is going.

Moreover, in its own way, the CPE continues to entrench a two speed society – those with temporary flexible contacts and those with the traditional protected contacts. This may not give a great incentive for employers to give traditional full time contracts once the two year CPE is over. Wholesale liberalization and moving to “at will” employment for everyone would be far more effective, but suggesting that in France is a sure way of getting stoned.

That is not to say France should ditch its attachment to social equity. Each society should make the moral and value judgment to select the amount of social equity it seeks to have. France would likely preserve its more redistributive choices than the U.S. However don’t sacrifice efficiency on the altar of fake equality and ideology!