Do Immigrants Lower Productivity?

Don't be mislead by statistics. Think of the economics.

I have two kids; they are the sweetest—I say as I clean spit-up off my shirt for the tenth time today. However, finding childcare has been a constant headache. We have daycare, but if we want to switch providers, there is a year-long waiting period for the newborn. Or if we want to find an in-home nanny for a few hours a week, good luck! That’s not easy, even when you pay well above market rates. The problem is that there are lots of frictions in the market beyond finding an agreeable price.

But this newsletter isn’t about my woes as a parent; it’s about immigration and productivity. The connection is that my woes would be improved with more immigration, especially low-skilled immigration, which would help me be more productive. I’m not alone, and so this effect would benefit lots of other people in an economy, making the overall economy more productive.

Alan Manning disagrees. In an interview in the Financial Times (gated) about immigration and productivity within the UK, Manning claims,

lower-skilled migration tends to be in lower-wage, lower-productivity jobs, so it tends to be a drag on the productivity level in the UK. Not a very big effect, but we know the UK’s got a very big problem with that.

The first part is absolutely true. Lower-skilled immigrants do have lower wages, given the link between skills and wages. The final part is true. The UK has a huge productivity problem, as Sam Bowman and others have written a ton about.

It’s that middle claim that’s the problem. Lower-productivity workers do not lower the overall productivity for any measure we care about. Instead, the claim elides the difference between an accounting statement and an economic statement. The economics is what matters.