David Card’s famous paper studied the impact of the sudden arrival of 120,000 refugees to Miami in 1980. He estimates that the total labor supply in Miami suddenly increased by 7% and the Cuban work force increased by 20%.
Because labor is one undifferentiated mass doing the same tasks, with the same skills, creating the same nondescript widget with a fixed number of machines, this increase in supply induces a decrease in wages and an increase in unemployment among native-born workers. At least this is the mental model most observers at the time carried around in their heads: people conjectured that unemployment spiked to 7.1% in the summer of 1980 because of the arrival of the refugees. It was presumed that the influx of workers created other systematic problems. For example, the boatlift was said to be partially to blame for riots in black neighborhoods that killed 13 people. Also crime, and specifically the homicide rate, spiked in 1980. The Mariel’s themselves participated in a number of crimes; they were responsible for about 10% of homicides. But presumably through their bad affects on the labor market, they caused higher crime rates even among the native population.
To a certain group of economists, to which Card is a high priest, the most important question to ask of correlations like the one found between unemployment and the Mariel boatlift is the following: is there some third factor that is correlated with bad market outcomes that is also, but independently, correlated with the influx of Cubans? Because the stories being told at the time suggested the boatlift caused bad labor opportunities for native-born Americans and then other social ills, this question is particularly important. If a third factor explains the worsening labor conditions in Miami around the time of the boatlift, then that would be the cause of so many social ills and not the boatlift itself. The obvious candidate for this third factor is the deepening national and international recession in 1980 ((The recession that year was later dated by the NBER to have started in January 1980, several months before the boatlift. Its also interesting to note that a primary reason for the boatlift was a bad economy in Cuba.)).
By comparing Miami’s experience with other similar cities that were not affected by the boatlift but were affected by the general economic slowdown, Card was able to show that wages and unemployment in Miami were not affected by the boatlift. He, in effect, subtracted out the effects of the recession on the Miami labor market and got zero. This suggests that the real culprit in Miami in 1980 was the recession. The boatlift just happened to have happened at the same time the economy was contracting.
Another group of economists cares more about the mental model used to understand the Miami labor market. In the case of the Mariel boatlift, for them the most important question to ask is: what’s wrong with the simple mental model that its obvious implication — more workers leads to lower wages and higher native unemployment — broke down? Here’s a number of possibilities:
- Workers are not an undifferentiated mass; they have different and complimentary tasks or they have different skills
- Workers are not all producing the same good
- The number and quality of machines is not fixed
To the degree that any of those three things are true, the implications of the simple model break down. If Cuban refugee workers have skills that are complimentary to native-born workers or if Cuban workers are making products that natives don’t make, then those two groups will not compete with each other in the labor market. Just like an increase in the number of dentists would not have an effect on the wages of construction workers, refugees with different skills from natives would not have an effect on native wages.
But even if workers are an undifferentiated mass, if the machines and production processes they use can be quickly installed or upgraded to accommodate new workers, then the refugee workers will increase the total amount produced by the Miami economy and they will not affect wages or employment of native workers.