А русских евреев принять на нашу работу?

Нет! ((Thanks Google Translate!))

An easy criticism of “experimental” data, like that from the Mariel boatlift, is it only applies to the particular situation under which the experiment was run. Immigrants may have had no effect on employment outcomes in the very special circumstances of Miami in the early 1980′s, but in other places and times immigration would have an effect. Card, himself, says that one of the reasons the Mariels had no effect on the Miami labor market was because the city had had ample experience in the preceding decades absorbing Hispanic and, in particular, Cuban immigrants. Maybe Miami is just an extremely efficient melting pot.

The only way around this criticism of experiments is to do as laboratory scientists do, replicate them. Of course, in the economic study of immigration, this is not something that can be done in the lab. Economists studying immigration can not run their own experiments; they can not produce their own data. They have to wait for nature run experiments for them. Lucky for economists, nature provided such an experiment in the collapse of the Soviet Union.

Between 1990 and 1994, Israel’s population grew by 12% due to immigration. Most of these immigrants were Jews from the becoming-former Soviet Union. Like the Mariel boatlift, this mass migration was almost entirely due to circumstances in the sending country and at least at first, it was largely unanticipated by the native population. The instability in the Soviet Union at that time encouraged many people to leave. Israel was chosen as the destination country simply because of shared religion and open immigration policies.

When something external to the system causes a change to that system, like these particular mass migrations, economists call it an “exogenous shock”. Laboratory scientists use random assignments into control and treatment groups, for example, as their exogenous shock. The great thing about exogenous shocks is that they remove the mystery from what causes what. If conditions in the system under study do not affect the timing or magnitude of the shock, then any changes to the system that come after the shock must be due to the shock itself. Because unlike laboratory scientists they can not induce exogenous shocks to the systems they study, the challenge for economists is to look for data that was generated from exogenous shocks or to use various, and sometimes complicated, techniques to analyze data in a way that makes it look like it was generated by exogenous shocks.

The mass migration from the Soviet Union to Israel, then, was an exogenous shock to the Israel labor force. However, the occupations chosen by Russian immigrants once they entered Israel are not exogenous. Because Rachel Friedberg wanted to study the effect of the mass migration on wages within occupations — her question was “Did Russian immigrants entering an occupation cause wages in that occupation to decline?” — she was worried about the non-random choice of occupation. Specifically, she was worried that the immigrants had chosen occupations that were experiencing above average growth in wages. In this case, if immigrants were depressing wages by increasing labor supply and so competing with natives for jobs, the raw correlation would show no effect of immigration. In the raw correlation the bad effects of immigrants on wages would be cancelled out by the fact that immigrants were disproportionately choosing occupations with higher wage growth. In a hypothetical world without immigrants, then, native wages would have been higher.

To test to see if Russian migrants were choosing occupations with higher wage growth and so creating an artificial zero correlation between immigration and Israeli native wages, she came up with a clever way to see what would have happened if those immigrants did not get to chose their occupations in Israel. What she did was to assign each immigrant to the occupation they had back in Russia. She reasoned that because of training and skills accumulated over the career, immigrants would prefer to have occupations in Israel that were similar to their old ones in Russia. Because some occupations get paid more than others, that the old occupation is similar to the new one means the old occupation is correlated with immigrant wages in Israel. The old occupations, however, do not depend on the growth in wages in Israeli occupations. So assigning the immigrant to their old occupation instead of their chosen one essentially removes the problem of occupation choice that was screwing up the raw correlation in the previous paragraph. Getting rid of the choice problem means we can see the real effect of immigration on wages.

The results are surprising. The immigrants that choose occupations different from their old occupations actually had lower wages than if they had stayed in their old occupation. Maybe “choose” is the wrong word here. It may be that immigrants, with their poor language skills or lacking social networks or because of discrimination, were forced into occupations with lower wages. In fact, when you control for this downward mobility of immigrants, the actual correlation between immigration and native wages is positive! Occupations that saw a disproportionate amount of immigration had higher wage growth in the period of the study.

This potentially throws the simple model of the affect of immigration on native employment opportunities on its head. Not only can we not confirm its implications, but its implications seem to be backwards. How is it possible that immigrants could increase wages of native workers!?

5 Responses to “А русских евреев принять на нашу работу?”

  • Google translate is wrong, you are missing one word in your title. Correct Russian:
    А русских евреев принять на нашу работу?

  • Brian Moore says:

    “How is it possible that immigrants could increase wages of native workers!?”

    Total spit balling idea: what if the immigrants brought with them demand for products created by those industries they participate in? It seems, all else held equal, that immigrants to a country would both a) want to consume similar things as they did in their country of origin and b) be more likely to get a job in the industry that produces them, because of their pre-immigration familiarity.

    The demand for those immigrant-friendly products might drive wages for their producers higher than the labor competition would drive it down, especially since I think the % of immigrants who would want to consume X might be higher than the % of immigrants who actually participated in the X production industry in their destination country. I’m sure there’s a more eloquent way to say all this, but I’m not very smart, so, there you go.

  • Brian Moore says:

    Like an idiot, I didn’t read ahead and see you basically say the same thing in your next post:

    “Can’t immigration be seen as a type of innovation? Immigrants bring more with them than their L.”

    Ignore me and my answering of rhetorical questions, please…

  • pushmedia1 says:

    Heh. Sorry about that. Maybe I should have “On the next episode…” instead of rhetorical questions!