Immigration is backwards

Democracy 4
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I need a lot of links because I am including a lot of studies. I will be labeling the links by number since the number of links I have is limited. I will link a pastebin with all of the links below.

In Democracy 4 (and 3), if immigration is increased, it results in an increase in unemployment, a decrease in wages, and an increase in healthcare demand. I understand the logic behind these effects: your reasoning is most likely that as immigrants enter the country, they compete with natives for jobs, thereby decreasing wages since the supply of labor is increased, and since these immigrants will take some of those jobs available in the country, unemployment as a whole goes up. Further, immigrants will demand more from the healthcare system of the country, thereby increasing healthcare demand.

The above reasoning exhibits a well-known economic fallacy called the lump fallacy. This economic fallacy ignores either the supply or the demand effect of a population. In other words, the given population is a lump of demand (e.g. for healthcare) or a lump of supply (e.g. of labor), not supplying or demanding respectively. Here, you ignore that while immigrants compete with natives for jobs, in strict economic terms, they increase the supply of labor, they also increase the demand for labor, since they demand the goods and services provided by the economy. By increasing the demand for labor, they offset wage effects from the increase in supply.

Many make the argument that if an immigrant enters the country, they will accept a lower wage rate than native-born workers. In neoclassical economics, this translates to the question of whether immigrants are substitutes for native workers.

The above argument is a simplification based on classical economics and only looks at first order effects. That is, it ignores factors such as savings rates, cultural differences in native vs immigration populations, and how attitudes shift among natives when an increase in immigration occurs. This and many other factors all necessitate an empirical look at effects of immigration on the economy.

Here is a 12 year old meta-analysis of labor market effects (wages, employment, that kind of thing) of immigration: (link 1)

Here is a noteworthy bit from the paper:

“In Longhi et al. (2005a) we analysed 18 papers that provided 348 estimates of the effect of immigration on wages of the native-born population. We found that a one percentage point increase in the share of immigrants in the population would lower wages of the native-born population by about 0.1 percent on average across studies. When migrants are about one tenth of the population this translates into a very small elasticity of a 0.01 percent decline in the average wage for a 1 percent increase in the number of immigrants. In Longhi et al. (2005b) we compared nine recent studies that yielded 165 estimates of the impact of immigration on job displacement among native workers and found, similarly, that on average a one percent increase in the immigration population would leave the native born virtually unaffected: their employment would decline by a mere 0.02 percent.”

The finding that immigrant effects on employment and wages are negligible is not unique to this study. That study is actually an outlier in the literature when I did my research for this post, in that it does actually estimate that immigrants even effect employment and wages. The meta-analysis I linked above most likely predicts that immigrants affect labor markets because it includes studies which use a homogeneous labor market model. Here is a piece from another study, this time from 2016:

“Twenty years ago, economists typically framed their analysis of immigration as an increase in the supply of labor within a model of homogeneous workers and a downward-sloping labor demand, which was determined by the complementarity between labor and physical capital. This approach tended to focus the attention of the researcher on how immigrants competed with other homogeneous workers in the labor force while keeping everything else fixed, in a ‘partial’ view of the labor market. More recent analyses offer greater flexibility”

Source: (link 2)

The study goes on to discuss the larger set of factors that weren’t taken into account in economic research on the topic of labor market effects in immigration, such as the differences between native and immigrant population skills that allows economies to specialize and improve efficiency, rather than taking away from native jobs and wages.

Now, Democracy 4 specifies that the immigration statistic is more about sudden influxes of immigrants, but, from the same study I linked above,

“Between May and September 1980, about 120,000 Cubans left from the port of Mariel to reach the United States, as consequence of a sudden and temporary lift of the travel ban by the Castro regime in Cuba. About half of them arrived in Miami. The event was sudden, very limited in time, and not accompanied by economic crises in Cuba. Hence the Miami economy was receiving many refugees because of its pre-existing Cuban community but was unaffected by the other forces related to the Cuban outflow. This episode was first analyzed by Card (1990), who compared Miami to four control cities chosen as roughly similar to Miami in terms of black and Hispanic employment percentages and pre-1979 labor market trends. He found negligible effects on average wages and on wage dispersion in Miami relative to the control cities after 1980.”

Negligible means it shouldn’t even show up in the game. If I were playing Democracy 4 and that event happened, it should spike the immigration level, and if the results of this study are accounted for, the labor markets effects wouldn’t even register. Racial tension? Sure. Employment and wage changes? No.

What I think should happen in Democracy 4 is that an increase in immigration should simply not affect wages or employment. The reasoning is that, meta-analyses cover economic studies finding immigrants lowering wages and raising wages, and this is because in economics this is a debated issue, although I believe the overall consensus currently is that whatever the case, immigrants have negligible effects on those. Here is something from the Federal Reserve that finds entirely contradictory results on the effects of immigration influxes on unemployment and wages: (link 3)

The point is: it’s kind of unknown. You have said your game is not really about any particular political message. It’s just, “here are the effects of this policy.” Well, that’s what I think is so great about the Democracy series. That’s why I have so much enthusiasm for the game! But this one particular point is driving me crazy, since every bit of economic literature I can get my hands on suggests the way the game deals with immigrants stems from xenophobic stereotypes about them rather than the empirical work that’s been done on the issue.

Just for reference, here are some other studies I found on immigration with respect to labor market effects:

This one looks at immigrant influx in Houston and compares it to Dallas. It’s findings are, “the relative average quarterly wages in Houston decreased by 0.7 percent compared to the same group of industries in Dallas following the abrupt in-migration to Houston.” But notes that this is only from assuming the lump of labor fallacy. That is, ignoring economic demand effects of immigration. It notes in the conclusion, “Lastly and importantly, the same DDD becomes statistically insignificant if we fail to include a proxy for demand-side effects.” (link 4)

This paper discusses how, specifically low-skill immigration, actually causes the kind of specialization in the labor force I mentioned earlier, and explains how this can account for the “modest wage consequences of immigration for less educated native-born workers.” (link 5)

Here is a study looking at effects in Canada of immigration, particularly in the long run, “This paper examines the relationship between unemployment and immigration in Canada. The bidirectional causality test finds no evidence of a significant effect of Canadian immigration on unemployment. Cointegration tests indicate that there is no observed increase in aggregate unemployment due to immigration in the long run. The results from the causality test based on the vector error correction model confirm that, in the short run, past unemployment does cause (less) immigration but not vice versa. There is also a long-run positive relationship among per-capita GDP, immigration rate and real wages.” (link 6)

Pastebin with links: https://pastebin.com/50L9VT8A

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Wow! I don’t really have anything to add, but I just wanted to compliment you on this awesome and detailed explanation! With footnotes and all, great job! Especially because in these contested and controversial areas like immigration it is important to see what the facts are and what are assumptions.

The difficulty with these things is that it is really, really hard to be absolutely impartial, probably even impossible. Even facts and figures are not always impartial, and even if they are, how you present the data is also subjective.

It might even be a good idea to hire a researcher to just see what the facts are and to see if the relationships between things in-game is somewhat accurate. Of course things need to be balanced and enjoyable in a game, but it does also need to make sense in a real world perspective. I can see how hiring a researcher would be a very costly thing to do, and maybe it has already happened, but I do think it will lead to a more interesting game and a more educational one too. It adds a layer of depth to everything.

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That doesn’t mean it doesn’t have to be realistic

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Interesting to see this one get boosted after a year, yet it is still relevant. Cliff has completely overhauled the immigration system since this post, yet not fixed these issues.

I still see high unemployment because immigration and stagnant wages because immigration and overcrowded hospitals because immigration. All this ignoring the facts that some immigrants are doctors, some immigrants start business which hire local workers etc.

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Rapid population growth stagnates wages causes infrastructure gaps and increases unemployment, and also destroys the environment.

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Well now that this is blowing up let me provide a quick update. When I wrote this post I had high hopes for the game, but now after playing a whole bunch of hours, I’ve just kinda given up on it. The inconsistencies with the real world are through the roof. I’ll go through a few that really irk me.

  1. Transgender healthcare access has virtually no impact on healthcare demand versus something such as heart disease so the fact that the game acts like it does seems so odd as to border on transphobic. The only effect that transgender rights should have is all of the boosts we see in mental health for LGBT people in real life, plus I guess pissing off conservatives? However, the boosts a society attains from accepting its LGBT members is essentially negligible to the society as a whole as these people are a tiny fraction of the larger population. What I’m saying is that macroeconomic effects like “healthcare demand” are extraordinarily overinflated as long as they even show up in the game.

  2. Immigration rate does not affect healthcare demand in that way either. There is simply no evidence for it. If someone here disagrees, I guess feel free to provide me a study. I could be wrong but that does not coincide with anything I’ve ever seen in research.

  3. The way that GDP works in general is complete fantasy. It has no bearing on any economic theories that currently exist.

  4. The way unemployment works is also incredibly off. You basically have two choices in this game when it comes to dealing with unemployment: either you implement state programs that employ large amounts of the work force, or you bring immigration to around zero. Neither of these options are all that realistic. In most economies, unemployment has a natural rate around that of full employment, and there are hard underlying factors in general stochastic equilibrium theory that support this. It is simply the case that a free market absent of major shocks and exceptional friction effects will naturally employ its labor force.

There are many other minor things, but overall I feel that this game as it currently exists is just a way to live out the political fantasies about how the developers view the real world, which as far as I can tell is in overly simplistic conservative/libertarian talking points, rather than a simulation of how the real world actually works.

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8

Suprisingly, when you have so many jobs that nobody is taking you really need immigration so it doesn’t drag down the economy

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Every immigrant requires between $100,000 to $200,000 in extra government expenditure so that the existing population doesn’t suffer any adverse effects from immigration—something beyond the means of all governments.

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Okay so like, did you plan on providing a source for that claim? Because on the face of it, it’s frankly egregious in light of known economic principles such as the aforementioned lump of labor fallacy in my original post.

I tried to find something on my own and found the following source (look at the graph on the front page) Do Immigrants Cost Native-Born Taxpayers Money? | Econofact

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The downward spiral of hasty population growth

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I’m going to have to agree with @spudzee here. There’s really not much to suggest that every immigrant needs 1-200,000 in extra government spending. My parents certainly didn’t get any help, and neither did the dozens of other immigrant families I’ve had the pleasure of knowing over the years. I don’t think any of them have been a drag on the local workforce at all. The source your provided literally has “opinion” in the name, so I’m not certain we can entirely trust it.

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All knowledge is conjecture that needs refutation. If that is your best attempt at rebuttal, then the article is the truth.

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Conjecture: inference formed without proof or sufficient evidence, or a conclusion deduced by surmise or guesswork.

Saying that “All knowledge is conjecture that needs refutation” is overbroad and most likely incorrect. The majority of proven scientific research does not fall under the definition of conjecture, and knowledge certainly does not need refutation.

Just because something has not been proven incorrect does not mean it is correct. This is known as the Argument From Ignorance Fallacy: Argument from ignorance - Wikipedia. Your point that since I did not fully refute the article, the article must be true is a logical fallacy and incorrect.

To your original point that immigrants need $200,000 in extra government spending to avoid negative outcomes, I’m going to point to @spudzee, where he pointed out how your point falls under the Lump of Labor Fallacy in economics. I would also like to add his link here, along with some of my own: Do Immigrants Cost Native-Born Taxpayers Money? | Econofact

A quote from the article: " Most immigrants are in their working ages and so, viewed as individuals, are average net taxpayers . Since they tend to arrive to the United States as adults, it means that the U.S. did not have to invest in their education, but will benefit from the taxes of their adult earnings."

An NPR article on the topic: 4 myths about how immigrants affect the U.S. economy | PBS NewsHour. Immigrants and their children, on average, require less government spending to maintain and contribute more in taxes than the average American.

This report Front Matter | The Economic and Fiscal Consequences of Immigration | The National Academies Press finds that each immigrant represents a net present value of $259,000 dollars, so even if the Government did need to spend $200,000 on every immigrant (which it certainly does not), they would still represent a net gain.

I’ve already talked about immigration in a previous discussion, so I’m going to reiterate that most economists and demographers find immigration to be a net benefit to the economy. Please see that discussion thread for more information: Skills shortage.

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Conjecture is a personal opinion based on imperfect information that needs testing. Testing this knowledge gets you closer to the truth or the truth through attempted refutation. You can’t prove anything, but you can falsify it.

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I don’t think the definition of conjecture is “personal opinion,” or that conjectures need testing. All of the major English dictionaries listed below define conjecture as a conclusion formed on guesswork/faulty information: (or something near to it)

  1. Conjecture | Definition of Conjecture by Merriam-Webster
  2. CONJECTURE | definition in the Cambridge English Dictionary
  3. Conjecture definition and meaning | Collins English Dictionary
  4. conjecture_1 noun - Definition, pictures, pronunciation and usage notes | Oxford Advanced Learner's Dictionary at OxfordLearnersDictionaries.com.

None of these sources mention the need for testing.

I don’t disagree with your point that testing knowledge and trying to refute it can sometimes lead closer to the truth, but saying that all knowledge is conjecture and must be proven wrong is still overbroad and likely incorrect. You haven’t refuted the point I made at all.

I would like to think that I haven’t falsified any information, but if I did use faulty or incorrect information, then I apologize for not checking my sources more thoroughly. If this occurred, please tell me.

You’ve been talking about refutation and how it leads closer to the truth in your posts, but I really haven’t seen much refutation/constructive information and explanations yet (From reputable sources). Please do try and refute some of what I have written at least, or we can’t really have an informed and enlightening discussion.

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