Wednesday, June 01, 2005

Eurovision :: Virginia Postrel

The futurist (Virginia Postrel) is ahead of the curve again. Her analysis explains why Arabs (and Bosnians) thrive in the U.S. but not in Europe. And why many European voters are anti-immigrant. Once again, people behave the way the institutional incentives surrounding them cause them to behave. In this case, racists aren't born -- they're made. The emphasis below is added.

EDWARD HANNA, the mayor of Utica, N.Y., seems perplexed. Ever since The New York Times ran a story about how his town is rebuilding its economy by welcoming refugees, he has been deluged with calls. Reporters as far away as Germany want to know what's going on in Utica: Aren't immigrants, especially refugees, supposed to be a drag on the economy? Don't they consume tax dollars and take jobs?

Hanna doesn't see things that way. The son of Lebanese immigrants, he resists talking about Utica's newcomers as different from migrants from Los Angeles or Rochester. "What are they supposed to be, freaks or something? They're people," he says emphatically.

More to the point, they're people who start businesses, buy houses and keep up their neighborhoods. An old industrial town in a generally depressed region, Utica suffers high unemployment. Its population is half what it was in 1960. Refugees from Bosnia, Vietnam, and Belarus are injecting much-needed vitality into the city's economy. "Business, the professions and others are grateful for the influx," says Hanna.

It's a common enough story in America, where immigrants are a well-established source of entrepreneurial vitality in places like New York City, Silicon Valley and Los Angeles. The only real quirk is the location.

I read the Times story on my way to Sweden, where I was soon struck by the sharp contrast to Utica's experience. In the dynamic, opportunity-oriented U.S. economy, new people mean new talents and more growth—a promise of a better life for everyone. In the static, security-oriented Swedish system, new people mean more mouths to feed from a shrinking welfare pie—a source of resentment. The Utica story made jaws drop when I told it in Stockholm.

Sweden has historically welcomed refugees as a humanitarian imperative. But unemployment among newcomers is reaching crisis proportions. Over the past decade about 400,000 immigrants have come to the country of around 9 million, and the economy has produced no jobs to absorb them. Private-sector employment in Sweden has been dropping for decades, but the effect was masked until recently by growth in government jobs. In the 1990s, however, the public sector, too, stopped growing, curtailed by the limits of tax-and-spend economics.

So while Bosnians have been creating an economic rebirth in Utica, their counterparts in Sweden have 60% to 70% unemployment. And that's a great success compared with the 95% rate among Somalis who moved to Sweden.

Inflated wages make marginal workers unemployable, and immigrants tend to be less qualified than native-born Swedes. Meanwhile, high taxes and stringent employment regulations block immigrant entrepreneurship, and generous welfare benefits discourage work anyway.

"Nobody is able to do anything about the problem, because the price to pay to change these static structures is higher politically than the price of keeping these people outside the labor markets," says Thomas Gür, an editorial writer with the Svenska Dagbladet newspaper, and the author of several books on immigration.


The only other angle to point out is that immigrants select to immigrate. If you've got talent, or a higher tolerance for hard work you'll want to immigrate to the place that rewards those talents. It's your kids and their kids that will tend to drift back to the average. [Gary Becker: "The old adage of "from shirtsleeves to shirtsleeves in three generations" is no myth; the earnings of grandsons and grandparents are hardly related. Apparently, the opportunities provided by a modern economy, along with extensive public support of education, enable the majority of those who come from lower-income backgrounds to do reasonably well in the labor market. The same opportunities that foster upward mobility for the poor create an equal amount of downward mobility for those higher up on the income ladder. "]

Link via Philip Beckman commenting here.


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