9UNP0433SD_Jeffrey_Williamson

- Margaret Lewis: Hello, I'm Margaret Lewis, the executive director of the Wisconsin Academy of Sciences, Arts, and Letters. Thank you all for joining us tonight for the "Wisconsin 2050: Pioneering the Future" Wisconsin Academy Evenings presentation called "Why Third-World Migrants Will Disappear from the United States by 2050" with Harvard emeritus professor of economics Jeffrey Williamson. Tonight's presentation is made possible by the Pleasant T Rowland Foundation and other generous sponsors. WHARF, the Evjue Foundation, M&I Bank, and the University of Wisconsin-Madison, and media sponsor Isthmus Publishing. We thank them for their support. 

(applause)

 Also important to us are our members, who also make these events possible. And I'd love it if all of the members who are here would just raise their hands so that any of you that want to know more about membership, keep them up there for just a minute, know who to talk to about how to become a member and why it's great to be part of this special community of the mind. I'd also like to thank our media partners tonight, Wisconsin Public Television and Madison City Channel 12 are here and we appreciate their help because it allows us to share these lectures statewide, so thank you very much. As always, our Wisconsin Academy Evenings presentations are intended to provide a forum for the exchange of ideas on many different topics in the sciences, arts, and letters. 

We encourage you to send your thoughts and comments our way about speakers and topics for the future. You should also have all received a little yellow card on your way in. That will allow you to be eligible for a drawing of the speaker tonight's book, "Globalization and the Poor Periphery Before 1950." So we hope you'll fill them out and share them with us. It also helps us know how best to market these programs. For those of you who are not Wisconsin Academy members, I would certainly also invite you to join today, and you can certainly receive information about all our programs and about membership on the table on the way out. For those of you who don't know about the Wisconsin Academy of Sciences, Arts, and Letters, we're an independent, nonprofit organization that's been around since 1870 and our mission is connecting people and ideas for a better Wisconsin. Now, what I'd like to tell you about is just a couple of announcements about some of our programs and upcoming events before Don Nichols here introduces our speaker, Jeffrey Williamson. One of the programs of the Wisconsin Academy is Wisconsin People and Ideas magazine. The other is on the third floor here in the Overture Center, we have a gallery for just Wisconsin artists, and there is a great new exhibition up there that we do in conjunction with the Wisconsin Arts Board, and it's the Wisconsin Arts Board Fellows winners, and that'll be running until June 13th. 

So the very best of Wisconsin artists are now displaying and so we encourage you certainly to come and enjoy that exhibition. Any of our other programs you can find information about on our website, wisconsinacademy.org. So we encourage you to go there for more details. Now it's my pleasure to introduce to you Don Nichols, one of the next season's Wisconsin Academy Evenings speakers, who along with John -- will talk about jobs in Wisconsin's economy. Don is an emeritus professor of economics and public affairs at UW-Madison. The former director of the La Follette School of Public Affairs, he is also an award-winning teacher who has played a prominent role in public affairs both nationally and in Wisconsin. He served on the staffs of the Council of Economic Advisors in '63, the US Senate Budget Committee in '75 and '76, was deputy assistant secretary of the US Department of Labor from '77 to '79, and closer to home, he was the economic advisor to the governor of Wisconsin from '83 to '86, and served on Governor Doyle's economic advisory council. So please join me in welcoming Don Nichols. 

(applause)

- Don Nichols: That's a longer introduction than I'd planned to give Jeffrey. 

(laughs)

 Jeffrey is a great academic, let me just start with that, then we'll talk about who he really is. But he lists 20 books and 200 articles. In economics this is a major accomplishment. One does not see this. And among the most recent books is the book on migration that you're going to hear about tonight. Jeffrey's an outstanding speaker, so we're in for an entertaining evening. I'm sure it will be enjoyable for everyone who's here. I'm very happy to see on the slide the University of Wisconsin is mentioned. 

Jeffrey's got two associations with the University of Wisconsin. One is, after he retired from Harvard, now two years ago, he became what we call and "honorary fellow," which means he has an office here and can use our library and all that. But he was a member of our department for 20 years, a full-fledged professor of economics. And a colleague of several people I see in the audience over the full 20. I am a youngster, so I was only his colleague for 17 years of that 20. But Jeffrey was always a great colleague. Accessible to students, a great teacher, and very popular with the faculty and with the students. After the University of Wisconsin, which he left in '83, he went to Harvard for 25 years. And had no connection to the University of Wisconsin then, but at Harvard had culminated a quite illustrious career. Many of the publications I mentioned came about at that time. 

Sidelights are, he was a master of a house at Harvard. Harvard has residential colleges like Oxford and Cambridge and like Yale, and they have a resident master who spends a lot of time with undergraduates. So you wonder how he could have put together this great scholarly effort while spending so much time with students. And this is not just the professional advising of students, but the personal advising that that requires. And it's a tribute to him that he would take this on, something many modern scholars would shun because it takes a lot of time. So we have two connections to the University of Wisconsin, one as a full-time colleague here. There was a time when he was at Harvard and I was chair of the department here, recruiting, where I would point out to new recruits that we had five former economics department members from Madison who were now on the Harvard faculty. So they view us as a fertile ground for reading because we do a good job of picking out good talent young. And nurturing it until the Harvards of the world come along and pluck our finest. So, Jeffrey's a good friend, Jeffrey's a very popular teacher, popular lecturer, as you will hear tonight, and I'm very happy to introduce him. 

I'm going to skip out because of a health problem, not in any way, should my skipping out be interpreted as a vote on what you are about to hear. So Jeffrey, welcome here, welcome back to Madison, I don't know if this is your first presentation back here, but it's your first one to the citizenry perhaps, and it's the kind of public spiritedness he exhibited his entire career that brings him here. 

(applause)

- Jeffrey Williamson: Well, Don is voting with is feet already. You have no idea what a pleasure it is to be here with you and with the Wisconsin Academy. So thank you all for coming, especially in competition with the "Lion King," for goodness' sakes. And thank you to Don for his generous comments about me. This is working, I think, right? Okay. 

And let's go. I think you may be in for some surprises here in these remarks. How do you do that? I don't know, I'll do that. First, if you are annoyed or stimulated by these comments, there's my email address, jwilliam@fas.harvard.edu. And I urge you to write to me with your annoyances. It may take me a while to reply because tomorrow morning, Nancy and I are going to Spain. But there you are. Well, that works just great. Which button do I hit, the middle button? 

(laughter)

 Okay. So let me start off first, of course, with an advertisement. My income is conditioned by these things. These remarks are built on work with a very good friend of mine, with whom I've collaborated forever from University of Essex and Australian National University. And we wrote this book in 2005, now in paperback. It's cheap, so go to amazon.com, buy it today, augment my income and one of my grandchildren, AJ in the audience, will get all the income from this. The $1.95 I get from it. Let me start the story with presenting you with two non-facts. They are presented in newspapers and indeed even by my colleagues. 

What do they know? But they present these as facts, and they are not. It is important that we level the playing field and get these out of our heads. So the first one is that most economists and other analysts believe that the supply of third-world labor facing the US is perfectly elastic. Now, I'm not assuming all of you have had any economics, but I think it's an absolute pity if anyone in here has not. And you should be ashamed of yourselves. 

(laughter)

 But we mean that there's this elastic supply of labor so that the US can actually get as many immigrants as they want. They just need to turn the tap on and off. Twist the quotas up and down and we will have no trouble filling whatever targets we set in terms of the number of immigrants that we want. 

This lecture is going to argue that that's just crazy, it's wrong, flat out wrong. And it matters, in terms of our perceptions of what the future's going to look like. So hang on to that thought. That's the non-fact number one that we want to deal with. The lack of elastic labor supply of third-world migrants to our economy. And here's the second non-fact. Now, you all, including me, went through grade school being taught that we are a nation of immigrants. We sure are now, absolutely no doubt about it, and we're a nation of immigrants now. It hasn't always been that way, although you've been taught that we have. But it's simply not true. 

For example, when the pilgrims fled religious persecution in southern England in the early 17th century and arrived to this miserable existence in Massachusetts in 1620, it's clear that it was a huge proportion of Americans were immigrants then, in fact. But between that point and when the Irish arrived more than two centuries ago on our shores, fleeing the potato famines in the late 1840s, this was not a nation of immigrants at all. It was a nation of American-born, that's what it was. And the immigrants' share or the immigrant proportions were trivial. They were so modest, people would write about them because they were so unusual on the American scene. It's simply not true. We went through an episode, a long episode, where we were not a nation of immigrants at all. And the reasons are obvious. It cost too much to make the move across the Atlantic, and most Europeans were much too poor to be able to, in fact, invest in that move. That's reason number one. 

Reason number two is, Americans bred like rabbits, right? I mean, every female had at least ten children, if she survived. So they would just overwhelm any immigrants that were there in terms of relative numbers. So that was not an episode in that early history at all of a nation of immigrants. And it mattered in terms of the culture that was created in this place. Different than now. And then came the Irish flood, and the census of 1840, I guess that was the fifth census that Americans had taken of themselves, and that census, which you can go right now to the historical library and get, tells you that about 3% of Americans were immigrants at that time. And that's a small number. Today, if you throw in the illegals, which are hard to estimate, but we've got pretty well-educated guesses about that, about 15% of residents in the US are immigrants. So at least five times greater than that. 

It's just a qualitatively different place, is America now than it was at that time. The native-born residents just totally overwhelmed the modest presence of immigrants before the Irish flood. And it's also true, just in the past century. Immediately up to the great rise before World War I, with a great invasion of immigrants, especially from southern and eastern Europe, the share of the population immigrant

- by that term, I mean anyone born abroad, not the numbers that we use today, but the accumulation of totals of those born abroad, that number is much like it is today, about 15%. Though today you have to throw in the illegals to push it up there. It's about the same. So there were two -- environments where the relative proportion of immigrants was larger than almost any other nation on earth. There are others that can compete with us, but not many, and certainly not many our size who would have numbers that large. Well, it didn't stay that way. 

After World War I, the numbers dropped because the immigrants, each year the new immigrants coming to the US diminished to a trickle. And so the total foreign born began to diminish. So when the debates were started in the early 1960s, triggered by John F Kennedy, the son of an immigrant family, who wanted to change immigration laws to make them fairer to not discriminate against individuals by where they were born, but to allow there to be a level playing field rather than have racist discrimination embedded in it, as it was. But from the 1920s until the 1960s, we had tight quotas and heavy discrimination against anybody who wasn't European. And then we had, of course, two world wars. We had a Great Depression. Things were not great in American labor markets, so there was an immense fall in the presence of immigrants in the US. So by the early 1960s, that number is less than 5%. So where we were a half-century ago is just totally different from where we are now in terms of the relative importance of immigrants. If you sense this, you're right. 

The evidence confirms it and it confirms it hugely. Okay, so why did we actually live in different episodes of relative absence of migrants and then relative abundance of migrants? Well, it depends upon whether it's peace or war in the world economy. It depends on whether there's Great Depressions, and it depends on policy. And as I pointed out, there was anti-third world immigrant policy that kept the numbers down between 1913 and 1965. And I'm going to come back to that issue because it's really important in influencing the performance of immigration that we've experience over the past few decades. Now here's an actual fact. This is not a non-fact, this is a fact-fact. And that is, the sources of immigrants coming into the US are drying up. The third world has, as you're going to see in a moment, the third world has been undergoing what economists call "life cycles." 

In this case, immigration life cycles. They got through experience where you start off early in the game, very low out-migration rates, very low immigration rates. You rise to a peak as time goes on, you reach that peak, and you come down the other side. So it's kind of an upside-down, inverted "U" in experience. Every single country who starts poor, not the US, it didn't start poor, it was relatively rich compared to the rest of Europe, that's why the immigrants came. But every poor country exhibits this pattern. When they're poor, very few out-migrations. Then as they begin to develop, the rate of out-migration increases, reaches a crescendo, and then drops into a modern era of relative developments. Every country, no exception hardly at all to that rule. I'll show you some evidence of that. 

And so the third world has been, each one, one at a time, as we'll see, has been passing through these cycles. Many of them have gone down the other side of this inverted "U" and stopped sending us very many immigrants. Some are in the middle of the rise, but they all pass through these cycles. That, for example, is a plot of experience from the start of the big immigration boom that we're now at the crescendo of. It starts right about the early 1970s. This for migration from the Americas, so it would be Latin American, the Caribbean. As you can see, it rises up to a peak in the early 1990s and it has a lot of volatility in it, but it's been declining pretty much ever since. The figures you see there, it's not a head count, it's not counting the number of migrants, but the rate of migration. And that's what I'm going to be talking about and it's what we should be talking about throughout. When I'm talking about the exit rate, the out-migration from the Philippines or --, I'm talking about relative to the numbers they leave at home. 

So as a share in the population. When they enter the US, it's calculated in terms of US populations. Obviously, if a thousand -- arrive in America, you'll never see them, they're lost. It's only a thousand, we're a big country. And if they arrive in Wisconsin, they're going to be lost. But if they arrive on the east side, you'll notice them. So the size of the economy they enter, or the society they enter, is going to be the condition. So we're always going to be talking about rates. The rates relative to the populations they leave and the rates relative to the populations they enter. And all questions we might have about economic impact, social impact, political impact, are always in terms of rates. 

They're not in terms of the head counts. We have to keep those in mind. What you see plotted there are rates. Migration per thousand relative to the countries from which they are coming. There it is again for the Middle East and Asia. Same pattern, but very highly aggregated regions. And here's the third major source region, sub-Saharan Africa, and that apparently has not yet finished its inverted "U." And we'll talk about why it's in the midst of it and hasn't exhibited the same amount of completion that we see for the other two regions. Okay, so there are some examples. So, what about, I'm talking about America, you're Americans, most of you, or maybe all of you, so I guess that's okay, but the fact is, the evidence for me to be talking with precision about this problem is best for the US, pretty good on Canada and Germany, and you get the same answers that I'm going to be presenting to you tonight, when you look at data from Canada and Germany, and that's important because it says there's nothing weird about the US. 

We see it for other rich host countries into which these third world migrants are entering. The data's lousy for the rest of Europe and Australia, so we can't be quite precise for that, but I expect the same results. And the reason is, I'm going to stress conditions in the sending countries, and less the conditions in the US. The drying up of the source is going to be a central feature of these remarks that I'm making. So those conditions of the source can affect all high-wage, rich countries, the EU, Canada, the US, Australia, who compete with each other for these immigrants. So two questions then. The first one is, what accounts for these life cycles, these inverted "U"s that practically every single poor country goes through as they're entering modern development? Could it be changing policy in the country that's receiving the immigrants, like the US? The answer's going to be, absolutely not. Forget it. 

That's not going to do the trick. It can explain bumps along these inverted "U"s, but not the full great transition we'll see. Could it be changing labor market conditions in the US, going from periods when there's very strong pull of immigrants to periods when it's less so? Maybe. Maybe, but the biggie is conditions abroad, in the sending countries. That's going to be the biggie that's the driving force. And I don't have to tell you, what are those forces in the sending countries that are yielding that result? Second, if we can figure out the past, then we ought to be able to say something about the future. And so I'm going to use the recent history to then inform us as best we can about the future. Maybe as far as 2050. 

And we can do that. You can decide whether you like it, but we can absolutely do it. Okay. I've asserted that every country goes through this. And there's a classic example that's based on Scandinavia of immigration performances during the great European out-migrations to the New World, this being a good chunk of the New World. And it starts there. That's the first surprising thing. You know what's surprising about that circled observation? Early in the game, here's a poor country, starting industrialization a little late. Britain's already done it, they're lagging behind. 

This is Serbia or Croatia or Poland, lagging behind. And they're very poor in 1850 and send out hardly any immigrants. That's a little surprising, wouldn't you say? They have the most to gain from the move! They're the poorest. They have the most to gain from the move and they're not moving. So obviously something is constraining them from making the move. Second interesting thing is, as development takes place over time, from 1850 to 1860, '70, '80, and up to World War I, as development takes place in those countries, and in some of these countries, so fast that they start catching up with the US, the US being the metric or the overachiever in the world, but these countries are actually catching up with the US or doing better than the US. And as they move up, they send out more young males and young females to the US. Not less. 

Wouldn't you think, as conditions improve at home, rapidly, better and better, really good jobs, that more would say, "Hey, I'm staying home, things are better"? That's not the way it works. Every single case, that's not the way it works. They send out more and more as things improve at home. Up to some point. And then, as things continue to improve at home, they start being less anxious to leave. But they all at first go through that period of rising out-migration. Terribly important to understand the great immigration boom since the 1970s to now in terms of that characterization. We have to know more about it. So what explains them? 

Well, the downside, when you pass over that peak, that's easy. That's simple economics. Things improve at home, and I have less incentive to move. I'm more likely to stay. But it's the up part that's the surprising bit. As economic success emerges at home, more and more of them actually leave. So, how come? Why is it that early industrialization and modern economic development tends to generate greater out-migration? Mexico is a great example, right, our neighbor. As things improve in Mexico, more of them go over the border, not less. 

Or had been, for quite a long time until recently. Certainly not the last two years. Things have not been very good for migrants, they're not coming. More on that later. Immigration experience, coming out of these poor countries that are sending their immigrants abroad, they all pass through these two regimes. Here's the horizontal access, measuring the wage at home, what is the standard of living and economic conditions at home? Relative to conditions abroad. And along the vertical axis is their out-migration rate, the percent of the population which chooses to leave for the given wages. And you pass through the early stages as those wages and conditions and living standards improve at home, and more leave. This is a period when the out-migration is constrained by conditions at home. 

And the constraint is slowly released. If you like, there are poverty traps that keep them at home. And the traps are being unlocked and the doors are opened and they're fleeing. And then you enter this other stage where it's unconstrained and they just respond to the economic distance between the conditions at home and the conditions abroad. As those diminish, less incentive to move. Okay, those of you who really don't like economics at all, or really detest looking at diagrams, please close your eyes. 

(laughter)

 Because I want to give you this again. Here you go, the game starts again with a poor country, with immigration rates, that E-nought bit, which are low, may even be zero. Small numbers. 

And a wage, W-nought, which is poverty. Very poor environment. Then an industrial revolution starts to bite on this economy and it has two effects. One is, it shifts outwards the demand for young men and women to exit this economy. And we have to talk about what those things might be. For the moment, these factors tend to shift outwards this demand for exit. While at the same time, the wage is increasing at home with successful industrialization taking place. And you put the two together and you end up there. You end up, you've got a higher wage, but you also have an increase in the out-migration rate as we saw on this inverted "U." And when the society gets mature, those conditions, to be determined in a moment, you're being very patient, those conditions may lose their power. 

They may stop pushing this exit rate outwards. In which case, you'd move along that curve backwards as the wage continues to rise. The wage continues to rise, things are pretty good at home, I think I'll stay rather than moving. So fewer will move, and maybe eventually if it really becomes a mature, well developed economy, those conditions that are pushing that exit demand curve out will actually disappear and it'll move back and you'll end up there. So you'd go through those four points and it would plot out that inverted "U" historically. So the key then is, all right, what shifts that curve outward and inward? And here they are. Here are the biggies that were doing a lot of the work from the 1970s to today. And their disappearance, they're going to do a lot of the work in diminishing the demand for entrance into the US by third world immigrants. The first is what demographers call the demographic transition. 

Every country that goes through an industrial revolution goes through other social revolutions at the same time. And one of the most dramatic ones is the so-called demographic transition. Basically, as nutrition improves and all the rest, child mortality rates decline big time. So these kids survive childhood and the parents don't quite figure it out. Because they have plotted and planned to have five kids, but because three are going to die and they only want one male child, you know that story. They're just slow in the bedroom in figuring this out. "It looks like they're surviving, well, it must be random." It won't go on like that. So the whole mortality environment changes and the child mortality rate drops and the parents don't adjust. It may take 50 years, even longer for parents finally to figure this out and believe, okay, it really did happen. 

In the meantime, they have larger families. The survival rates of the kids increase. So initially you have a society like the Philippines in the 1970s when Nancy and I were there and I was teaching at the University of the Philippines, when it feels like somebody just let school out. There's little kids running around all over the place. Well, they're just starting this demographic transition where the percent of the population that is children is really huge. But then they age and eventually they become young adults. A little more annoying than little children, but they're the ones that are going to make the move. And as the economy goes through these demographic transitions and the proportion of the population that's young adults increases, more and more of the citizens in that country will exit because more and more are young adults. You may pass through that phase, but as you're going through that phase, it's going to crank out that demand for exit because there's more kids and more young adults. Second thing that goes on during this early industrial revolution that we have seen first in Asia, and now we see double digits in India, mimicking China and so on, it increase living standards, wages, and the quality of jobs in these countries. 

Their wages, of course, aren't as high as ours. The quality of the jobs, of course, aren't as good as ours, but they're a hell of a lot better than they were a few years ago in these economies. And that kind of wage growth and living standards improvements unlocks the poverty trap. What it does for a lot of households, it makes it more and more feasible for parents and other family members to invest in the move of the eldest son. Send him to Chicago. And as conditions improve, the household gets more resources to invest in the second son to move to Chicago. So wage growth, and early industrial revolutions at home tend to improve the ability of households to invest in their kids to make the move. This is really an important force that is at work. Third, as these countries start early industrialization, they get committed to schooling as America did in the 19th century. And public schooling, typically, and literacy movements and all that. 

And this is true of Asia, Africa, and Latin America during the '60s and '70s, and as their literacy rates increase and their schooling levels increase, it gives them a ticket to enter the US labor market. They now have better skills, maybe unskilled jobs to us, but it requires literacy and schooling to even do these unskilled jobs and now they have a ticket to ride. So schooling revolutions in this environment will augment their out-migration rates and create a brain drain. Perhaps one of the biggest forces is, the first immigrants that make their move and reside in Madison, Chicago, Boston, and so on, send remittances back home. You've all read in the newspaper about the magnitudes, they're huge, the magnitudes of remittances back home. They're used for various purposes, but one of their purposes is to invest in the move of the next kid out of these households. So the presence of past immigrants in the US has a very big impact on the immigrants that will come to the US today. And that has a very cumulative impact on migration, and I'll tell you in a moment why it's especially true for the US, more than any other immigrant country in the world. Okay. So here are some numbers. 

You actually saw these plotted a moment ago, so I'm giving it to you again as numbers. The first upper panel is immigration rates, that is, the in-migration rates into the US. And the bottom panel is for the out-migration from the sending regions that are listed there. I've aggregated everything out to these three large regions. So okay. Here is, for example, the peak in-migration rate into the US coming from Latin America and the Caribbean. Remember, this is a rate of in-migration. But still, you see from the early '70s it increased by a factor of about 3. A huge increase in the rate of in-migration into the US. And it's been falling off. 

It's unstable, but depending upon whether at full employment or not, but it's been falling off ever since. Now look what happens when that's the in-migration rate into the US, and now look what happens when you measure, same immigrants, the same numerator, the same head count and number of immigrants, but now it's divided by the population in the region that's sending them, not the numbers that are receiving them. And first of all, the number's lower. Second of all, it rises less steeply. It still rises a hell of a lot, but less steeply. But more importantly, it reaches a peak even earlier. Now, why is that? Well, the answer is pretty clear. The denominator's behaving differently in the US than it is in Latin America. Latin America has a much more rapid population growth rate than the US does. 

So that denominator is growing faster, making the rate of out-migration less steep and reaching less high rates. And it means that you can use the out-migration rates from Latin America as kind of an early warning signal. Kind of a leading indicator of what's to come over the next five or ten years for the US. It leads the peak. And it does the same when you look at Asia, and MENA, Middle East and North Africa. When I say Africa, we're talking about black Africa, sub-Saharan Africa. And you'll note that Asia reaches a peak earlier than does Latin America, there, in terms of the out-migration rates or emigration rates. So for Africa, it's still being written and yet peaked out, because they've started from a lower level and haven't shown much development, or disappointing development, over the last 50 years. So anyway, the fundamentals that are driving all of this is some changes in policy in the host countries. They're not trivial, but they're not going to be fundamental in driving these forces. 

And in any case, the US in 1965 changed its immigration policy from being discriminatory, favoring some regions which have people of certain colors, whether they eat garlic or not, and so on, versus others, to a level playing field. So now it's the attributes of the individual that matter and not where this person is from. But we set quotas, total quotas, on the numbers that we'd like to have admitted. Of course a lot go under the bar as illegals, but policy sets the quotas. But those quotas apply to all countries that are sending us immigrants. They all compete to try to get entrance and be one of those in the total quotas. So that won't matter, I guess, but more importantly it's going to be the ratio or the economic distance of income per capitas between the US and all these sending countries. Gap gets big, bigger incentive to move. Gap gets small, smaller incentive to move. So we know that's going to matter. 

How fast these countries are growing relative to us will matter in terms of the relative attraction of the US. Now China's growing double digits, India's growing double digits, there are countries that don't make the newspapers doing double digits. And they're catching up on the US and the economic distance between the US and them will diminish and that will reduce the incentive to move. Not for all, but enough that you start seeing it in the numbers. Education gaps. As source countries improve their schooling and literacy levels and educational achievements relative to the US, they'll be in a position to exploit the US labor market better. If they don't have the tools, they can't exploit. No matter how good the jobs are, you can't exploit those jobs as effectively if they had the educational tools. So rapid growth of education in the poor third world will improve their chances of getting jobs in the US and will actually give them more incentive to move. The demographic stuff is going to matter. 

The number of young adults present today, as that increases, will increase the out-migration. Or a couple of decades ago, the number of really young children, their share in the population, they'll age and become young adults in a couple of decades, will trigger out-migration simply because their numbers increase. So those will matter a lot. Unlocking the poverty constraint is going to matter. Increasing incomes at home, whether they're catching up to the US or not, is going to matter. And then these family reunification effects that I'm going to have to stress more later on. Now, okay, I have to establish credibility. I am 75 years old, or almost, and I have to show you that I can do the empirical work. 

(laughter)

 So there it is. 

There are one, two, three, four regressions that use all this data where the unit of observation is a given country in any one year, okay? So we have an observation for India in 1970. An observation for Cambodia in 1980 and so on. And you throw all those observations together, and then you ask, all this theorizing that Williamson is doing, does it really work or not? It works! God, it's just wonderful, look at this! Let's look at that one, the second regression, because it works the best, of course. And you start off. There's the demographic impact as the share of the population, very young population, 15 years ago increases and then 15 years later, today, they'll be young adults and ready to move, that has a very big impact on the exit rates from these countries. So we said it, it made sense, it was plausible that it would work this way, and it sure does, empirically. 

Second one, the size of the income gaps, here measured in logarithms, who cares? But the size of the income gap tends to also contribute to the out-migration rates from all of these countries. And what else have we got going here? Ah, education. Improved education in the US relative to the poor countries, that is, as the education gap increases, it diminishes the out-migration. That is, the poor individuals in the third world countries that would like to move don't have as good educational credentials to do well in the US market and match the needs in the US market, and thus, it tends to diminish the out-migration. What else do we have going here? Well, immigration policy is going to matter, so it's the size of the US quota, will influence. As the quota is raised, the number of immigrants is going to go up, but it's not one for one. What is this elastic labor supply business? 

It's not one to one at all. It's much less than that. Other things apparently matter. Oh, the poverty effect. As the numbers in poverty go up, the out-migration rate goes down. Not many places in the third world has the numbers in poverty gone up. On the contrary. The numbers in poverty have gone down. Except for Africa. You know, the real disaster case during this episode, and to the extent that African countries are undergoing deterioration in living standards, then the out-migration rate goes down as you'd predict. 

They have fewer resources to invest in the move. And so on. I'll skip that one. Here's the immigrant stock effect. The more immigrants from Cambodia who came to the US in past years and now reside in the US, the bigger the impact on the number of Cambodians that'll come today. And that effect is big. And I want to talk about that effect, because it really matters in terms of what our future looks like. This immigrant stock effect. During the 19th century you actually can do the same kind of empirical analysis, you'll be delighted to hear. You can do this empirical analysis and when you get all done, it tells you that for every thousand foreign born Dutch that are in Michigan here in the US, that year will pull 20 more Dutch to the US. 

So a thousand residents pull 20 each year. That's a pretty big number. And every year it will work that way. Every year that thousand will pull in another 20. And here's what it is in the late 20th century, pretty much up to today. It's almost exactly the same, 18 per thousand. So here's an empirical fact that seems to have been going on for two centuries in terms of the impact of resident migrants on new migrants coming thereafter. It's got a name, it's called the "friends and relatives effect." It's very powerful in working and influencing the emigration rates in the third world. First for Latin America, then Asia and more recently for Africa. 

These effects fade over time. Migrants eventually die and absence does not make the heart grow fonder, right? The longer they're away from their roots, the less interested they are in remitting and helping cousins come over and so on and so forth. So it does fade over time, but it takes a long time for these effects to fade away. And therefore, all these other forces I've been talking about, double digit growth rates, demographic effects in the third world and all that stuff, can tend to be muted by the persistence of this immigration stock effect. And I think some analysts haven't seen the downturn in the trends in these immigration rates because of that, perhaps. So why is this effect so big in the US? And it is, the stock effect. The number of resident immigrants in the US will influence the number of migrants that'll come today, big time. And why is it so big in the US? 

Because ever since the quota act was created, first in 1921 and then we kept trying to improve it as time went on across a decade, they have, as they were dealing with the quotas, and trying to favor Europeans and especially west Europeans in those quotas, they always added a family reunification effect in the legislation, which was, if one guy, it would have been mostly guys then, but whoever is the primary migrant whose decisions are being influenced mainly by economics

- "I want to improve the job I can get and I'll do it by going to New York." So they migrate from Cork to New York and take the job. Then, if he gets in the quota, then he can be reunified with his family. And it turns out that the US has put these in every single new immigration act that Congress passes. And it turns out that the quotas that you hear so much about only apply to that primary migrant. They do not apply to the family that comes thereafter. They have a ticket to ride, free, they can get in, as long as their primary migrant gets in first. The US is different because it has, by far, the most generous definition of family. You know, third generations, twice removed, whereas for Britain, it's, "Okay, spouse, kids, parents, that's it." 

I'm not even sure they include parents, actually. But the Brits have a very limited definition of family. And ours is, "Bring 'em all." So anyone related by kinship, bring 'em. It has a profound impact on our numbers, this multiplier effect. I don't think when we debate quotas and illegals and all that, we kind of forget that the biggest part of the migration are the ones that are not coming out of the quotas at all, they're legal, and coming by family reunification. Okay, so what are the forces that are doing most of the work in raising the third world immigration rates and the in-migration rates to the US from less than 5% to today 15%, making us now a nation of migrants? Well, the family reunification effect is a big part of that story. Second, a rising income gap. Before China started doing double digit growth rates and before India mimicked China, the US was growing faster than most of the third world. 

So the economic gap between us and them widened. And the incentive for migrants, therefore, to make the move increased. So that's a second force that was at work. Next are the demographics. The share of populations in the Philippines and -- and so on were increasing dramatically in the 1970s and 1980s when the boom starts. So demography is really pushing it. It's dying out in those countries now, as we're going to see. Third, there was a primary schooling revolution in the third world in the '60s, '70s, and '80s, which gave them better skills to exploit conditions in the US labor market, so that was playing a role. And the numbers in poverty dropped like a rock. As you can see, the number was about 50% in the late '50s, as a share of the world that was below a poverty line, $1 a day, about half the world was below that line. 

And by the middle of the '90s it had dropped to 25%. 25% is not a great human record, but it's a lot better than 50% and that implied that there is a huge number of households in poor parts of the world which now had enough resources since they leaped out of poverty, enough resources to invest in the move of one or more of their kids. It was especially powerful in Asia and Latin America, but not in Africa, because Africa has been the troubled continent of the past half-century. Next question is, why does the boom start in the '70s? There is no boom in immigration into the US from the late '40s onward. There is this trickle from Europe, but it's modest. Why would a European come to the US when they're undergoing double-digit growth rates? So why? Well, it could have started in the '40s, '50s, '60s, it doesn't. It starts in the '70s. 

The income gap is huge. How come they don't exploit it? And the answers are consistent with what I've been telling you. First, the US leveled the playing field, the policy playing field. Really important. And between the '50s and the '70s, the share of immigration shifted completely from Europe toward the third world with Asia leading the parade in that shift. And one of the reasons why it did so is that we changed our immigration policy. During the 1920s, the quotas that were introduced were straight out racist restrictions, especially Asians. No Asians need apply, forget it, you're not coming. You are barred from the US. 

So it was very discriminatory immigration policy because we wanted people who looked like us. So we took only Europeans, thank you very much. And then we changed that in 1965. We said, "Nope, from now on, if we're going to be a leader of nations, we have to show that we can play that role." And one way to do that is by having egalitarian immigration policy, which we did. So we leveled the playing field thinking, eh, won't be a big deal. Whoa! Whoa, boy, did that open the doors! And that was pretty important in terms of what happened. If this legislation was passed in 1945, it probably wouldn't have had a very big impact. 

Because the other conditions that are necessary to make it possible for migrants to move were not present. They were just too poor and so on and so forth. The demography wasn't right, and so on. But they had the stars aligned. They had all these conditions on the supply side be right. The demography, the economics, and had the US change policy so it leveled the playing field across all countries of potential immigrants. Wow, those were the conditions that triggered it all. Like the schooling revolution that I mentioned, the big revolution in primary schooling. Between 1960 and 1987, the number of school years achieved per person of adults rose only at 0.3% per annum in industrial nations like the US. And it increased ten times that in the poor countries. 

They still had much lower skills in schooling, of course, than we did, but they're catching up in terms of those schooling credentials which made it possible for many of them to do better in US labor markets. That's more of the same. Unlocking the poverty gap, okay. There was double digit extraordinarily fast growth in east Asia, led by Korea, Singapore, Japan, along the east Asian edge in the 1960s. Those kind of growth rates were not being achieved elsewhere, and everybody was oohing and aahing at them. The third world was salivating that they would like to do the same. They did, but it took them a little while to achieve that. But nonetheless, incomes were increasing in the third world. Not double digit, and not fast enough to catch up or to start catching up with the US, but they were increasing. And they were increasing by quite a bit, even in Africa in the early stages of African development, before it fell apart. 

As you can see up there, it increased by about 50% between 1950 and 1970. And those increases in income made it possible for households in Africa to invest in the move of their kids. And so it was for east Asia, Latin America, and as you can see, the Middle East. Whoa, oil prices, will do wonderful things for you. The demographic transition effects. The timing mattered a lot. The share of the working age, Asia leading the pack, east Asia in particular, rose dramatically after the 1960s. The share of the populations in Korea, in Japan, and all the way down east Asia, the share in those countries that were young adults increased a lot, therefore augmenting their out-migration. And then it stopped and petered out. Then other countries followed. 

So, I think the bottom line is, had the US Congress passed those amendments prior to 1965, it wouldn't have had a very big impact. The timing was perfect, they passed it in '65, implemented in '68, and then all those third world conditions are changing so that they could exploit the now-open doors, or more open doors in the US. So what caused the downturn that we are into now? I'm talking about the long-run forces, not the last two years. So, basically what happened is, all those forces that were strong on the upswing began to peter out and weaken. So the forces for out-migration weakened. Asia is becoming more and more mature, it's aging, and when you're 50, you're much less likely to move than if you're 20. And as Asia goes through that, as their population, that big share of the children become a big share of young adults, become a big share of mature adults, and then become a burden on society, like me, getting up in your 70s. And Latin America and now Africa is following the same trend. So those demographic conditions are petering out. 

More and more of the third world is joining the double-digit growth rate club, and as they catch up on the US and the EU, the incentive to move is going to diminish. And then it turns out the schooling revolution kind of lost its poop in the third world and that has tended to weaken the out-migration rate. Now, what about the future? That's what I'm supposed to be doing, I'm supposed to be focusing on 2050. That's impossible. 

(laughter)

 It's impossible because we know the conditions that I've just been belaboring you about, those conditions, who knows what the hell is going to happen to perturb them over the next three or four decades? But we do the best we can. So what I'm going to do is show you what the results are when you project using this kind of economic thinking and that empirical evidence of the past, project up to, as you can see, ten or 15 years from now. And then guess about the rest. 

And I see Margaret standing up, so she wants me to get moving through this. Is that right? So I am going through. And I do this absolutely superb projection, technically correct, brilliantly performed, voila, we come up with these guesstimates. And here they are. It says that US immigration up to the year 2020 to 2024 will undergo a modest fall. It won't rise. It will not, it's going to fall off. And when you push the envelope out to the middle of the century, it'll be a large fall in immigration. So there's this guru, he's a friend of mine, but he wrote a bad book. 

(laughter)

 And he is not here, so I can say that, and don't you tell him I said this. Lance Pritchett was at the World Bank and I was at Harvard, and he wrote this book saying, there's an elastic supply of labor, the pressure on the US is going to go on forever, and we should do all kinds of things to respond to that. Not true. It's simply not true. Indeed, the US is, over the next decades coming ahead, going to have to compete harder and harder with Australia and Canada and the EU for migrants from the third world. There are going to be, relative to their populations, fewer of them. And we may in fact begin to have to subsidize migrants to compete effectively with these other countries. Two speculations to ponder. Here's one. 

These projections tell us that the mix of migration in the US is going to move away from Hispanic, which dominates it now, to black, sub-Saharan Africa. Is America ready for this? Has America thought about this? Doesn't have a great track record in this dimension. Maybe we can do better the second time around, but we should be ready and think about that. Furthermore, suppose the past is just a lousy predictor of the future. Like, suppose Africa, the basket case of the third world, suppose it gets its act together and starts behaving like China. Finally gets things together. No more blood on the sand, no more revolutions and political instability, they get their act together and start undergoing double-digit growth rates. If that's true, then these projections understate, I think, what's going to happen in terms of the change in the mix of our migrants, because more and more Africans are going to have the cash to invest in their kids' moves as the poverty traps are unlocked. 

So there will be more Africans in your future big time. Second speculation to ponder is the current economic crisis that we hope we are coming out of. But most economists are pretty pessimistic about the growth rate after we get the present problem solved, the growth rate the EU and the US will be going through over the next decade or two. It'll be slower than the past, it'll be suppressed by an aging population, by higher interest rates. What are we going to do with all that debt, after all? Consumer pessimism, blah, blah, blah. And lower growth rates means the US is not going to be as an attractive place for immigrants as has been true in the past. So one might want to speculate on what that might do. It's going to change the direction of migration. More and more migrants are going to go to India and China rather than come to the US. 

They're going to go where the action is. So, if what I'm saying will come true, and of course it will, what's the US going to look like and why do we care? Well, will the greater absence or the less abundance of immigrants tend to improve the conditions for less-skilled US workers, with whom many of them compete? A big debate about that, but that's something we should ponder as we look to the future. What about its impact on the social security crisis? Right now, the US is helped by immigration, which keeps the younger group increasing so people like me can go to the fat farm. But if that dries up, it may increase the social security crisis. What about the pressure of immigrants on health systems, emergency rooms, unemployment systems, and all the rest? What'll it do with a city's core? Will it improve all those dimensions as their numbers decline? 

Well, it's a question that Wisconsin and the US should ponder if these predictions I'm making come to pass. But here's two things for sure. Number one, fewer immigrants is going to diminish our hostility towards them. That's maybe plausible, and history supports the plausibility. You see it ever since the Irish first arrived in the late 1840s. They met incredible hostility and large numbers has done it every time since. So it's not surprising that there's been increased hostility to immigrants over the past decade or two as we've reached this crescendo in their numbers. Second thing that's for sure is that Congress, I predict, will develop before I die less restrictive restrictions on immigration. They're going to raise the quota, maybe even offer subsidies to more skills, which would be quite a different dimension of conversation out there. Why am I so sure? 

Because they've done it every single time in the past over the past 200 years. They've behaved the same way, so why should they behave any differently now? There it is. Thank you. 

(applause)