11/19/15 Driving Down Wages

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In the spring of 1980, the Cuban economy was faltering.  People were suffering.  Dictator Fidel Castro said he would allow some to leave the socialist state.

President Jimmy Carter’s infamous “open arms” speech opened the floodgates to what become known as the Mariel Boatlift.  Castro allowed some Cubans to flee.  He also emptied the prisons and insane asylums.  More than 125,000 reached U.S. shores.

One question raised: What was the impact on local wages when the Marielitos reached south Florida?  Princeton professor David Card rocked economic theory of supply and demand.  His 1990 paper claimed the influx of low-skilled immigrants had “virtually no effect” on wages.

However, recent peer review of his work points out Card made several faulty assumptions.

Harvard economics professor George Borjas examined the data and Card’s analysis.  Card lumped together Marielitos with different education levels.  Borjas broke-out the education categories.  This is critical since more than 25% of the existing Miami work force were high school drop-outs.

“The Marielitos were disproportionately low-skill[ed]; around 60 percent were high school dropouts and only 10 percent were college graduates.”  Borjas found wages for U.S. high school drop-outs fell by as much as 30 percent.  The least educated suffered substantial harm.  The demographic most affected were blacks who comprised nearly 43% of Miami’s high school drop-outs.

[The Borjas paper wasn’t first that questioned Card’s conclusions.  Professors Joshua Angrist (MIT) and Alan Krueger (Princeton) analyzed a subsequent boatlift Castro threatened to send in 1994.  While the Clinton Administration initially turned back the early flotilla, about 50,000 Cubans eventually arrived in south Florida.  Angrist and Krueger found that influx of low-skilled Cuban immigrants adversely impacted area wages.]

This is important information to consider as we again open our nation to thousands of low-skilled immigrants.

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