The problem with Krugman is that he's extremely partisan. He's basically starting with a premise of defending Biden, and then working backwards to see all plausible arguments that might lead there. No amount of 'predictions' that prove him wrong in hindight seems to reduce his fan following in the New York Times
What makes me curious is why nearly no one makes any distinction about whether the immigrants are legal or illegal. I'd say that's a more essential point than their wage rate. And, are the illegals legally employed? How is that possible? Are they having the usual deductions taken from their paycheck? Do they have social security numbers?
The easiest, quickest way to get a 20% raise is to work under the table.
Totally off topic, but I wanted to bring this to your attention. A researcher argues that China GDP is grossly over reported, using light as a measure of economic activity.
I gave up on Krugman in 2016 after seeing his approach to Brexit. Before the referendum he was writing the usual articles arguing it would be an economic calamity. The arguments made no sense so I ignored him. Immediately after the vote he published an astonishing column in which he said he feared economists would be discredited, because they were making Brexit-related predictions that sounded like they were based on solid macro-economic theory but actually weren't. He said he feared economists were engaged in motivated reasoning.
A good and true point, which would have been much more powerful if he'd stood up and said it before the vote. Doing so after his preferred side lost looked like the most rank damage control: abuse people's trust in your credentials, lie about what you expect, and then when your bluff is called step back and play the responsible honest adult in the room.
Sure enough, as the years passed all those economic predictions were steadily falsified. Actual economic impact of Brexit turned out to be zero, apparently. Beyond a former head of the BoE saying he also feared economics was discredited, there wasn't any soul searching or attempt to analyze the failures, of course.
It says nothing good about the NYT that they've kept this guy for so many years.
Even thought the population grew only by .5% overall, I think we need to look at labor force participation. I don't spend a lot of time on FRED, but the general gist seemed to be that a lot of people left the labor market during covid. Most were boomers FINALLY retiring, some were deaths, and some seemed to be people who got laid off during lockdown and then just gave up (which conservatives were obsessed with).
So my gut feeling is that there was a lot more movement in the job market then meets the eye. Even a year ago the participation rate was still down 1% from pre-pandemic. We've had over 3 million immigrants in the last year, not a lot to move overall population numbers but if they are overwhelmingly working that is enough to move the participation rate.
As to the wages thing, immigrants might not lower wages, but they are definitely relieving pressure for wages to rise which in basic econ would look like... reduced inflationary pressure. And the whole immigrants only take jobs from other immigrants thing misses who was doing those jobs before the immigrants took them over in the first place.
So while I hate to agree with Krug because he's become a cartoon economist, the basics seem legit, but the irony of his "immigration saved us from inflation" story is that it did so by breaking the back of worker wage increases, which sadly just tracks with the modern post TDS Democrats. SMDH.
I agree the case here is pretty shaky, but I don't think the delay between the drop in immigrant wages and the slowdown in inflation is necessarily the strongest point against -- a lag on cost-input reduction feeding through into consumer prices makes sense. Companies start out by just pocketing the cost saving. Eventually somebody decides to try to cut prices to gain market share, and a cycle of competition eats away the extra profit.
The # of folks listening to Krugman is about equal to the # who would let "Dr" Jill do their brain surgery (come to think of it those are probably the same folks!) .
The immigration chart is absurdly undercounted (ironically this works in Klugmans favor) - the latest illegal immigration bill wanted a limit of 5k illegals a day, that's 1.825 million per year as a major reduction on what is currently taking place at what's left of our Southern border.
Also left out of the equation is the demand side - illegals get "free" healthcare, schooling, meals, hotels etc etc. which drives up the price of everything for legal citizens.
Please ask the Mayors of NY, CHI, LA , El Paso, PHX & SD if they are reaping the great benefit of illegals invading and reducing the rate of Bidenflation. Guessing they would be happy to "share the wealth".
It seems that immigration should increase supply by providing additional labor, but this should be offset by the increased demand from the immigrant’s consumption. Could a higher savings rate (or sending money back to their country of origin) create the differential? Or probably too small.
a) Is/Was an increase in immigration a positive shock to GDP?
b) Does/Did an increase in immigration increase federa and or state deficits?
c) What effect does/did a) and b) have on inflation?
My guess would be that a) is yes but modest, b) is yes and also modest and c) is no. Modest shocks to GDP or modest increases in federal and state deficits are things that the Fed is supposed to take into account in setting the values of the policy instruments it uses to achieve its inflation target. Therefore, they would have no effect on inflation, up or down. They could properly be said to "cause" a change in Fed policy instrument settings.
Now if the influx of immigrants were large enough to constitute a sectoral shock that required significant changes in resource allocation (say toward the expanding sectors that were employing the new immigrants) then the Fed could decide that a little higher inflation (higher than it would have targeted w/o the influx) would be useful to facilitate the changes in relative prices said reallocation of resources would entail. But that would look like immigration raising, not bringing down inflation.
Crediting Biden for economic success and attributing it to immigration in a country that is in a death spiral of debt, crime, drugaddiction and social and moral corruption is beyond hilarious....
Very Cognizant of Noah. Although it’s really not clear who’s classified as “managers” these days, especially in H1B-rich industries such as IT, tech and finance.
Consider the impact of remote work in the global context. You are frequently importing highly skilled professional tasks at reduced costs. This doesn’t show up in the immigration data
The problem with Krugman is that he's extremely partisan. He's basically starting with a premise of defending Biden, and then working backwards to see all plausible arguments that might lead there. No amount of 'predictions' that prove him wrong in hindight seems to reduce his fan following in the New York Times
What makes me curious is why nearly no one makes any distinction about whether the immigrants are legal or illegal. I'd say that's a more essential point than their wage rate. And, are the illegals legally employed? How is that possible? Are they having the usual deductions taken from their paycheck? Do they have social security numbers?
The easiest, quickest way to get a 20% raise is to work under the table.
It would be interesting to do this analysis in Canada, where immigration growth has been considerable relative to country size.
So, Krugman is wrong…again. This is news, how?
Totally off topic, but I wanted to bring this to your attention. A researcher argues that China GDP is grossly over reported, using light as a measure of economic activity.
https://www.economist.com/graphic-detail/2022/09/29/a-study-of-lights-at-night-suggests-dictators-lie-about-economic-growth?
I gave up on Krugman in 2016 after seeing his approach to Brexit. Before the referendum he was writing the usual articles arguing it would be an economic calamity. The arguments made no sense so I ignored him. Immediately after the vote he published an astonishing column in which he said he feared economists would be discredited, because they were making Brexit-related predictions that sounded like they were based on solid macro-economic theory but actually weren't. He said he feared economists were engaged in motivated reasoning.
A good and true point, which would have been much more powerful if he'd stood up and said it before the vote. Doing so after his preferred side lost looked like the most rank damage control: abuse people's trust in your credentials, lie about what you expect, and then when your bluff is called step back and play the responsible honest adult in the room.
Sure enough, as the years passed all those economic predictions were steadily falsified. Actual economic impact of Brexit turned out to be zero, apparently. Beyond a former head of the BoE saying he also feared economics was discredited, there wasn't any soul searching or attempt to analyze the failures, of course.
It says nothing good about the NYT that they've kept this guy for so many years.
Even thought the population grew only by .5% overall, I think we need to look at labor force participation. I don't spend a lot of time on FRED, but the general gist seemed to be that a lot of people left the labor market during covid. Most were boomers FINALLY retiring, some were deaths, and some seemed to be people who got laid off during lockdown and then just gave up (which conservatives were obsessed with).
So my gut feeling is that there was a lot more movement in the job market then meets the eye. Even a year ago the participation rate was still down 1% from pre-pandemic. We've had over 3 million immigrants in the last year, not a lot to move overall population numbers but if they are overwhelmingly working that is enough to move the participation rate.
As to the wages thing, immigrants might not lower wages, but they are definitely relieving pressure for wages to rise which in basic econ would look like... reduced inflationary pressure. And the whole immigrants only take jobs from other immigrants thing misses who was doing those jobs before the immigrants took them over in the first place.
So while I hate to agree with Krug because he's become a cartoon economist, the basics seem legit, but the irony of his "immigration saved us from inflation" story is that it did so by breaking the back of worker wage increases, which sadly just tracks with the modern post TDS Democrats. SMDH.
I agree the case here is pretty shaky, but I don't think the delay between the drop in immigrant wages and the slowdown in inflation is necessarily the strongest point against -- a lag on cost-input reduction feeding through into consumer prices makes sense. Companies start out by just pocketing the cost saving. Eventually somebody decides to try to cut prices to gain market share, and a cycle of competition eats away the extra profit.
The # of folks listening to Krugman is about equal to the # who would let "Dr" Jill do their brain surgery (come to think of it those are probably the same folks!) .
The immigration chart is absurdly undercounted (ironically this works in Klugmans favor) - the latest illegal immigration bill wanted a limit of 5k illegals a day, that's 1.825 million per year as a major reduction on what is currently taking place at what's left of our Southern border.
Also left out of the equation is the demand side - illegals get "free" healthcare, schooling, meals, hotels etc etc. which drives up the price of everything for legal citizens.
Please ask the Mayors of NY, CHI, LA , El Paso, PHX & SD if they are reaping the great benefit of illegals invading and reducing the rate of Bidenflation. Guessing they would be happy to "share the wealth".
It seems that immigration should increase supply by providing additional labor, but this should be offset by the increased demand from the immigrant’s consumption. Could a higher savings rate (or sending money back to their country of origin) create the differential? Or probably too small.
This confounds different questions.
a) Is/Was an increase in immigration a positive shock to GDP?
b) Does/Did an increase in immigration increase federa and or state deficits?
c) What effect does/did a) and b) have on inflation?
My guess would be that a) is yes but modest, b) is yes and also modest and c) is no. Modest shocks to GDP or modest increases in federal and state deficits are things that the Fed is supposed to take into account in setting the values of the policy instruments it uses to achieve its inflation target. Therefore, they would have no effect on inflation, up or down. They could properly be said to "cause" a change in Fed policy instrument settings.
Now if the influx of immigrants were large enough to constitute a sectoral shock that required significant changes in resource allocation (say toward the expanding sectors that were employing the new immigrants) then the Fed could decide that a little higher inflation (higher than it would have targeted w/o the influx) would be useful to facilitate the changes in relative prices said reallocation of resources would entail. But that would look like immigration raising, not bringing down inflation.
See
Short answer: No.
Crediting Biden for economic success and attributing it to immigration in a country that is in a death spiral of debt, crime, drugaddiction and social and moral corruption is beyond hilarious....
Once again, yet another great article.
Very Cognizant of Noah. Although it’s really not clear who’s classified as “managers” these days, especially in H1B-rich industries such as IT, tech and finance.
Consider the impact of remote work in the global context. You are frequently importing highly skilled professional tasks at reduced costs. This doesn’t show up in the immigration data