Fleeing Opportunity
How immigration distorts internal mobility, and why it matters.
Written by Arctotherium.
During the 19th and 20th centuries, internal migration to productive locations was one of the greatest sources of upward mobility and economic progress.1 People moved from countryside to city, from densely populated small farms to the mechanizable expanses of the American West, and from declining rural towns to the bustling metropolises of the future. This sort of internal migration is normal: people want to be richer, so they move to where their skills are most valuable. But at some point in the past 30 or so years, the pattern broke down.
Most countries throughout human history have followed the pattern seen in Italy, Japan, and Spain on the graph above. People move from low-productivity to high-productivity places in order to improve their standard of living. This is exactly what you’d expect from both common sense and basic economic theory. But Canada, Germany, the United States, and above all France and Britain, show the opposite pattern. Instead of moving towards places where their skills are at a premium, citizens of these countries flee them in droves.
At first glance, this is baffling, like watching water flow uphill. But a look at the list of anomalous countries suggests an explanation: Third World immigration.
Evidence that immigration drives this
So we have a hypothesis. Is it actually true? Evidence from the United States suggests yes:
Above, I have established three key empirical results: (i) in accounting terms, foreign inflows account for a vast share (40%) of local population adjustment; (ii) this share is largely attributable to spatial correlation between migrant enclaves and local employment conditions; and (iii) despite this, foreign inflows do not significantly accelerate local population adjustment, as they crowd out the contribution of internal mobility (Amior, 2023).
This applies to both skilled and unskilled labor, and the effect is large enough to explain the oft-remarked upon decline in internal mobility within the United States:
This reduction in internal migration is also partly responsible for the surprisingly small drop in wages associated with mass immigration; when immigrants arrive, not only do some of their local competitors leave (lowering labor supply in an easily-measurable way) but fewer potential competitors arrive (lowering future labor supply in a way that is easily missed). For instance, in the famous case-study of the Mariel Boatlift, “the evidence suggests that around 50% of the wage recovery over the 1980s in Miami, relative to a number of potential control locations, is explained by internal migration, with the rest explained by other factors, such as technology adoption” (Monras, 2020).
The same happened in Germany, where “low-wage workers [were] more likely to leave or not enter the workforce in response to [Czech] immigration” (Dustmann, Schönberg, and Stuhler, 2016).
If the immigration is stopped, does internal mobility resume? Yes. In 1924, when the United States cut off almost all immigration from outside Northwestern Europe and the Americas, with a corresponding collapse in the number of immigrants, “the loss of immigrant labor was replaced on a nearly one-for-one basis by new inflows of internal migrants, as well as immigration from unrestricted countries” in urban areas (Abramitzky et al, 2021).2
In short, actually-existing immigration drives locals away, and in the place where this effect is measured best (the United States), it is large enough to fully explain otherwise-puzzling changes in internal migration since 1970. Since immigration to the other countries on the list tends to be less selective, and space is more at a premium (even in Canada), we can reasonably assume the same applies to them.
If people are moving in the opposite direction of the economic “pull” factors, there must be some “push” factors driving them. They’re trying to escape. But what exactly are they running away from?
Mechanism #1: Overpopulation
The first mechanism by which immigrants drive locals out of productive areas is higher housing prices and other local overpopulation issues, such as congestion. This mechanism is approximately origin-agnostic; immigration from anywhere increases demand for housing and the number of vehicles on the road. In the United States, an immigration inflow equivalent to 1% of a city’s population increases rents and housing prices by about 1% (Saiz, 2007). Counterfactually, in the absence of immigration, housing prices in productive areas would still increase, but more of the people living there would be locals, and housing prices in the rest of the country would fall.
This can be alleviated to some extent by permitting zoning reform and better infrastructure, but there are fundamental spatial limitations to both housing and transport infrastructure in dense cities3 and doing these things would reduce overpopulation even more in the absence of immigration.
Mechanism #2: Behavioral Differences
However, influxes of Third World immigrants often lower housing prices, at least locally (Sá, 2015).4 This means many more locals leave productive areas than would be explained by housing prices or other population issues alone. Here, local emigration is driven by newcomers’ behavior. In the United States, this is often called white flight, but it is not limited to white people or America.
The exodus is often motivated by concerns about crime and physical safety, but it doesn’t have to be. Political differences, cultural differences, disagreements about appropriate use of public space (such as littering or noise levels), or simple dissatisfaction with minority status can all cause locals to leave in spite of the economic incentives. For instance, even West Coast Asians, who are wealthy and commit very little crime, drive white flight by greatly increasing5 the grind associated with education (Enjeti, 2017).
Unlike housing prices, this mechanism is highly sensitive to the race and national origin of immigrants. Ellis Islander immigration in the early 20th century did not produce anything like white flight. There was no absolute decline in native-born Americans even in the demographically transformed East Coast metropolises, unlike what has happened in modern day California, New York City or London. Generally speaking, the more different an immigrant group is from the locals, the more native outmigration there will be.
Who Loses?
To the extent that locals are more skilled than immigrants, which is true in almost every wealthy country, the national economy as a whole is harmed. Skilled locals are driven out of the places where their skills are most valuable by overcrowding and the poor behavior of unskilled (and often economically inactive) immigrants. As such, labor is misallocated and national productivity falls below the counterfactual.
Furthermore, locals miss out on upward mobility. In high-immigration countries, the age-old life story of “ambitious country kid moves to the big city to better himself” is practically gone. Instead, it is the immigrants themselves that benefit from the upward mobility powered by high-productivity cities.6
Distorting the Immigration Debate
Immigration driving internal migration away from productivity centers doesn’t just impact individuals or the economy at large. It also warps the larger immigration discussion by making immigration look much better than it really is.
First, many debates over the economic impacts of immigration compare the fiscal impact or income of immigrants with natives, which is how you get charts like this one:
But since immigrants cluster in high-productivity areas7, thereby driving natives away, immigrants’ incomes are artificially inflated. For instance, in Britain, ethnic minorities are overrepresented by a factor of three in London, which has 50% higher productivity than the rest of the country. Were it not for them driving white Britons out of the city, white British incomes would be higher, and ethnic minority incomes lower, than they actually are. As such, the fiscal impacts of immigration immigrants is significantly worse than it looks on paper.
Just as importantly, internal migration of natives “diffuses the impact of immigration from the affected local labor markets to the national economy” (Borjas and Edo, 2022). This applies to housing prices too: much-touted papers finding that immigration has little effect on local wages or housing prices are distorted by the fact that internal migration spreads these effects over the entire economy. If this effect is properly accounted for, the downwards pressure on wages and upward pressure on housing prices that you’d expect from supply-and-demand reappear (Monras, 2020).
Conclusions
Immigration has numerous effects on locals and it is impossible to accurately measure all of them. The obvious way to check if immigration is harmful or beneficial overall is to see whether locals move towards or away from the immigrants.
Revealed preference indicates that Westerners dislike actually-existing immigration so much that they are willing to take large pay cuts to escape it. In immigration-heavy countries, people move away from economic opportunity! This harms the national economy, distorts the immigration debate, and has effectively destroyed one of the biggest pathways for upward mobility over the last two centuries. Internal migration away from productive areas should be a huge screaming red flag to policymakers that the time has come for immigration restriction.
Arctotherium is an anonymous writer interested in demographics and the future of civilization. You can find more of his writings at his blog Not With A Bang or at his Twitter.
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This effect was so big that essentially all of the Soviet Union’s economic gains from 1917 to 1945 came from accelerating this shift from low-productivity countryside to high-productivity manufacturing; productivity within each sector barely budged.
In agriculture, the immigrants were instead replaced by capital, which helped make American agriculture by far the most modern and productive in the world during World War II.
With current technology. Flying cars and hundred-mile-high diamond arcologies would change things.
Those locals who leave don’t disappear, they move elsewhere, so national housing prices still increase.
And destructively. As education is mostly zero-sum signaling, Asians’ propensity to grind makes childhood worse for all Americans who aspire to middle-class status.
This would not be the case if it were the immigrants themselves that turned the cities they moved to into high-productivity areas. In theory, this isn’t impossible. German and Jewish immigrants in Eastern Europe and Huguenots in Germany both created new high-productivity centers. But in practice, all of the major high productivity centers attracting Third World immigration today were high productivity long before the current wave of immigrants showed up. New York, London, Paris, and Berlin have been economic centers for centuries, and even Silicon Valley, where high-productivity immigrants are incredibly thick on the ground, was already the world’s most important tech hub by 1970. As such, locals and immigrants are effectively competing for access to the same limited set of productivity centers created by locals long ago.
Partly because of path dependency—immigrants join previous enclaves, which happen to be concentrated in high-productivity areas—and partly because if you’re going to move to another country, you may as well go where your skills are most valuable.
Great article. The concentration of migrants in urban areas inflating productivity data isn't something that occurred to me before- I wonder if remote work would alter the calculus there?
Why would politicians encourage fertility in detriment to immigration when a strong family unit is the biggest obstacle to big government.