Is Immigration To Blame? Immigration and Income Inequality

Polarized America: The Dance of Ideology and Unequal Riches (2nd Edition, 2016) 1. We (Nolan McCarty, myself, and Howard Rosenthal) show that political polarization in Congress seems to move in lock-step (dance) with: 2. The Percent Foreign Born in the USA 3. And Income/Wealth 4. It appears to be two-way causality (dance)

Note that we are measuring polarization as the distance between the two major parties on the Liberal-Conservative (First) Dimension.

Income of the top earners moves with Congressional Polarization 1. If Polarization is lagged 10 years the correlations in the next two graphs are greater than 0.9. 2. Note the important role of financial services (Banking & Insurance). This sector plays a key role in the pattern of the income at the very top.

This is Figure 4.1 From our book Polarized America (2nd ed., 2016) 1. The data are from the November Current Population Survey (CPS) conducted by the U.S. Census. Sample sizes range from 60,000 to 90,000. 2. The Census asks whether or not you voted, your family income level, and whether or not you or your parents were born outside the US. 3. The higher the income the more likely it is that the respondent voted.

In Polarized America we (MPR) work with the income distributions of (1) voters, (2) non-voting citizens, and (3) non-citizens. For each of the three groups and for the entire sample, we estimate (1) mean income and (2) median income using the estimated mean and variance of a two-parameter log-normal distribution.  

The Log-Normal Distribution The Log-Normal Distribution. The Distribution in Blue is a good approximation for the distribution of income.

Consider the ratio of median income to mean income Consider the ratio of median income to mean income. As this ratio falls, there should be more pressure to redistribute income. As the median voter’s income falls relative to the mean, the voter’s share of the initial pie falls and the voter through the ballot box will seek to get a larger piece, even if the total pie shrinks.

Ratios of Centiles in the Income Distribution (From the CPS). 1. Looking at the ratios of centiles (chopping up the income distribution into 1/10s) is a good way to see how the distribution of income changes over time. 2. Unfortunately, the CPS only reports aggregations and this “top coding” problem lumps together a big chunk of the highest earning families.

Turnout has not declined Voters = 51.23 +0.042(Year -1972) + 14.38(Pres. Year) (44.71) (0.69) (13.67) Equation replicates McDonald and Popkin, Freeman 6/10/2018 HR

Income Ratios – noncitizen_5 = Noncitizen Median/Voter Median -- nonvoter_5 = Nonvoter Median/Voter Median 6/10/2018 HR

(MPR) The median income voter’s incentive to redistribute has not increased as overall economic inequality has risen. The increase in inequality has been partially offset by immigration that has changed the location of citizens in the income distribution. Those ineligible to vote are substantially poorer than the eligible. (MPR) Immigration cannot have been a driving force in the onset of the increase in income inequality and political polarization. In the early 1970s, non-citizens were quite a small share of the population of the United States, and their income profiles were close to those of citizens.

3. (Noah) – By 2011 net traffic of people back and forth across the Mexican border was zero. Fertility in Mexico has fallen sharply to about 2.0 so the “surplus” population that can be exported to the USA is slowly disappearing. (Fertility rates have also fallen sharply in Central America.) 4. (Noah) – Illegal Immigrants have only had a minor effect on the wages of unskilled workers.