Julie Hotchkiss: Welcome to another Federal Reserve Bank of Atlanta's Economy Matters podcast. I'm Julie Hotchkiss, research economist and senior policy adviser in the research department here at the Atlanta Fed. Immigration is an issue that has been much in the news lately. It's often said that we are a nation of immigrants, but the U.S. has a long history of alternately welcoming and restricting immigration. And to understand current U.S. policy on, well, pretty much anything, including immigration, it's important to have a well-informed historical perspective.

To help us give some perspective on issues related to immigration, I'm talking today with Dr. Ran Abramitzky, an associate professor of economics from Stanford University. Ran is an economic historian and has published his work on immigration and many other topics in top economics journals. He's also recently written a book, The Mystery of the Kibbutz: Egalitarian Principles in a Capitalist WorldOff-site link. In it, he tells the story of his own family's history with kibbutzim and explores how this experiment in volunteer socialism has survived the inherent conflict between equality and incentives. Ran, thank you so much for taking the time to talk to us today about your research and what we can learn from history.

Ran Abramitzky: Thank you for having me, Julie.

Photo: David Fine

Hotchkiss: I'm going to dive right into the hard questions. In spite of the acrimonious political environment surrounding immigration, I've read recently that the share of Americans thinking we should have lower levels of immigration has fallen from 65 percent in the mid-1990s to about 35 percent today—which is apparently a record low. Also, the [U.S.] Chamber of Commerce recently concluded that immigrants significantly benefit the U.S. economy by creating new jobs and complementing the skills of U.S. native workers. OK, so my question to you is whether this apparent conflict between changing popular sentiment and current political stalemate on immigration issues is new, or do we see other instances of this political disconnect throughout history?

Abramitzky: Well, it may be true that few Americans today call for lower levels of immigration than 20 years ago, but it's also true that immigration has become more divisive over the last 20 years. Now, is this conflict new? Not really—the tension between viewing the U.S. as a nation of immigrants and fearing that immigrants are bad for the economy has been the key issue during the age of mass migration 100 years ago, just as it has been the key issue today. When you read what politicians at the time said, it sounds a lot like today: similar language, similar concerns, but only targeted at different immigrant groups. In the past it was toward Irish and Italian immigrants. Today it is towards Mexican and Asian immigrants—but otherwise, very similar issues.

Hotchkiss: OK, are there any lessons from history that we could apply to today's politicized immigration debate, or—I guess, conversely—are there lessons from the past that just simply no longer apply today?

Abramitzky: Right. I think there's a lot to learn from history. The debate was remarkably similar then and now—the same kind of questions: what kind of immigrants did the U.S. attract, how did immigrants perform in the U.S. labor markets, did immigrants catch up with the native-born, did they assimilate into society, how did they contribute to the economy and society, and so on. And so my long-term collaborator, Leah Boustan, and I—often with Katherine Eriksson—devoted much of the last decade to study these questions. The idea is to bring data and long-term perspective on the immigration debate, which is often based on fear and anecdotes rather than evidence. And so one reason to study the past age of mass migration as opposed to just today is that U.S. borders at the time were open to European migrants—they were definitely not open to Asian migrants, but they were open to European migrants—and this allows a window into how immigration might look in a world without immigration restrictions.

Another advantage of looking at the past is that history provides us with a long-term perspective. Politicians, as you know, naturally take a short-term perspective on immigrants, which leads them to care more about how immigrants do when they first arrive. But one lesson from our work is that taking a short-term perspective gives a misleading sense of immigrants' lack of success in the economy. In the past, it often took immigrants more than one generation to close the economic gap with the native-born. Today, evidence suggests that while first-generation immigrants, on average, receive more healthcare and more income support, second-generation immigrants more than pay off their parents' debt to these programs. Another lesson from our work is that while immigrants definitely care about maintaining their original identity, they also integrate rather quickly into the broader society. So I think it's fair to say that, overall, history teaches us that it will be a mistake to determine our nation's immigration policy based on the belief that immigrants will not integrate. It was not true in the past, and it's not true today.

Hotchkiss: Considering the political climate today and the current level of immigration in the U.S., I can't help but wonder whether there's some magic number of immigrants that tends to trigger a higher level of concern among some immigration critics. For example, in the 1900s the immigration share of the U.S. population exceeded 14 percent, which resulted in strict immigration quotas. We are once again about at that 14 percent share and hearing loud cries for limits to immigration. Is there any evidence globally for this notion of a magic immigration number?

Abramitzky: Yes, Leah and I were wondering the same thing. When immigration reached 14 percent in the 1900s, politicians like Henry Cabot Lodge advocated to close the borders. When immigration reached again 14 percent today, politicians advocate to build a wall and close the borders again. When immigrants reached about 14 percent in the UK, politicians like Nigel Farage advocated to close the borders and to Brexit. And so, yes—maybe there is something magical about this 14 percent number. Maybe more likely, as immigrants become a significant share of the population, native-borns start to notice them more and blame them for some of the country's problems.

Hotchkiss: Right, those similarities are striking. Well, let's turn now from policy to the experience of immigrants themselves. You mentioned assimilation earlier, but let's start with—let me ask you who actually chooses to immigrate to the U.S., and has it changed much over time?

Abramitzky: Right. So in terms of country of origin, there has been a big change. In the 1860s, 90 percent of immigrants were from Western Europe and Northern Europe, such as Britain and Germany, and other Scandinavian countries. In the 1890s, immigrants from Southern and Eastern Europe started to come in larger numbers, like from places like Italy and Russia. By the time the border closed in 1920, about 40 percent of immigrants in the U.S. were from eastern and southern Europe.

Today, of course, Europe is no longer a main sending region, and 75 percent of immigrants coming to the U.S. are from Latin America—mainly Mexico—and Asia. In terms of skill levels, there has also been a change. In the past, despite the nostalgic view, immigrants from poorer backgrounds were more likely to come—of course, Emma Lazarus' song on the Statue of Liberty reads, "Give me your tired, poor, huddled masses," so she knew that a long time ago. Today, immigrants often come from developing countries, but there is what economists call "positive selection" from almost every sending country, meaning that the more educated and skilled people are actually more likely to move to the United States today.

Hotchkiss: We also often hear about immigrants being motivated by the "American Dream," where someone might come to the U.S. penniless and then catch up with the native-born residents. How accurate is that experience for immigrants?

Abramitzky: Yes, so this conventional wisdom of the "American Dream" we think is overstated. Of course, we all know stories of immigrants who came with very little and made a fortune, but this is not the experience of the typical, average immigrant. In fact, both parts of the conventional wisdom are inaccurate: that immigrants start out worse than the native-born in the labor market is inaccurate. We found that on average, immigrants didn't do worse than the native-born upon first arrival. Of course, this varied a lot country by country, so immigrants from some sending countries like England actually held higher-paying occupations than the native-born upon first arrival, while immigrants from other sending countries like Norway held lower-paid occupations. So in this sense, the idea that immigrants start out worse is inaccurate.

But at the same time, that there was a fast catching up is also to a large degree inaccurate. We find more evidence for persistence than for catching up, so immigrants from countries that started out with lower-paid occupations than the native-born still held lower-paid occupations 30 years later. Catching up basically sometimes takes more than one generation, and this is one reason why we think it's important to take a longer-term view to evaluate immigrants' economic success. We all know that Norwegian immigrants today are doing quite well, and it wasn't always the case. Sometimes it took them even more than one generation to get there.

Hotchkiss: You mentioned earlier that we have sort of a different wave of immigrants today than we did in the past. How did the assimilation of those European immigrants in the past compare with assimilation of a lot of Mexican immigrants today, for example?

Abramitzky: Yes, it's a great question. So first, maybe it's important to notice that both in the past and today, the concerns about immigrants' lack of ability to assimilate often have to do more with culture than with economics. We find that both in the past and today, immigrants make substantial efforts to integrate into the broader society. So being concrete about it, using historical censuses, we found that immigrants learn to speak English, they apply for U.S. citizenship, and they married outside of the group. We even found that immigrants gave their children more American-sounding names when they spent more years in the U.S., eventually closing almost half of the gap in naming practices with the native-born. And similarly, using modern data from California birth certificate records today, we find that Mexican immigrants give their children more American-sounding names when they spend more years in the U.S., similarly closing a third to half of the gap with the native-born.

And by the way, just to be clear about this: it is important, for me, to know that our research on cultural assimilation doesn't at all suggest that immigrants should assimilate into the dominant culture—in fact, a diverse society is a society that embraces different cultures and identities—but our research simply implies that those who claim that immigrants do not assimilate are simply wrong. There is substantial and measurable assimilation of immigrants, both in the past and today.

Hotchkiss: So what I'm hearing you say is that the more things change, the more they stay the same—pretty much. Well, what about the actual impact of immigration on the U.S. economy? What would you say is the current conventional wisdom, or if we might say "consensus among economists," about the impact of current immigration patterns on the economy?

Abramitzky: That's a tough one. There is definitely no one set of...

Hotchkiss: Lots of opinions. [laughter]

Abramitzky: Exactly. There is definitely no consensus on this question of how immigrants affect the native-born. It is a complicated question to answer, mainly because it is a causal question, if you want—the data doesn't tell us directly what would have been the wages and employment of the native-born had immigrants not arrived here to begin with. And so I would say one thing is for sure: it is a more complicated issue than it seems at first sight. The intuition that immigrants increase the supply of labor and reduce wages is a powerful intuition, but it's also incomplete. Immigrants are customers—they're not just workers—so they increase demand as well. And immigrants and the native-born are often not perfect substitutes, and there is also more than just one type of label, as we typically assume in our models—so it is a more complicated topic.

And still, I think that most economists will tell you that there is no strong evidence for large impacts of immigrants on the native-born. Most studies find small impacts if at all—and that is not to say that nobody is impacted, to be sure. Immigration does create winners and losers, and those who compete more directly with immigrants—including previous immigrants, by the way, they are sometimes negatively affected. But the impacts on the average, if you want, native-born worker are much less conclusive. But definitely this is still an open and active area of research.

Hotchkiss: Well, has this pretty much always been the case, or are some of the impacts different over time?

Abramitzky: On that very interesting question, we need more research. Because you can think on the one hand, we might expect that today's immigrants benefit the native-born more. In the past, immigrants and the native-born competed more directly for the same jobs. Today, as researchers like Giovanni Peri show us, immigrants tend to come in two types: either they have very high-skill jobs, like they solve differential equations, and they start up firms—in which case they actually create jobs for the native-born—or, on the other side, they work in low-skill occupations that few native-born want to do. The native-born, on the other hand, mostly work in middle-skill occupations, so immigrants and the native-born are not perfect substitutes for each other, like they maybe used to be more in the past.

But on the other hand, it's also true that in the past the U.S. was transitioning from agricultural to industry, and the U.S. population was smaller, so perhaps it was easier for the economy, if you want, to absorb immigrants. And there is a growing body of literature that suggests that immigrants in the past benefited the economy and the native-born quite a bit.

Hotchkiss: OK, I know you've done a lot of research on immigration and assimilation, but what is the burning question or questions about current or historical patterns of immigration that you think still need to be studied? I don't mean for you to give away your research agenda! [laughter]

Abramitzky: Well, there are so many questions to study, and maybe I'll just give you one example. Leah and I have long felt that the analyses of quantitative data, such as population censuses, don't actually capture the full immigration experience. So censuses don't tell us why immigrants wanted to come here to begin with, and how immigrants felt when they first arrived, and what was their subjective experience, and so on, and so they also don't tell us how immigrants were perceived by the native-born and how this perception of immigrants changed over time.

And so to get at the immigrants' subjective experience, if you want, we—meaning Leah and I, together with Dylan Connor and Peter Catron—are now analyzing thousands of in-depth interviews with immigrants done on Ellis Island. To get a sense of the perception of immigrants, we—together with economists Matt Gentzkow and Jesse Shapiro, and Stanford linguists Dan Jurafsky and Rob Voigt—analyzed the attitudes towards immigrants in the New York Times and other newspapers and how it changed over the last 150 years. So this is maybe the research that I'm most excited about right now.

Hotchkiss: Well, your data sources are fascinating. I guess as an economic historian, you have to do a whole lot of digging and searching for your own data. All right, well I'm going to change gears a little bit here, and I'd like to wrap up our conversation by giving you an opportunity to tell us about your new book, which came out just in February. The book is titled The Mystery of the Kibbutz—which is not to be confused with the book Murder on a Kibbutz. I don't know if you've read that.

Abramitzky: Great book.

Hotchkiss: It comes up as the second result from a search on Amazon, by the way. But actually, for our listeners' benefit, the full title of your book is: The Mystery of the Kibbutz: Egalitarian Principles in a Capitalist World. And first off, Ran, can you quickly explain what a kibbutz is, for those who may not know, and what got you interested in researching them?

Abramitzky: Yes, so kibbutzim—which is the plural of kibbutz—are communities in Israel that were based for many years on full equality in the distribution of incomes among members and on collective ownership of all property. They are important social experiments in income inequality and income equality, and as such they challenge traditional economic theory.

Now, I first got interested in them when I was a child—you know, I did not grow up myself in a kibbutz, but my mother did, and all her part of the family did. So kibbutzim have always been an important part of my life. My grandparents actually founded one kibbutz in the south of Israel, and my grandmother lived there for 50 years. My mother grew up there and left, and her sister stayed. Then my brother is now married to a kibbutz member and lives in a kibbutz. And so as children, my brother and I always loved kibbutzim. It was a great place to, you know...we wandered around the green paths of the kibbutz, and our parents didn't have to worry about us because it's a safe place, and it's a great place to be.

And when I grew up a little bit more, as a teenager, I admired kibbutzim even more because the idea of sharing everything equally sounded like a just and right way to go. But as the cliché goes, if you're under 20 and you're not a socialist, you have no heart, but if you're still a socialist over 30, you have no brain. A little bit of the same thing happened to me, and so I remember one day I was doing...actually, as I was studying economics in the Hebrew University, we had lunch with my uncles and aunt in the kibbutz, and my uncle described the groundbreaking innovation of his factory, which is like a really fabulous factory. And I decided to provoke him, and I told him, "You know, according to economy theory the factory doesn't have...it shouldn't be as good, and kibbutzim should not survive and should not exist anyway because, you know—why would anybody work hard if all they get is an equal share of the total income?"

And so I explained to him the free rider problem that we studied, and then I told him, "You know, besides that: why would anybody who is very talented and can earn more outside the kibbutz, why wouldn't they leave?" Israel is the size of New Jersey. Everybody can leave. Why wouldn't there be a brain drain from kibbutzim? And also, why wouldn't all the lazy workers and people who don't have much prospects, why wouldn't they enter a kibbutz? What a great way to be subsidized by other people that are more productive than you—so like the adverse selection problem. And then I continued my annoying speech and told him that also, I would worry a little bit about his children, because what are the incentives to study hard in school when the returns, financial returns, to schooling are so low? In a world where a computer science engineer earns the same thing as a high school dropout, what are the incentives for studying hard?

And of course he, you know, he got a little bit upset and started a nice fight. He said, "Yes, you economists are so cynical and you think people are only selfish and think about themselves, but everybody who is familiar with the kibbutz knows that kibbutz founders were anything but selfish people, and they cared more about the collective" and so on. And he got me thinking, and to begin with, I didn't actually truly believe everything I said. And as I started my PhD at Northwestern, I decided to study this in more detail and collected data on all 268 kibbutzim and members of kibbutzim over the last 80 years, really, with the idea of asking how did kibbutzim thrive and survive despite all this incentive problem. When can such a society fail and succeed, and can we create a society in which people have equal incomes, and what are the costs of this and so on. It's a long answer to your question... [laughs]

Hotchkiss: No, no, that's really good. It gives people a really good idea of all of the multiple details that you delve into in the book. But you also detail a declining period for kibbutzim through the ‘80s—I guess the ‘70s and ‘80s—and you find that the shift of most of the kibbutzim away from equal sharing to be related to a higher work ethic and higher productivity, but at a cost of happiness. So it got me to wondering whether there's a way to strike a balance between growth and happiness, and what role equality might play in achieving those.

Abramitzky: Right, so starting in the late ‘90s, many kibbutzim shifted for the first time in their history away from equal sharing. Kibbutzim have introduced various degrees of reforms, ranging from small deviations from equal sharing to substantial reforms where members' budgets are mostly based on their earnings, and this shift away from equal sharing increases the financial returns to schooling, as well as the financial returns of working hard, and so on. And so, together with Victor Lavy, I document that high school students indeed start to take school more seriously once their kibbutz shifts away from equal sharing—especially if their parents were relatively less educated. And as you say, there is also some suggestive evidence that the shift away from equal sharing improved work ethics in kibbutzim, but might have come at the cost of decreased sense of community.

And so I would say the kibbutz experience suggests that income equality does not come for free: what you gain in a safety net in insurance, you may lose in individual incentives. But if you raise incentives, inequality follows. Still, I would say that even under the equal-sharing period, incentive problems were not nearly as severe as naive economic logic would suggest, even in the absence of monetary returns. For example, kibbutz members worked long hours and acquired education and skills, and many talented members did stay in their kibbutz, allowing many kibbutzim to thrive. And so even kibbutzim that shifted away from equal sharing continue to provide a safety net to weak members, and to the older generation, and maintain mutual assistance as a building block of the kibbutz, even if they are not based on the full income sharing that they once were.

Hotchkiss: Right. So even in spite of those changes, you identify sort of a common ideology as providing an important glue for sustaining the egalitarian kibbutz model. Does this imply that a society that's religiously, ethnically, and morally diverse—say, as some might say the U.S. is—is incompatible with a more equal distribution of wealth?

Abramitzky: Well, yes.

Hotchkiss: [laughs] OK, that is a short answer.

Abramitzky: The founders of kibbutzim were often rather homogeneous, as you would say. They were young Jewish people who shared similar ideological and vocational training, and they had similar prospects. And this homogeneity made the creation of the kibbutz easier. Now, over time idealism declined and kibbutzim became more diverse, making income equality more difficult to sustain, so I would say more generally, it is easier to sustain equality in a society that is religiously and ethnically less diverse and where the people are relatively homogeneous and have similar preferences for redistribution, and similar abilities and so on. So it is easier to sustain income equality—and a more generous welfare state—in Sweden and Norway, which are relatively homogeneous, than in the U.S., which is more diverse.

Hotchkiss: And you've done some study in those countries as well, on those data. Through your research on the structure and evolution of kibbutzim, you come to some more general conclusions about inequality. Tell us what lessons we might learn about inequality from kibbutzim.

Abramitzky: Yes, so while the book is on the kibbutz, it addresses some broader questions like can we create a more equal society, and under what conditions such society will succeed, when it will fail, and so on. Now, in a world of rising income inequality, where the top 1 percent in the U.S., for example, today hold about 40 percent of the country's wealth, it's only natural that many people wonder whether and how we can create more equal and just societies. And so the way I thought about it is, think about if people were given a choice to live in a society where all incomes and resources were shared equally, who would choose that option, and would the society thrive—would they work hard in their society? What rules and norms would they choose to govern their society?

Now, these questions are hard to address typically, because people are not typically given such a choice of where to live. So you could study former communist countries—but they, as we know, can't help us answer these questions because the citizens couldn't exit at will and couldn't vote against socialism. And so maybe liberal socialist countries like Sweden and Denmark and Norway...of course, they offer more individual choice, but their egalitarian and socialist principles are more difficult to disentangle from other factors. And so the way I thought about it, kibbutzim offered a laboratory with which to address these questions, because it allowed Jewish immigrants—especially Ashkenazi immigrants, which is a totally different story—it allowed them the choice of whether to live in a society that is more equal.

Hotchkiss: OK, all right. Well, Ran, thank you so much for joining us today. I only have a couple of chapters left, and I'm looking forward to finishing your book.

Abramitzky: Thank you very much.

Hotchkiss: And this brings us to the end of another Economy Matters podcast episode. Please visit the Atlanta Fed's web page, frbatlanta.org, for economic and banking information, and for materials on related topics. Thank you for listening.