Wednesday 24 May 2017

CPS and the Marial Boatlift

George Borjas and Michael Clemens have been arguing about the effects of the Marial Boatlift. What happened to the wages of prior Miami residents when 125,000 Cuban low-skilled refugees showed up over a short period? 

Early work by David Card showed no effects on wages. Borjas more recently claimed negative effects on the wages of high-school drop-outs.

Here's Clemens:
But it was in that act of slicing the data that the spurious result was generated. It created data samples that, exactly in 1980, suddenly included far more low-wage black males—accounting for the whole wage decline in those samples relative to other cities. Understanding how that happened requires understanding the raw data.

Both the Card and Borjas papers use data from the Current Population Survey or CPS, a representative sample survey of U.S. workers. This survey happens every month; it’s where we get the estimates for the U.S. unemployment rate. Two datasets taken from the CPS also report workers’ wages. These two datasets are called the ‘March Supplement’ and the ‘Outgoing Rotation Group’ (ORG). These aren’t surveys of all workers, but of a small number of workers chosen randomly from within subsets of the population, so that their answers to questions about wages will be representative of the wages of others like them.

Right in 1980, the Census Bureau—which ran the CPS surveys—improved its survey methods to cover more low-skill black men. The 1970 census and again the 1980 census had greatly undercounted low-skill black men, both by failing to identify their residences and by failing to sufficiently probe survey respondents about marginal or itinerant household members. There was massive legislative and judicial pressure to count blacks better, particularly in Miami. Starting in the 1981 CPS, survey coverage of lower-skill black men shifted sharply to include relatively more black men with less-than-high-school, and relatively fewer black men who had completed high school.
Upshot: Miami started including in its sample a pile of black men with less-than-high-school education who should have been in the prior surveys, but weren't, at the same time as the Marial boatlift. Where other work pooled those with high school education and those with less than high school, this effect didn't matter so much because the change in population composition was small. But when you drill it down to the cohort of high school dropouts, the composition effect mattered and drove the Borjas results.
What I’m discussing here is just one of many ways that this change in the composition of the survey sample can explain discrepancies between earlier studies of the Boatlift. One of these is that a study by Giovanni Peri and Vasil Yasenov of U.C. Davis showed that the results in the Borjas study are sensitive to which dataset one uses. I mentioned above that the CPS has two wage surveys each year. The above graphs are for the March CPS that the Card paper used, and Borjas’s paper focuses on. Peri and Yasenov showed that the result is much smaller in the other wage survey (the ‘ORG’ survey), a result that is discussed in revised versions of the Borjas study. Specifically, the wage effect estimate in the Borjas study is three times larger in the March CPS survey data than it is in the ORG data. There is no clear reason why the true effect of an immigration wave would change that much between two different surveys. But our paper has a simple and definitive explanation for this result: the post-1980 increase in coverage of low-wage blacks is three times larger in the March CPS than in the ORG data. The glove fits, in this way and several others that we discuss in our paper.
Clemens concludes:
The evidence from the Mariel Boatlift remains as found in David Card’s seminal research: there is no evidence that wages fell, or unemployment rose, among the least-skilled workers in Miami even after a sudden refugee wave raised the size of that workforce by 20%.

This does not by any means imply that large waves of low-skill immigration do not or could not displace any native workers, especially in the short term. But facile pronouncements in recent statements by politicians, that immigrants necessarily do harm native workers, must grapple with rigorously-studied real-world experiences to the contrary. The Mariel Boatlift remains one of the most enlightening experiences of this kind.
Update: Borjas responds to Clemens here, noting that if he re-runs things pulling blacks from the sample, it doesn't affect his results. Clemens replies that there are only 3 non-blacks in the sample in one of the important years, and that regressions relying on three observations aren't really reliable.

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