Milton Friedman's Argument for Illegal Immigration

Yesterday at Hit & Run, Kerry Howley put up a brilliant post on Milton Friedman's most misused utterance (riffing off Bryan Caplan's also outstanding post) which I thought was more or less dispositive.
But in the comments, MikeP (this man needs his own blog, if he doesn't have one) points to this immensely useful post containing a partial transcript of a much more considered and representative discussion of immigration by Friedman from a lecture titled “What Is America.” It really puts the wall-builders' favorite Friedman quotation in its proper context.

You had a flood of immigrants, millions of them, coming to this country. What brought them here? It was the hope for a better life for them and their children. And, in the main, they succeeded. It is hard to find any century in history, in which so large a number of people experience so great an improvement in the conditions of their life, in the opportunities open to them, as in the period of the 19th and early 20th century.
You will find that hardly a soul who will say that it was a bad thing. Almost everybody will say it was a good thing. ‘But what about today? Do you think we should have free immigration?’ ‘Oh, no,’ they’ll say, ‘We couldn’t possibly have free immigration today. Why, that would flood us with immigrants from India, and God knows where. We’d be driven down to a bare subsistence level.’”
“What’s the difference? How can people be so inconsistent? Why is it that free immigration was a good thing before 1914 and free immigration is a bad thing today? Well, there is a sense in which that answer is right. There’s a sense in which free immigration, in the same sense as we had it before 1914 is not possible today. Why not? “
Because it is one thing to have free immigration to jobs. It is another thing to have free immigration to welfare. And you cannot have both. If you have a welfare state, if you have a state in which every resident is promised a certain minimal level of income, or a minimum level of subsistence, regardless of whether he works or not, produces it or not. Then it really is an impossible thing.
Look, for example, at the obvious, immediate, practical example of illegal Mexican immigration. Now, that Mexican immigration, over the border, is a good thing. It’s a good thing for the illegal immigrants. It’s a good thing for the United States. It’s a good thing for the citizens of the country. But, it’s only good so long as its illegal.
That’s an interesting paradox to think about. Make it legal and it’s no good. Why? Because as long as it’s illegal the people who come in do not qualify for welfare, they don’t qualify for social security, they don’t qualify for the other myriad of benefits that we pour out from our left pocket to our right pocket. So long as they don’t qualify they migrate to jobs. They take jobs that most residents of this country are unwilling to take. They provide employers with the kind of workers that they cannot get. They’re hard workers, they’re good workers, and they are clearly better off.

Friedman's point about free immigration and the welfare state, then, was simply that if the U.S. is going to offer welfare payments to anybody who legally migrates, then we're going to have to put a limit on legal migration. But because free migration is such an unmitigated good, limits on legal migration make both the immigrants and the natives worse off. So, illegal migration, which severs the fact of residency from welfare eligibility, is therefore desirable in the context of a regime that guarantees welfare eligibility to all legal residents.
Friedman's considered view is that free migration without a welfare state is first best. Welfare for all legal residents makes first-best free migration impossible. In that case, a high rate of illegal immigration is the second-best solution.
Now, Friedman's discussion would have been much clearer had he recognized the logical and practical possibility of severing legal residency from welfare eligibility. It need not be the case that all legal residents are made eligible for welfare. Indeed, there are many actual effective restrictions on welfare eligibility based on legal immigration status. In the 1999 ISIL interview, Friedman says of this possibility: “I don't think that it is desirable to have two classes of citizens in a society.” And then he admits that he had never thought about it before. Well, if he had, he would have grasped that illegal immigration — which, remember, he thinks is pretty great — ensures a very stark separation of classes. Because tight immigration restrictions hinder pareto-improving mobility, create underground economies that encourage corruption and abuse, and do much more to create invidious structural inequalities than would a formalized guest worker system, Friedman's own logic clearly leads toward opening up labor markets while restricting welfare eligibility. It is no accident that Lant Pritchett, an economist very much in the Friedmanite mold, argues for precisely that.
But the important takeaway here is this: Friedman's view is that a certain kind of unrestricted welfare state makes illegal immigration good, because it severs residency from welfare eligibility. Friedman is unequivocal about the desirability of free migration. Anyone really committed to Friedman's stated view about welfare and immigration should by no means try to restrict immigration, but instead should try to enable illegal immigration. A devout Friedmanite should stand stoutly against every fence, every border cop, every increase in the INS budget, any proposed database check for a new workers' legal status, etc. I think it makes more sense to argue first for a guest worker program. But if that is in fact impossible, then Friedman has it right: more illegal immigration is the best we can do.