Between 1900 and 1950, the population of Detroit increased more than six times over. But this understates how radical the growth really was at its peak—between 1900 and 1930, the population grew by 4.5 times. In the decade between 1910 and 1920 alone, the population grew by nearly 115 percent.
A lot of this population increase was due to inflows from other regions of the United States, but no small fraction of it can be attributed to foreign born immigrants. In Wayne County, where Detroit is located, the foreign born population increased by about 326% between 1900 and 1930. If our current foreign born population increased by a similar proportion, it would add another 130 million to their numbers.
And it’s not as though the native-born Americans who migrated there were cut from the same demographic cloth as the Detroit residents of 1900. African Americans from the south, for example, migrated to Detroit by the tens of thousands during that time period.
Moreover, the migrants to Detroit were overwhelmingly competing for very similar factory jobs–foreign in origin or not, the straightforward supply analysis of immigration restrictionists would suggest that wages for these jobs should have plummeted due to all the new arrivals. After all, the people who were there in 1910 had to compete against a labor market that was more than twice as large a decade later! To say nothing of the people who were there in 1900 and in three decades had to compete in a labor market that was more than four times as large as the one they started in!
But this is exactly the opposite of what occurred. It was precisely during this time period that the median wage of low-skilled workers in Detroit was exploding, rather than falling. The reason was largely the auto manufacturing revolution, an economic phenomena that owed quite a lot to one son of an immigrant. The innovation in manufacturing drew over a million people to Detroit like a magnet, and still a huge portion of the benefits of the innovation ended up with the average worker, even with the dramatic expansion in the supply of their competitors.
If we had gone back in time and closed America’s borders prior to 1900, hundreds of thousands of the people who helped make the Detroit boom happen would never have come. And if we applied the same restrictionist logic to Wayne County and limited the inflows from the rest of the country, far from helping out Detroit’s residents, the city would have played no part in the auto manufacturing revolution whatsoever; it would have gone to another, less restrictive city.
Immigration inflows are not random. They are likely to occur where the labor is most highly valued–and the increase in scale can have dynamic effects beyond simple supply and demand analysis. In Detroit, it made an entirely new industry possible.
So what can we learn from this specific episode in one city’s history? In my next post, I will discuss that very question.
It is sometimes alleged that technological progress is inherently capital-intensive and labor-saving, and therefore that migration restrictions, which make labor relatively scarce, promote technological change. Henry Ford’s automotive revolution is a striking counter-example. While Ford’s methods were fairly capital-intensive, they used a lot of labor too. What they really economized on was HUMAN capital. They made unskilled workers a lot more productive. It seems plausible today that a wave of technological innovation might be driven by a need to economize on human capital. If so, a large influx of unskilled labor would be just the thing to trigger it.
The case of Detroit was different in that the change in technology was the trigger, not the change in labor supply conditions (i.e., it is not that the borders were opened and that led to an immediate boom). So, one might say that it merely shows that if the borders are open, such technological takeoffs are possible (i.e., we don’t rule them out), not that they will happen as soon as the borders are opened. Perhaps they will, but the example of Detroit at any rate is not strong enough for that conclusion — you’d need to argue from a somewhat different angle.
I always come at this from a trial and error perspective.
Entrepreneurs and practitioners are trying out new approaches and new models and nearly all of them fail, as opposed to the safe, established way of doing things. The more entrepreneurs you have, the more trial and error occurs and therefore the greater chance of finding “the next big thing”. Increasing the scale of a population means that there are more possible niches for entrepreneurs to fill (a long tail of consumption type argument). and there are more “labor inputs” (to put it in cold economic language) for entrepreneurs to tinker with in their trial and error discovery process.