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Immigrants, Wages, and Employment: A Trumped Up Charge

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Immigrants, Wages, and Employment: A Trumped Up Charge

Dr. Ernest M. Zampelli, Ph.D.

Images of HistoryAt a recent Trump rally, the Donald exhorted once again that our open borders are allowing immigrants to enter at will, taking away American jobs and lowering American wages. As an economist, I know that this is pure hyperbole, but many, if not most people, believe it, especially Trump supporters. For full disclosure, I am not a labor economist and do not conduct my own research in this area. I do, however, attempt to remain abreast of the literature on the kinds of hot-button issues that erstwhile politicians like Trump use to inflame and garner supporters with rhetoric that sheds more heat than light. So, I decided I would try to counter such rhetoric with quotes from some of the more recent research on the economic impacts of immigration. To ensure credibility, I provide the last name of the author(s), the year, where the research was published, and the page(s) from which the quote was extracted.

Bolin (2006), Institute for Research on Labor and Employment, UC Berkeley:

“… the preponderance of evidence points to positive net fiscal and economic impacts—albeit modest ones—and negligible effects on native wages and employment rates.” (p. 2)

Longhi et al. (2009), Journal of Geographical Systems:

“Using a meta-analytic approach, we found that the wage and employment effects of an immigration shock are very small. Using a weighted average with weights determined by the precision of the estimate, we found that a 1% point increase in the share of immigrants in the

local labour market of a typical host country decreases wages of the native born by 0.029% and decreases employment of the native born by 0.011%.” (p. 383)

Hanson (2009), Migration Policy Institute:

“…illegal immigration’s overall impact on the US economy is small. Low-skilled

native workers who compete with unauthorized immigrants are the clearest losers. US employers, on the other hand, gain from lower labor costs and the ability to use their land, capital, and technology more productively. The stakes are highest for the unauthorized immigrants themselves, who see very substantial income gains after migrating. If we exclude these immigrants from the calculus, however (as domestic policymakers are naturally inclined

to do), the small net gain that remains after subtracting US workers’ losses from US employers’ gains is tiny. And if we account for the small fiscal burden that unauthorized immigrants impose, the overall economic benefit is close enough to zero to be essentially a wash.” (p. 1)

Levine (2010), Congressional Research Service:

“Studies thus have compared differences in labor market outcomes between native-born workers who live in high- versus low-immigrant areas and who most often compete for jobs with foreign-born workers; given the composition of the recent immigrant flow, thesewould be low-skilled U.S. workers. Most inter-area analyses have found scant evidence that foreign-born labor adversely affects the labor market prospects of U.S. workers in general. A few cross-city studies have estimated a slight negative impact on low-skilled natives.” (Summary)

“For many years, national studies estimated that immigration in the short-run substantially reduced the wages of native-born workers in each skill (education-experience) group. Native-born workers who lacked a high school diploma were determined to be the most severely affected. More recent national studies have estimated the adverse wage effect of immigration in the short run to be much smaller, even among the least skilled.” (Summary)

Peri (2010), FRBSF Economic Letter:

“Statistical analysis of state-level data shows that immigrants expand the economy’s productive capacity by stimulating investment and promoting specialization. This produces efficiency gains and boosts income per worker. At the same time, evidence is scant that immigrants diminish the employment opportunities of U.S.-born workers.” (p. 1)

Ottaviano and Peri (2012), Journal of the European Economic Association:

“… in the period from 1990 to 2006 immigration had a small effect on the wages of native workers with no high school degree (between 0.6% and +1.7%). It also had a small positive effect on average native wages (+0.6%) and a substantial negative effect (−6.7%) on wages of previous immigrants in the long run.” (p. 152)

Peri (2012), The Review of Economics and Statistics:

“First, we confirm that there is no evidence that immigrants crowd out employment of (or hours worked by) natives. Second, we find that immigration is significantly associated with total factor productivity growth. Third, such efficiency gains are unskilled biased—larger, that is, for less educated workers.” (p. 357)

Card (2012), Journal of the European Economic Association:

“… the absence of a strong effect of immigrant inflows is fully consistent with a properly specified model of the demand side of the labor market. This is not to say that some particular groups of workers haven’t been affected by competition from immigrants. But the state of the evidence suggests that the overall impacts on native wages are small—far smaller than the effects of other factors like new technology, institutional changes, and recessionary macro conditions that have cumulatively led to several decades of slow wage growth for most US workers.” (pp. 214-215)

Costa et al. (2014), Economic Policy Institute:

“The evidence shows that in the long run, immigrants do not reduce native employment rates. But some evidence suggests that in the short run, immigration may slightly reduce native employment, because the economy takes time to adjust to new immigration.” (p. 4)

“The most rigorous work on the effect of immigration on wages finds extremely modest effects for native-born workers, including those with low levels of education.” (p. 4)

Chassambouilli and Palivos (2014), International Economic Review:

“We analyze the impact of the U.S. skill-biased immigration influx that took place between 2000 and 2009 within a search and matching model that allows for skill heterogeneity, differential search cost, and capital-skill complementarity. We find that although the skill-biased immigration raised the overall net income to natives, it had distributional effects. Specifically, unskilled native workers gained in terms of both employment and wages. Skilled native workers, however, gained in terms of employment but lost in terms of wages. Nevertheless, in an extension where skilled natives and immigrants are imperfect substitutes, even the skilled wage rises.” (p. 111)

 

I would also like to reference Peri (2011) in the Journal of International Economics which focuses solely on the wage and employment impacts of immigration in California in every decade since 1960. The author finds no statistically significant impacts of immigration on native worker wages or employment.

Why is the evidence so contrary to the hyperbole, to the rhetoric, to the popular wisdom? First, an influx of immigrants affects both the supply and demand for labor. Second, immigrant labor and native labor are not perfectly substitutable. Third, labor is mobile. And fourth, an influx of immigrants can foster increases in productivity and innovation.

The bottom line is this. By far, the preponderance of evidence suggests, at worst, very small to no impacts of immigration on the wages and employment of natives and at best, small positive impacts on both. Please, don’t believe the hype.