I would prefer to ask this in General Questions, since what I really want is a non-ideological, evidence-based answer, but in my experience these are hard to come by in economics. In this particular issue, I can sense how tempting it is to come up with some reasonable-sounding but basically BS answer one way or the other, depending one’s biases.
I have always wondered this, but what got me thinking about it recently is a comment in a book by a left-leaning economist I am reading that some people complain about minimum-wage laws interfering with the workings of the market, but their effect on wages pales almost into insignificance next to immigration policy, at least in rich countries. This seems intuitively correct: surely if the USA had no immigration laws at all, an influx of migrants would lower wages, wouldn’t it? On the other hand, I have read a number of arguments from writers ranging from conservative to socialist in ideology that in Canada or the USA, at least under current immigration laws, immigration does not tend to lower wages.
I assume, if this is true, then there is still some point at which it would cease to be true. Do we have any way of knowing what this point is?
For what it is worth, I enjoy living in a multicultural community, and I personally have definitely economically benefited from that. I would be even willing to trade some of my nation’s wealth for the benefits that come from living in a community which is diverse, yet still a genuine community. I just would like to know the straight dope on this.
The problem with this question is that there are short- and long-term answers.
In the short term, immigration depresses wages. In the long term, immigration keeps industries competitive, which elevates wages.
Or, to put it another way, pretend all the migrant workers in the US get deported tomorrow. In the short term, wages for agricultural laborers go way up until jobs are filled. In the long term, the cost of labor makes the price of US crops skyrocket, and we start importing crops instead… and US farmers go out of business, so nobody has any wages at all.
Generally a labor surplus is going to lower wages. But the fields that immigrants can work in, and the legal bottom you can give to people are both going to limit it IMO.
When I was in San Diego, nearly all the service sector jobs were done by latinos, many of whom were probably immigrants (it reminded me of stories of the south where all the low paid service work was done by blacks). But here in the rural midwest low paying service sector work pays just as badly even with no influx of immigrants. The minimum wage puts a basement on how low wages go, and there is a labor surplus (esp in this economy) even w/o immigration.
This study claims H1-B visas slightly cause wages to go down in IT.
How much would they go up in a high unemployment environment? Consider the drop in teen labor participation. Also, by lowering wages employers can delay investing in labor saving technology.
George Borjas has summarized the economic impact of increases in the number of immigrant workers by their education level and experience in the work force, using US Census data from 1960 through 2000 here.
I think the methodology used in that study is clearly flawed. The article says that the data was gathered based on “government reports and scanning resumes posted on online job search sites.” Neither the government reports nor the resume would tell you what the H-1B holders were being paid, though. The government reports would include information on the minimum allowable wage for H-1B applicants, but they wouldn’t tell you the ACTUAL wages – especially after bonuses and salary increases.
When I was sitting investment exams, it was drummed into me that effective exam technique starts with the principle that if you can legitimately mention supply and demand then you will get a point for doing so. Therefore:
Immigration increases the supply of labour, all other things being equal, therefore it will tend to exert downward pressure on wages.
Immigration, in the presence of effective and almost universally enforced minimum wage laws, will have relatively little impact on wages at the bottom.
The same quantitiy & quality of immigration, in the absence of effectively enforced minimum wage laws and the presence of a large informal (“underground”) economy, will have a much larger impact on wages at the bottom.
So which regulatory regime are we discussing? The one we say we have on paper (case 1), or the one we really have today (case 2)?
Not if they keep coming in large numbers. And you’re not taking into account native-born workers who have not gotten jobs because the jobs went to immigrants.
Even statistics can be fudged, misinterpreted or the product of sampling bias. There is no way to get around the need for the most intelligent reasoning.
The real issue is overpopulation. If immigration had been toned back to reasonable levels (200k a year) and illegal immigration stopped, then our population would soon be stabilized.
This is good. Infrastructure and capital catches up to the level of population. There are as many jobs as there can be for that population size, there are enough schools, etc.
The lower the total population the better also. Think about the company Google. If a million people are added, they might generate enough traffic to add a new server. Maybe 10 new servers add the need for a new server maintenance technician.
The jobs in the corporate offices don’t scale with the amount of business they do. See what I am saying? Less supply of high paying jobs, wages go down.
In addition, it makes no distinction between immigrants and native-born workers. That is, these are the average wages for the entire industry. When immigrants take jobs that could have gone to citizens, and especially when immigrants are hired specifically to avoid hiring citizens as is often the case with H1Bs, incomes for citizens in that field of work will go down (and some will be forced out altogether) as immigrants take their places, even though overall wages may seem to be affected little or not at all. It is also difficult to account for the impact of illegal immigrants, as they often work off the books or with phony documentation.
Yes, immigration lowers wages. It’s simple supply and demand. The greater supply of workers the less power each individual worker has. The more scarce workers are, the more valuable the “rare commodity” is and the higher the wages they can demand.
Thank you for the Borjas and NBER links. I looked at the Borjas one and the discussion attached to it. It is interesting that it seems so tricky to get an empirically justified answer to my question. Basically, if I understand it right, Borjas divided the working population up into 32 “skill groups,” calculated the percentage of each group that was composed of immigrants in each of the censuses, and then looked for patterns. Most of the previous studies compared cities with large immigrant populations with those with low immigrant populations. The two approaches yield somewhat different answers to my question. I guess it is not as clear-cut as I would like, and the analysis still relies to a degree on economic models that I don’t quite trust, but at least it is a step above the “everyone knows that markets work like this, and therefore the answer to your question is …” type of answer to my question.
I don’t know the exact details of the study. It was done by researchers and professors at Wharton and the Stern school of business. You are free to read their paper and ask them for answers because I don’t know. However I doubt that they would make such basic mistakes and assumptions in their paper. I can only find the abstract.
Immigration raises wages. It’s simple supply and demand - since immigrants demand products, they increase demand for workers to make those products and wages go up. See how easy economics is?
Paul Krugman and Robert Samuelson have both pointed out that illegal immigration does decrease the wages and increase the unemployment rates of “native-born Americans without high school diplomas.”
Now, unfortunately, for better or worse, you’re talking about a group that is disproportionately black.
Now, we shouldn’t be surprised that blacks have been hurt by immigration, because historically that’s been the case. You’ll notice that during the 19th and early 20th Centuries, black people didn’t start flooding into the North the way they did a few decades later. The reason for this was that European immingrants(Jews, Italians, Poles etc.) were flooding in at that time and employers would rather have hired them than blacks.
However, laws restricting European immigration in the 1920s caused the great migration(which started due to WWI) to turn into a flood.
Obviously, things changed when the US changed it’s immigration laws in the 1960s.
Economic migrants who only intend to stay for a few years are unlikely to spend large amounts of money in the country they visit to work. Either because their wage is so low that they can only afford the bare minimum, or because they earn enough to save up and send money home.
Immigration is an emotional issue. One either likes or dislikes immigrants. I like most of them. I would be bored living in a community where nearly everyone was white, and of north weatern European extraction.
Unfortunately, emotions cause people to believe things that are not true. It is well known that economic inequality has increased in the United States since perhaps the recession of 1974. I do not believe that employers are any greedier than they were during the 1950s and 1960s. What I do suspect is that the larger number of job applicants has enabled them to hold the line on pay increases, while the larger number of consumers has enabled them to raise prices.
