Immigration raises wages of U.S.-born workers, study shows

A new study by the Economic Policy Institute takes on the idea that immigration is causing a drop in wages of U.S.-born workers. Rather, it suggests that immigration actually increases the wages of U.S.-born workers overall, but may lower those of immigrant workers already here.

The study is entitled "Immigration and Wages: Methodological Advancements Confirm Modest Gains for Native Workers," and is authored by Heidi Shierholz.  The study is a bit on the technical side, but worth a read anyway for anybody who is confronted by friends, relatives or coworkers who are convinced that immigration creates competition for a limited number of jobs, and therefore must act to bring wages down.

The idea that the sheer number of workers in the country at a given time determines what wages they can attain is an old one, but it is fallacious. It has frequently been brought into the debate on immigration, but also pops up elsewhere, as a red herring to distract workers' attention from the real reasons for low wages such as weak labor laws and unfettered corporate power.

Since the January 12 earthquake in Haiti, for example, numerous commentators attribute Haiti's pre-earthquake poverty to overpopulation. This allows them to ignore the role played by imperialism and inequitable trade relationships in blocking poor countries from advancing economically.

In the case of immigrants coming to the United States, Shierholz puts it succinctly: "Although immigrant workers add to the labor supply, they also consume goods and services, creating more jobs. In other words, as the labor force expands (as it is always doing, due to both native population growth and immigration) the economy adjusts and expands with it, and average wages are not hurt." Otherwise, she further points out, each child who graduated from school and entered the labor force could be accused of bringing down the wages of existing workers.

Schierholz might also have mentioned that most immigrant workers pay into Social Security and Medicare, as well as paying federal and state income taxes. All pay local property taxes (many through their rent) and sales taxes, things which also create public sector jobs.

There are exceptions, for example when employers deliberately play off immigrant and native-born workers against each other. But the point is that overall, immigration per se does not automatically bring down wages, any more than natural population growth does.

Shierholz's study uses the "national" approach, a methodology which in the past has led to claims, by George Borjas and others, that immigration brings down wages. But Shierholz adds the concept of "substitutability" (or elasticity of substitution) among sectors of the working population. This means the degree to which one worker, or set of workers, could be substituted for another in a given category of jobs. So for example when more people get advanced degrees in nuclear physics, it does not bring down the wages of taxi drivers, because people who have the set of skills needed for driving taxis do not have the skills needed to be nuclear physicists (and vice versa). No increase in the number of people with taxi licenses will lower wages of the physicists, and no increase in the number of physicists will affect the earnings of the taxi drivers.

Further, Shierholz groups workers differently, regarding those who have no high school diploma and those who have a high school diploma but nothing more as basically the same in terms of substitutability within the present and recent labor market.

She then analyzes immigration and wage date for the years 1994 through 2007, breaking the data down by immigrant and native born, male and female, race, and educational level. She pays special attention to comparing the states which experienced most immigration in that period (California, Texas, Florida and New York) with the rest of the country.

Her overall conclusion is that new immigration actually increased wages for U.S.-born workers, but reduced wages for immigrant workers already in the country. The results were not even across the board, but on the average, U.S.-born workers saw an increase of wages due to immigration from 1994 to 2007 of $3.68 a week. This works out to $2.78 for women and $4.32 for men. This was even greater in states with many immigrants than the national average. The higher the educational level, the more the increase for women. But for native-born men, there was a slight dip for those with no high school or only high school.

For immigrants however, there was a drop in weekly earnings of $33.11 overall: $28.59 for women and $46.92 for men. This was worse at the higher educational levels. There was state-to-state variation.

So new immigrants are in a sense "competing" with immigrants already here, not just by existing but by reason of the high level of substitutability of their skill sets. But native-born American workers are either benefited or only slightly harmed.

Shierholz recognizes a major problem, namely the near impossibility of sorting out, from the available national statistics, undocumented immigrants from other immigrants, as well as categories like guest workers. This is important because within a given category of "substitutable" workers, those that can be forced to work longer hours for less pay are more likely to have a negative impact on wages of the rest.

Clearly, undocumented workers and guest workers are used by employers to control wages. This is not due their mere existence or to any "cultural characteristics" of those workers, but to their powerlessness. Though many show that they are eager to join unions and fight for higher wages (which would benefit all workers, especially in their "substitutable" categories), they are stopped from doing so by the conditions they have to put up with both on the job and in the community. This is another good reason for a comprehensive immigration reform that embraces legalization of immigrants already here and a change in visa policies so that people do not have to come illegally or as easily exploited "guest workers."

 

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