Immigrants Don’t Depress Wages

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According to Lou Dobbs, “middle class and working men and women in the United States are going to continue to be assaulted by a continuing flow of cheap foreign labor into the United States.” Mr. Dobbs said that “working men and women … are watching $200 billion of wages disappear every year because of illegal immigration.”


And a Harvard University professor, George Borjas, finds an average 4% decline in wages due to immigration, ranging from 2% for those with some college to 7.6% for those without a high school diploma.


So immigrants lower wages, do they?


Actually, careful research shows the opposite. Immigration has widespread helpful effects on the economy and may cause wages to rise, because immigrant labor does not substitute for native labor, but complements it. This has been largely ignored in recent debates and marches.


Professors Gianmarco Ottaviano of the University of Bologna and Giovanni Peri of the University of California, Davis, showed that immigration causes native-born American wages to increase. Over the past two decades, they find that a 9% immigration rate resulted in an increase of 2% in the wages of native-born American workers. Increases ranged from 0.2% for those without high-school diplomas to 2.5% for college graduates.


Other economists have also found little negative effect on wages. Senior economist Pia Orrenius of the Federal Reserve Bank of Dallas finds a slight increase in wages for professionals and a slight decline for manual workers from immigration of less than 1%. Professor David Card of the University of California, Berkeley, finds a decrease in wages of no more than 3% among low-skill workers in high immigrant cities such as Miami and Los Angeles, and smaller effects in other cities and occupational groups.


Foreign-born workers complement rather than substitute for native-born workers because they have a different pattern of education and skills. Immigrants are 10.5% of the labor force, yet represent 23% of those without a high school diploma, 14% of all doctorates, and 30% of doctorates working in science, math, and engineering. However, since they have a smaller share of high school diplomas and B.A.s, they don’t compete directly with most native-born workers.


Immigrants also choose different occupations from the native-born. Low-skill immigrants are often agricultural workers, tailors, and gardeners, but not funeral service workers and correctional officers. High-skill immigrants are found in science and dentistry, but not in law or veterinary practices. So immigrants can reduce labor supply bottlenecks in the economy, and help it grow faster.


So how does Mr. Borjas get his results? Mr. Borjas assumes that immigrants and native-born Americans are perfect substitutes, and that physical capital is fixed and doesn’t vary with additional immigration. Mr. Borjas measures immigration’s effect on wages assuming that no other changes take place in the economy, while Mr. Ottaviano and Mr. Peri measure wages after labor and capital respond.


However, Mr. Borjas’s assumptions obviously don’t match what goes on in the United States. A casual look at Silicon Valley, where immigrants head up a disproportionate number of high-tech startups, shows that immigrants fill specific niches. Not only do immigrants pursue certain fields and occupations, but capital flows into Silicon Valley to support their efforts.


Many issues are under discussion, including national security, culture, and competitiveness, as the United States moves towards a new immigration policy. But the effects of immigration on wages should not be a matter of debate. Lou Dobbs notwithstanding, American middle-class wages have not been hurt by immigration.



Ms. Furchtgott-Roth is a senior fellow and director of the Center for Employment Policy at the Hudson Institute. From 2003 to 2005 she was chief economist at the U.S. Department of Labor.


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