Immigration and Wages
THE COSTS of draconian immigration policies are obvious. Building a wall along a third of the 2,000-mile U.S.-Mexican border, as proposed in the recently passed House bill, would swallow more than $2 billion, and it would not remove the need for squadrons of border guards to prevent people from coming across via tunnels and ladders. Forcing employers to get tougher in checking workers' documents, and clamping down on those who fail to do so, would impose a regulatory burden on businesses without necessarily doing much to stem the tide of illegal workers. It might be worth persevering with these policies if the benefits of lower immigration were truly significant. But at least one commonly cited benefit -- better wage prospects for low-skilled Americans -- is not as powerful as is often claimed.
It's true that immigration presents a greater challenge to low-skilled workers than in the past. The 1970 Census found that 63 percent of immigrants had been born in Canada or Europe and were generally well educated. The 2000 Census, by contrast, found that 48 percent of immigrants had been born in Mexico, Central America or the Caribbean, and that more than a third had less than a high school education. By 2000 immigrants made up over half of the workforce with less than eight years of schooling.
It sounds obvious that this influx must be depressing wages at the bottom: Double the supply of a certain type of labor and you push its price down. But attempts to measure this effect suggest that it's either modest or nonexistent. The most credible pessimist is George Borjas of Harvard University, who has calculated that wages for native-born high school dropouts are 7.4 percent lower than they would have been without immigration. But David Card of the University of California at Berkeley has compared wage patterns across cities and concluded that high school dropouts in cities with lots of immigration are no worse off. In low-immigration cities, it seems, employers don't necessarily respond to a paucity of low-skilled workers by bidding up wages to attract more of them. Instead, they may respond by investing in machinery that allows three low-skilled workers to do what six might do in a high-immigration city. Construction workers get extra trucks and power tools; gardeners get electric trimmers instead of manual shears.
Even a small impact on low-wage workers is alarming, given the rise of inequality over the past 25 years. But the question is whether to address that inequality by trying to stop immigration or to go at it via progressive taxation, larger public investments designed to prevent poor kids from dropping out of high school, or some other policy tool. Given the expense and doubtful effectiveness of border walls and employer crackdowns, progressive tax and social policies seem preferable. After all, to the extent that immigrants drive down wages at the bottom, they are driving up the inflation-adjusted wages of other Americans who get cheaper goods and services. Taxing the "immigration windfall" that flows to better-off Americans and passing it on to the less fortunate may be the best way to go.