What with the Donald now moving into policy mode on immigration–what could go wrong with that?–it seems an opportune moment to jot down some thoughts on the subject. Since this is such a divisive issue, let me start by giving some background on from whence I’m coming.
The short story is…I’m not totally sure where I’m coming from re immigration, which I hope is somewhat comforting in that I don’t have a thumb on anyone’s scale. Full disclosure, the idea of a nation that welcomes those who want to come to it to improve their lives and the lives of their children is immensely appealing to me. But neither do I believe that the discussion/debate ends there.
Like most economists, I was raised on supply and demand. While some opponents of immigration reform espouse nativism and racism—certainly many of Trump’s recent comments fit that description—this simple model is often what they have in mind. All else equal, if you increase the supply of workers, you lower the wages that employers must offer to get the workers they need.
Trump’s Web site makes a version of this argument:
The influx of foreign workers holds down salaries, keeps unemployment high, and makes it difficult for poor and working class Americans – including immigrants themselves and their children – to earn a middle class wage…
Though Trump’s plan is a mashup of radically bad and cruel ideas, most notably ending automatic citizenship for children born to immigrants who came to the United States illegally and seizing money that immigrants try to send back to their families, this bit is consistent with labor econ 101 and there are numerous examples of where these dynamics hold in the short run.
One such example: back when I worked for the Labor Department in the 1990s, a group of Silicon Valley execs came in to explain to us why we needed to lift the cap on H1-B “guest workers.” After hemming and hawing for a while, they told us that if we didn’t raise the caps, they were going to have to raise wages. Similarly, this study of farm laborers explicitly shows—and bemoans—that the decline of low-skilled immigration has forced farmers to pay more to field/crop workers (see Figure 2, top panel).
Like raising wages is a bad thing that must be avoided at all costs! (Also, let’s not miss this moment to point out that this supply deceleration flatly contradicts Republican claims that unauthorized immigration is soaring.)
Yet real life is of course a lot more complicated than econ 101, and there are actually few markets where simple supply and demand analysis provides the last word. For one, immigrants increase supply, but a) they also increase demand—so much for “all else equal”—and b) over the longer run, they can help to offset the negative growth impacts of our slower growing labor force, as we baby boomers fade from the scene.
Look around, Donald people! You don’t need data sets to tell you how deeply immigrant workers are embedded into our workforce, and how essential their contribution is to our economic lives. I’ve often thought that if the immigrant workforce got pissed off enough about the abuse they get from these politicians, and got organized enough to do something about it, they should stop working for a few days. Good luck with that, America.
For those who do want to see what the data sets say, you can do no better than the work of David Card, one of the more careful economists to undertake the question of the impact of immigration on the wages of native-born workers. Keepin’ it real, one might update that research question to read: “should native-born, American workers really be as pissed off about immigration as the Republican candidates generally say they should?”
Card concludes that “…the state of the evidence suggests that the overall impacts [of immigrant competition] 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.”
How can that be, given the shorter term evidence cited above? One reason is that, as the immigrant population grows, the macroeconomy grows as well. Another key factor is that new immigrant labor is more often a “complement” to than a “substitute” for workers already here. Only a small minority of native-born workers compete with immigrants; research typically shows that as more immigrants enter a local labor market, many native-born workers actually move up the occupational ladder.
At the low end of the pay scale, it is true that certain workers, like native high-school dropouts, can face substitution. But their problem is less immigrant competition than their lack of education; immigration notwithstanding, it will be virtually impossible to get very far in this economy without finishing high school.
So, collecting facts, there is ample evidence that immigration-induced changes in the supply of labor can have negative, short-run effects on wages, and there are employers (and their lobbyists) who want to increase immigration so they don’t have to face pay increases. Over the longer term, however, not only is there little in the way of negative wage effects from immigration, it is a source of economic growth. Though I didn’t mention it above, it is also widely recognized that bringing unauthorized immigrants who are already here “out-of-the-shadows,” would lift their own wages (as they would then be covered by labor standards) and the wages of those who compete with them.
It’s also, if I may close the spreadsheet for a moment, a source of spiritual growth. Many of us want to live in a country that welcomes those seeking new opportunities, a place that gives them a fair shot at success. The ramped up vitriol we’re hearing from immigration opponents, besides being factually incorrect, has no place in that more enlightened country.