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The Wages of Immigration

By Matthew Yglesias  

"The Wages of Immigration"


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The Statue of Liberty in New York Harbor

Sir Charles says he has to “call bullshit” on my contention that immigration has only a small negative impact on the wages of low-skill native born Americans and a positive impact on everyone else (the immigrants themselves, more-skilled Americans, etc.) because he “live[s] in the actual world of people who work with their hands for a living (Matt probably knows a waiter or two) and I have seen the incredible damage that those who employ and exploit illegal immigrants have done to the labor markets in which my clients operate.”

Well, okay. I live in the world where we try to address complicated questions with scientifically valid research methods. So I’ll quote Gianmarco I.P. Ottaviano & Giovanni Peri “Rethinking the Effects of Immigration on Wages”:

This paper asks the following question: what was the effect of surging immigration on average and individual wages of U.S.-born workers during the period 1990-2004? We emphasize the need for a general equilibrium approach to analyze this problem. The impact of immigrants on wages of U.S.-born workers can be evaluated only by accounting carefully for labor market and capital market interactions in production. Using such a general equilibrium approach we estimate that immigrants are imperfect substitutes for U.S.- born workers within the same education-experience-gender group (because they choose different occupations and have different skills). Moreover, accounting for a reasonable speed of adjustment of physical capital we show that most of the wage effects of immigration accrue to native workers within a decade. These two facts imply a positive and significant effect of the 1990-2004 immigration on the average wage of U.S.-born workers overall, both in the short run and in the long run. This positive effect results from averaging a positive effect on wages of U.S.-born workers with at least a high school degree and a small negative effect on wages of U.S.-born workers with no high school degree.

I think an important thing to note about this is that even if you cite an economist like George Borjas who’s more pessimistic about the impact of immigration on wages, the negative impact is restricted to high-school dropouts. It’s not, in other words, a question of immigrants plus pointy-headed elites versus average Americans. It’s a question, at worst, of pointy-headed elites plus average Americans plus immigrants versus high school dropouts. I don’t think we should be indifferent to the fate of native born high school dropouts by any means. But we shouldn’t be indifferent to the aspirations of would-be immigrants born into economically backwards societies that are often stuck in the mud, growth-wise, due to catastrophically poor governance. And given that those adversely impacted by high levels of immigration are a relatively small minority of Americans, and given that immigration vastly increases the volume of resources available to the country with which to help people in need, I think crackdowns on immigration are a very unappealing way of helping low-skill immigrants.

I do, however, agree with Sir Charles that both undocumented immigrants and those who compete with them in the labor market are seriously disadvantaged by the fact that, due to their immigration status, they have no meaningful way of enforcing their legal rights. This is one of several reasons to favor comprehensive immigration reform.

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