How immigrants might actually boost wages

Martin Wolk Chief economics correspondent • Profile • E-mail

In the debate raging on Capitol Hill over how to reform the nation’s immigration laws, one assumption never far from the surface is that foreign-born workers are taking jobs from native-born Americans and driving down wages.

“What is wrong about thinking about justice for the guy whose wages are being depressed because of the millions of people who are coming in here and willing to take the job for even a lower price?” Rep. Tom Tancredo, R-Colo., asked in a Fox News interview recently. Tancredo, an outspoken opponent of illegal immigration, favors building a 700-mile security fence along the Mexican  border and strongly opposes any “amnesty” for undocumented aliens, including the path to citizenship contemplated by a bill that stalled Friday in the Senate. 

Many economists agree that undocumented aliens reduce wages for the least skilled native-born workers, but most also say immigration benefits the economy overall by lowering prices for consumers in a sort of Wal-Mart effect. One intriguing study even suggests that the huge influx of immigrants since 1980 has boosted the average wage of U.S.-born workers by about 2 percent, partly by spurring additional capital investment.

A huge wave of immigration that began in the 1980s has brought millions of foreign-born workers into the labor force, including about 7.2 million unauthorized migrants, or nearly 5 percent of the total work force.

George Borjas, a professor at Harvard’s Kennedy School of Government, who is probably the most respected economist studying the issue, says the surge in immigration – both legal and illegal – has reduced wages across the earnings spectrum by an average of 3 percent. The biggest impact has been on U.S.-born men who lack a high school diploma, who have seen their wages depressed wages by nearly 9 percent, he found.

"What immigration really does is redistribute wealth away from workers toward employers," Borjas told the Washington Post recently.

But not all economists agree. Another highly respected researcher, David Card of the University of California at Berkeley, recently published a study challenging Borjas’ conclusions and asking, “Is the New Immigration Really so Bad?” The study finds that the gap between wages for high school graduates and high school dropouts has remained nearly constant since 1980, despite the increased supply of less-educated workers from abroad. “Overall, evidence that immigrants have harmed the opportunities of less educated natives is scant,” he concludes.

A new study goes even further and seeks to turn the Borjas view on its head, finding that immigration has probably reduced wages at the low end of the scale but raised average wages by 2 percent.

Co-author Giovanni Peri of the University of California, Davis, said his findings assume that the millions of immigrants who have entered the country over the past two decades have spurred capital investment that has expanded the economy.

“When immigrants come in there are more business opportunities and more firms are created,” he said. He also said it is not accurate to assume that immigrants take away jobs from native-born Americans because the two groups of workers are “imperfectly substitutable.” In other words, immigrant workers tend to gravitate toward occupations that are largely different from jobs that native-born workers are seeking.

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