Do unskilled immigrants hurt the economy?

John W. Schoen • Profile • E-mail

The intense debate about immigration reform on Capitol Hill and across the nation stopped a compromise bill dead in its tracks last week and sparked a lot of questions from readers. Francelia in California posed one of the most succinct:

Do unskilled immigrants hurt the American economy?
—Francelia, Santa Ana, Calif.

The short answer is — not really.

It’s true that higher-skilled workers generally make more money and, therefore, spend more and pay more taxes than unskilled workers — all of which benefit the economy. But a policy that allowed only highly-skilled workers to come to the U.S. — by itself — wouldn’t create more highly-skilled jobs.

Congress is wrestling with the issue, although a comprehensive bill that made it to the Senate floor was mortally wounded last week when supporters failed to win enough votes to cut off debate on a blizzard of amendments.

Debate over the bill has featured plenty of behind-the-scenes maneuvering over which groups of workers, if any, should be given preferential treatment. But with the U.S. unemployment rate at historically low levels, there seem to be plenty of unskilled jobs to go around. Or at least that’s what many lobbyists representing agriculture, hotel owners and other service industries were telling Congress.

Many companies also have been urging Congress to ease immigrations restrictions so they can hire more highly-skilled workers, like software engineers. (The list of those lobbying to ease restrictions includes Microsoft, which jointly owns MSNBC.com with NBC Universal.)

Any compromise that eventually is struck will have an impact on specific industries. But overall, the arrival of new immigrants is neither good nor bad for the U.S. economy, according to Boston University economics professor Laurence Kotlikoff.

“Immigrants are basically a wash, fiscally speaking,” he said. “They don’t cost us anything on balance, and they don’t make us anything on balance. The taxes they pay are offset by the benefits they get and the cost of public services.”

Not everyone involved in the reform debate buys that argument. Some opponents of easing restrictions on immigration argue that unskilled immigrants are forcing U.S. wages lower. According to this line of thinking, immigrants from developing countries are willing to work for less money than American citizens, so they displace them from unskilled jobs.

There's no question that many unskilled American workers have been coping with meager wages and grim job prospects for the past 30 years. But there are much bigger reasons than the arrival of foreign workers. Technology and automation began eroding the growth of manufacturing jobs in the 1980s. The decline of organized labor has also been a factor in slowing the growth of wages. Closing the borders won’t reverse those trends.

More recently, expanded trade with developing countries has forced American companies to compete more aggressively on the prices they charge for goods and services. That price pressure from globalization would continue even if the United States was surrounded by an impenetrable border fence. U.S. companies in need of unskilled workers will have an even harder time growing and competing in a global market if they can’t find enough labor.

Though employers have been among the loudest participants, the debate over immigration reform is about more than dollars and cents. The American Dream has long been a global phenomenon; cultural diversity has kept it strong. But even it was only about money, as long as the U.S. economy represents a source of opportunity for people from around the world, they’ll continue to try to find a way to work here — even if it means risking their lives to do so.

That powerful economic attraction is a big reason that efforts to close U.S. borders to new arrivals haven’t worked; developing a controlled system of granting legal status seems like a rational alternative. But the devil is in the details. Based on the feverish lobbying over the provisions of the bill, it will be hard to gauge the specific impact of any new law until we get a chance to read the final version.

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