Do immigrants depress the wages of the American worker? Are they taking jobs away from U.S. citizens? Former President Trump thinks so. However, the evidence does not support Trump’s pessimistic views on immigration. Immigrants have a modest impact on wages. For many Americans, they can increase wages. Immigration expands the number of jobs in the economy.
At first blush, Trump’s position on immigration seems reasonable. When the number of immigrants increase, the supply of workers expands, thus lowering wages. However, the economic dynamics are more complicated.
Trump’s position assumes that immigrants are close substitutes for American workers. This is often not the case. Immigrants often bring a different skill set than comparable American workers. This means Immigrants often have a complementary relationship with American workers. This makes both the American worker and the immigrant more productive, thus raising their wages.
For example, an increase in less-skilled immigrant workers allows greater specialization of the American worker. It becomes easier and perhaps cheaper to hire someone to mow your lawn or paint your house because of immigrant labor. People can spend more time on their job, or get more rest which makes them more productive, increasing their compensation over time.
Weak English-language skills of some immigrants and a limited understanding of American culture makes immigrants poor candidates for jobs that require interaction with customers. Most, but not all, lower-skilled immigrants work in agriculture, construction, or service industries; jobs that require limited interaction with customers. The presence of immigrants often causes American workers with their better language skills to move into jobs that take advantage of these skills, usually paying a higher wage.
Another factor Trump ignores is that immigrants are also consumers of the products and services provided by businesses. As the number of immigrants increases, consumption rises. Business sales expand resulting in the hiring of more workers and investment. Employment of both American and immigrants increase. In addition, the rising labor demand puts upward pressure on wages, offsetting any downward movement in wages that might be caused by the increase in immigrant workers.
Immigrants increase economic growth when they start new businesses. They tend to be entrepreneurial. While foreign-born individuals’ make up about 14 percent of U.S. population, they start approximately 25 percent of new businesses.
There has been a concentrated effort to empirically determine the impact of greater immigration on labor market outcomes in the U.S. The time periods and methodology of these studies vary. The consensus is that rising immigration has a modest impact on American workers. While a few studies find greater immigration can modestly lower wages of lower skilled American workers, especially high school dropouts, the overall impact on American workers is not significant. In fact, some studies find it can raise the wages of more educated workers. This is consistent with the idea that immigrants bring different skills to the economy.
Many of the studies alluded to used data from the 20th century. The U.S. economy and the skills of immigrants have changed a lot since. The service sector is far more important today than in the past. More immigrants have college degrees than in the past. As of 2022, 36 percent of Americans have a college degree compared to 35 percent of immigrants. These changes are likely to influence the impact immigrants have on the economy.
What can we say about the impact of immigrants on American workers over the last twenty years? A recently published National Bureau of Economic Research paper by Caiumi and Peri examines the impact of immigration on American workers for the 2000 to 2019 period. They find a complementary relationship between American workers and immigrants for all levels education, and it has grown stronger over the last 20 years. They also find the flow of immigrants over this period raised the wages of less skilled workers, those workers with a high school degree or less, by 1.7 to 2.6 percent. The average wage for American workers increased by 0.5 to 0.8 percent over the period. The employment rate of American workers increased by 2.4 percent. There is also evidence that immigration resulted in occupation upgrading and better wages for many American workers.
The data indicate that immigration flows over the last twenty years have not harmed American workers. Both wages and employment rates have increased as a result. These results show immigrants with different skill sets make American workers more productive, increasing their earnings. It also shows immigrants are not adversely hurting the employment outlook for American workers. They end up with better jobs.
From a policy perspective, it makes no sense to reduce immigration or expand deportations. These policies will lower economic growth and make American worker worse off. It is time to reform our immigration policies. We need to make it easier for foreign individuals who want to come to the U.S. to work, innovate, and start new businesses to enter the country. It would also allow us to better control our borders.
Comment
Show comments
Hide Comments
