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Why Immigration May Not Have a Big Impact on Wages Why Immigration May Not Have a Big Impact on Wages Why Immigration May Not Have a Big Impact on Wages Why Immigration May Not H...

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Congress

Why Immigration May Not Have a Big Impact on Wages

Milagros Rodriguez, top right, who is originally from the Dominican Republic, works with a customer at her salon in New York.(AP Photo/Seth Wenig)

photo of Niraj Chokshi
May 2, 2013

How immigration affects the wages of American citizens is one of the most contentious concerns in the immigration reform debate. Wages are at an all-time low. But, don’t worry. The impact, if there is any, is small.

 There’s an academic debate over whether immigration has boosted or dragged down wages for existing citizens. Either way, the effect is small. Plus, any increased immigration will be offset by tighter border security, advocates argue. And, taking into account other factors, immigration may even come with some economic benefits.

Some of the most-cited research showing that immigration has depressed wages comes from a pair of Harvard economists, George Borjas and Lawrence Katz. Specifically, they found that Mexican immigration from 1980 to 2000 lowered wages for high school dropouts and college graduates, they found in a 2007 paper. (They also found that it raised wages for high school graduates and college dropouts.) Borjas repeated his analysis last month in a report published last month for the “low-immigration, pro-immigrant” Center for Immigration Studies. That April report found that from 1990 to 2010, immigration had roughly the same effect with immigration also dragging wages down for another group: those who have received post-college education.

 

The results may seem striking: only high school graduates and college dropouts benefited from immigration. Everyone else was earning less than they would have otherwise. But zoom out a little and the effect is null: on average the long-term effect immigration had on wages from 1990 to 2010 was zero, Borjas found.

Borjas and Katz have plenty of detractors, the most high-profile among them Gianmarco I.P. Ottaviano and Giovanni Peri. In their own oft-cited 2010 study, the duo built on the Borjas-Katz model and found that immigration has actually boosted native wages by a slight 0.6 percent.

(Source: Brookings Institution)

There’s clearly academic disagreement on the impact of immigration on wages, but the effects are tiny, notes Demetrios Papademetriou, president and co-founder of the Migration Policy Institute and a former director for immigration policy and research at the Labor Department. “I will go one further... not only are they small," he says, "but they pale in comparison to the effects that other big forces in the real world have had on wages, such as openness to trade, technological innovation, etc.”

Plus, it may be too narrow to just look at wages, he and others argue. “If you are really thinking about the overall economy, then you should be thinking about the overall economic byproducts, or economic benefits in the longer term certain types of immigration bring about,” he says.

One of those benefits is how immigration can boost purchasing power, Michael Clemens, a senior fellow at the Center for Global Development, recently told The Washington Post. Specifically, Clemens points to a 2008 paper. That study found that, low-skilled immigration from 1980 to 2000, lifted purchasing power for high-skilled native workers in the nation’s 30 largest cities by an average 0.32 percent. For high school dropouts, however, low-skilled immigrants reduced their purchasing power by a maximum of 1 percent.

“[T]hrough lower prices, low-skilled immigration brings positive net benefits to the U.S. economy as a whole but generates a redistribution of wealth,” the author concluded.

Any negative impact immigration may have on wages and purchasing power is concentrated on high school dropouts, but there may be an upside, according to another recent study: immigration has boosted the likelihood that native-born citizens will graduate. The effect may be small, but that’s the finding of a paper last year by Rutgers economist Jennifer Hunt, who is now the Labor Department’s chief economist. 

The results, she suggested, may “help explain how natives respond to immigration in such a way as to obviate the potential negative impact on native wages.”

In other words, even if immigration has dragged down wages for dropouts, native-born citizens have responded by simply sticking it out in high school for the hopes of better future opportunities.

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