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Eli Kantor is a labor, employment and immigration law attorney. He has been practicing labor, employment and immigration law for more than 36 years. He has been featured in articles about labor, employment and immigration law in the L.A. Times, Business Week.com and Daily Variety. He is a regular columnist for the Daily Journal. Telephone (310)274-8216; eli@elikantorlaw.com. For more information, visit beverlyhillsimmigrationlaw.com and and beverlyhillsemploymentlaw.com

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Monday, June 01, 2015

Does Immigration Suppress Wages? It’s Not So Simple

Wall Street Journal (Opinion)
By Jeffrey Sparshott
June 1, 2015

Rick Santorum, the former senator from Pennsylvania, is now running for president on an overtly populist platform. Middle-class America, he said in his announcement speech last week, is being hollowed out by “big government and big business.”

Mr. Santorum blamed the country’s stagnant wages on a different force: immigrants to the U.S. “Over the last 20 years, we’ve brought into this country, legally and illegally, 35 million mostly unskilled workers,” Mr. Santorum said in announcing his candidacy. “And the result over that same period of time? Workers’ wages and family incomes have flatlined.”

The Pennsylvania Republican is the latest in a string of politicians drawing a direct line between depressed wages and immigration. Wisconsin Gov. Scott Walker has drawn the connection. So did President Barack Obama in a 2011 speech.

The economics of all this, though, are far from clear.

Immigration critics frequently cite the work of George Borjas, an economics professor at the Harvard Kennedy School of Government and the prime voice arguing that immigration erodes wages for lower skilled U.S. natives. In a report for the Center for Immigration Studies, a group favoring strong border enforcement, he wrote that the effects of immigration are especially acute on Americans with fewer skills. For example, immigration reduced the wage of native-born high school dropouts by 2% to 5%.

“Some groups of workers face a great deal of competition from immigrants. These workers are primarily, but by no means exclusively, at the bottom end of the skill distribution, doing low-wage jobs that require modest levels of education. Such workers make up a significant share of the nation’s working poor. The biggest winners from immigration are owners of businesses that employ a lot of immigrant labor and other users of immigrant labor. The other big winners are the immigrants themselves.”

Elsewhere, though, findings often show more broadly distributed benefits to the economy, a less severe squeeze on wages and occasionally even a boost to pay from immigration.

Start with Texas. The Lone Star state is on the front lines of the immigration debate. In a 2006 study, the state comptroller found that wages would be higher without the 1.4 million undocumented immigrants then estimated in the state, because the labor market would be tighter. But it also said a tighter labor market wouldn’t necessarily be good for the overall economy.

“This tightening would induce increases in wages, as indicated by a rise in average annual compensation rate. Wage rates would rise by 0.6% in the first year and stay above the forecast rate throughout the entire 20-year period. While pay increases can be viewed as a positive social and economic development, when they rise due to labor shortages they affect economic competitiveness. In this case, it would be expressed as a modest decline in the value of Texas’ exports.”

Likewise, the Congressional Budget Office found that a major 2013 immigration overhaul proposal would boost employment, investment and productivity, but average wages would take a short-term hit. The bill, which made it through the Senate but died in the House, would have provided a path to citizenship for many of the 11 million immigrants in the U.S. illegally and created new work-visa programs. The legislation would have boosted the U.S. population by 10.4 million residents over a decade—a 3% increase in the population.

“CBO’s central estimates also show that average wages for the entire labor force would be 0.1% lower in 2023 and 0.5% higher in 2033 under the legislation than under current law. Average wages would be slightly lower than under current law through 2024, primarily because the amount of capital available to workers would not increase as rapidly as the number of workers and because the new workers would be less skilled and have lower wages, on average, than the labor force under current law. However, the rate of return on capital would be higher under the legislation than under current law throughout the next two decades.”

Is that clear? Well, wait then.

Gihoon Hong, an economics professor at Indiana University South Bend, and John McLaren, an economics professor at the University of Virginia, in a paper released earlier this year looked at the the effect immigrants have on local demand for services. Their conclusion: immigrants increase the availability of some services, which boosts employment.

“For this reason, immigrants can raise native workers’ real wages, and each immigrant could create more than one job. Using U.S. Census data from 1980 to 2000, we find considerable evidence for these effects: Each immigrant creates 1.2 local jobs for local workers, most of them going to native workers, and 62% of these jobs are in non-traded services. Immigrants appear to raise local non-tradables sector wages and to attract native-born workers from elsewhere in the country. Overall, it appears that local workers benefit from the arrival of more immigrants.”

There’s more.

Andri Chassamboulli, an economics professor at the University of Cyprus, and Giovanni Peri, an economics professor at the University of California, Davis, look specifically at illegal immigration. They find illegal workers generally receive lower pay than native-born workers, generating higher profits for local businesses.

“This in turn pushes firms to create more jobs per unemployed [person] when there are more immigrants, improving the labor market tightness and reducing unemployment rate of natives. This key mechanism implies that policies aimed at reducing illegal immigration that are also restrictive and discourage total immigration (such as forced repatriation, border controls, increased cost for job search by illegal immigrants) will reduce job-creation of firms and increase unemployment of unskilled native workers. They will also reduce income per native.”


One last twist. Many assumptions about immigration are premised on waves of low-skilled workers crossing the border from Mexico or countries to the south. But recent data shows China and India have taken the lead, and many of those immigrants are higher on the skill scale. It’s not clear what effect that will have on the U.S. workforce.

For more information, go to:  www.beverlyhillsimmigrationlaw.com

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