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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