What Happens to Wages When Refugees Arrive? More Than You Might Think

Wall Street Journal

By Jeffrey Sparshott

September 21, 2016

What Happens to Wages When Refugees Arrive? More Than You Might Think 

The U.S. is accepting 85,000 refugees this fiscal year and the Obama administration plans to raise that figure to 110,000 next year.

The plan is controversial amid worries that terrorists could slip through a rigorous screening process. But what about the economic implications?

A new study by Harvard University’s George Borjas and the Center for Monetary and Financial Studies’s Joan Monras looks at evidence from four earlier refugee surges and finds they worsen prospects for one segment of the population while bettering the lot of another.

“In short, refugee supply shocks have sizable distributional consequences in the labor markets of receiving countries,” the authors said.

Mr. Borjas is generally considered an immigration skeptic, though his work is careful to avoid political judgement or policy prescriptions. His work is often cited as evidence that immigration erodes wages for lower skilled U.S. natives. His latest work is surprising because it shows clear benefits as well—though not for everyone.

The new study looks at the Mariel boatlift, which brought Cubans to Miami in 1980; an influx of French and Algerians into France as Algeria gained independence in 1962; a surge in Jewish emigres to Israel when the Soviet Union collapsed in the early 1990s; and the tide of Balkan refugees as Yugoslavia splintered through the 1990s.

Refugees damaged the prospects of natives with similar skill levels, the study found, but benefited natives with complimentary skill sets.

For example, the Mariel boatlift brought about 120,000 refugees, mainly to Miami. Messrs. Borjas and Monras write that more than 60% lacked a high school diploma. “Even though the Marielitos increased Miami’s population by only 8%, they increased the number of male workers without a high school diploma by 32%,” the authors wrote.

And that was the group that saw wages fall. By contrast, workers with a high-school or college degree saw wages rise. (That may be because the higher-skilled workers paid less for services filled by low-wage workers, like landscaping or housekeeping, making the wealthier workers more productive.)

In the case of Soviet Jews emigrating to Israel, most were college-educated. The influx, which increased the country’s population by more than 13%, hurt wages of high- and intermediate skill natives. But the earnings of the lowest education group increased, possibly because demand for the services they provide rose.

Mr. Borjas’ work isn’t without controversy. University of California, Berkley, economist David Card studied the Mariel boatlift and found no impact on wages or employment rates in Miami. In a paper earlier this year, he said Mr. Borjas’ work lacks nuance and offers a “one‐sided view of immigration.”

So perhaps it is striking that Mr. Borjas finds such clear economic benefits from the arrival of refugees.

To be sure, the U.S. is accepting a relatively small number of refugees relative to its population, and they tend to be distributed widely across the country. By comparison, the European Union is struggling to handle more than one million migrants, including many Syrians escaping civil war, who have settled in Germany, Austria and elsewhere.

But even a small number of new entrants in the labor market can have an effect.

“A couple of hundred refugees in a town with a thousand workers can have an effect,” Mr. Borjas said.

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