Does the United States Benefit from Having an Immigrant Underclass?

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Sunday, 26 September 2010 10:14

Yes, they work cheap, but is it a good thing to have a group of especially low-paid workers in the United States? That is the question that goes unaddressed in Ezra Klein's column hyping recent research suggesting that immigrants do not lower the wages of even less-educated workers.

While there are some issues about the research findings (rent, which is a large share of low-wage workers' budgets, is far higher in cities with large immigrant concentrations [e.g. Los Angeles and Miami] than in cities with relatively few immigrants [e.g. Buffalo and Toledo] which makes real wage comparisons difficult), the implications are a bit more complicated than suggested in the column.

Essentially the research implies that less-skilled immigrants have formed an underclass that is paid so poorly that its size does not affect the wages of even the least skilled native born workers. This would be consistent with the findings of other research that it is taking far longer now than in prior decades for immigrants' wages to catch up with the wages of native born workers. As would be expected, new immigrants primarily compete with other earlier immigrants, so a more rapid flow depresses their wages.

There are some statements (derived from the cited research) that are simply untrue. There are very few jobs done by less-skilled immigrants that would not be done by native-born workers. They would be done, just at much higher wages. For example, the jobs in construction and meat-packing that are now filled largely by immigrants used to be filled by native born workers, and in fact were often sought out. But, the pay in these sectors has fallen sharply and many fewer native born workers are now willing to fill the jobs. However, there is nothing intrinsic to the jobs that makes them unsuitable for native-born workers.

Klein is right about the enormous potential gains from allowing in more highly-skilled immigrants but does not carry the point far enough. If the United States adopted more transparent professional and licensing standards for doctors and lawyers and other highly paid professionals, and adopted an open door policy for foreigners who met these standards, we could send pay in these professions plummeting. There would be enormous gains to consumers and the economy, which would swamp the marginal benefit of getting lower cost construction workers and custodians. However, doctors and lawyers have enough power to prevent such policies from being adopted and generally from even being discussed.