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Immigrants Lower Immigrants' Wages

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Friday, 01 February 2013 06:22

David Brooks makes the case for immigration reform in his column today. Surprisingly, there is not much to dispute here. However, the story of more immigration is not quite the picture where everyone wins that he implies.

Brooks cites research by my friend Heidi Shierholz showing that wages of native born workers of all education levels increased as a result of the immigration from 1994 to 2007. The essential story here is that it models a situation where immigrants and native born workers largely fill different jobs. In this way, immigrants are not seen as competing with native born workers, but in effect providing a lower cost input into production in the same way that lower energy prices provide a lower cost input.

One can certainly point to industries and occupations where this story would seem to hold. Cab drivers in Washington, DC are almost exclusively immigrants, as are many of the people working in restaurant kitchens, as are custodians in offices and hotels. In these sectors, more immigrants would not have much impact on the wages of native born workers. (The impact of these sectors coming to be dominated by immigrants initially is another question.)

However more immigrants would be expected to have an impact on the immigrant workers in these sectors. Imagine the impact on the earnings of immigrant cab drivers in DC if we doubled the number of people driving cabs.

Sheirholz's mid-point estimate of the effect of the 1994-2007 immigration on the wages of immigrant workers is -4.6 percent. For a worker earning $30,000 a year this is a hit of $1,380. Her high-end estimate is 6.0 percent, implying a hit of $1,800. (Interestingly, by education group she finds that college educated immigrants would be most adversely affected by more immigrants.) 

Anyhow, these numbers are worth keeping in mind in designing the shape of immigration reform. It may be the case that more immigration will in general be a positive (albeit a small positive) for the wages of most native born workers, but if we want to see recent immigrants have an opportunity to quickly improve their living standards and earn wages that are closer to those of native born workers, then more immigration is not always better. (See John Schmitt's paper on this topic.)

Comments (15)Add Comment
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written by skeptonomist, February 01, 2013 9:58
There is no doubt that immigration lowers the overall cost of labor, since immigrants are generally willing to sustain a lower standard of living. The important analogy should probably not be with decreasing resource cost (oil price for example), but with a reversal of growth of the capital/labor ratio. Immigration of low-skilled workers tends to decrease productivity - is that a good thing?
missed boat
written by Jeff, February 01, 2013 1:11
Mr. Baker, you completely missed the point on Brook’s piece. Immigration and employment are a zero sum game. When employers higher foreign born workers to perform skilled work that’s one fewer skilled jobs available for American workers and means that one more native born worker will either be out of work or forced to accept an unskilled job. The report by Ms. Zavodny which Brook’s sites admits as much.
Fall-back jobs, entry-level jobs
written by John Emerson, February 01, 2013 1:54
When I was having hard times I spent about 5 years working as a fruitpicker, dishwasher, and day laborer. Eventually I got a good job but those other jobs kept me going. That kind of job is now gone.

The job I did end up getting required a HS degree and no more, though my 3 years of college helped. Now it requires a year of specialized schooling (no more on the job training).

One of the peculiar things about the present brutal system is that many able-bodied low skilled people can neither get jobs nor get help. They end up wishing that they had a disability and often develop one (alcoholism for example).

This is rooted in the American system and the American psyche. From the beginning the American welfare state was designed to give minimum or no help to the able-bodied unemployed, for fear of free riders. The Chicago School has developed the fear of free riders into a science. Behind it all is the idea that some musty suffer in order to motivate the others ("labor discipline" in Mellon's words). They need not be guilty of anything but poverty and unemployment.
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written by david j michel jr., February 01, 2013 1:56
fuck the mexicans, thats what we are talking about,they take a large portion of jobs in the construction field in ca. they dont just pick veggies any more.they send almost all there money to mexico,thus not adding anything to the ca. economy.then they get all the social services,because they are paid cash.I know this.I have been in this field for 35 years,so shut-up you libtards.the only benefit to giving amnesty to all the illegals maybe they will keep the scam of social security going long enough for me to collect it!
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written by liberal, February 01, 2013 2:36
david j michel jr. wrote,
I have been in this field for 35 years,so shut-up you libtards.


Actually, as a libtard myself, I have serious misgivings about large-scale immigration, precisely because I can't see how it would not lead to lowering wages of non-immigrants.
Immigration reform is economic policy, too
written by urban legend, February 01, 2013 4:45
Higher wages for anybody near the bottom tends to translate into higher wages for everybody -- an upwards cascade as employers find it necessary to maintain distances from the bottom. (It likely is not proportional or 1:1, since employers will take as little such action as they can get away with, so it should also generate modest reduction in inequality.)

Higher wages for anybody also adds spending into the economy, with money being transferred from people who don't spend much of it to people who spend all of it. As more spending increases demand for labor, that further puts upward pressure on wages -- and as the economy improves even the wealthy get their money back in higher asset prices, i.e., more wealth.

By giving immigrants a path to citizenship and an established place in society, immigration reform should tend to push wages up as their fear of rocking a boat declines. That should be good for all of us.
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written by denise, February 01, 2013 5:11
I don't see how the fact that immigrants have displaced the Americans who used to drive cabs, work in hotels and restaurants, do construction and landscaping labor, etc. can be considered irrelevant to the wage question. It seems to me to be completely the point. It's simply a lie that Americans won't do these jobs; but the jobs are certainly less desirable than they were before immigration pushed down wages and working conditions.
Surprise! You can get a taxi in countries with few or no immigrants!
written by G Burtless, February 01, 2013 6:35
I think there is a serious problem with the argument that immigrants do not compete with non-immigrants since the two groups work in different (noncompeting) industries and occupations. The problem is this: Countries without immigrant communities (Japan, Iceland) somehow manage to fill jobs that are held mainly by immigrants in high-immigration societies.

This implies that in high-immigration countries native workers who would have held jobs in industries / occupations now mainly filled by immigrants have been displaced by the immigrants. To observe that cabbies in Washington or New York seem mainly to come from abroad does not mean that native workers could never be found to drive taxis. Perhaps the availability of immigrants to drive taxis has made wages and working conditions in the cab industry worse than native drivers will tolerate. In that case, they exit the cab industry and intensify competition in occupations or industries where native workers are more common. The extra competition could reduce the wages or worsen the terms of employment in those occupations and industries.

Of course, it is conceivable that all's best in this best of all possible worlds. Perhaps ALL immigrants and ALL native workers benefit as a result of immigration. It's also conceivable, however, that the separation of immigrant and native-born workers into different industries and occupations means something quite different from what immigration advocates claim. It is easy for me to imagine that some native workers are harmed by labor market competition with immigrant workers, even though the two kinds of workers are employed in different industries and occupations.

By the way, I FAVOR immigration, and I believe its benefits for immigrants and natives exceed by a wide margin the costs imposed on workers or families made worse off as a result of immigration. But count me as skeptical of the claim that all the adverse labor market effects of immigration are concentrated on immigrants themselves. Part of the costs may be shared by some native-born workers, too.
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written by david j michel jr., February 01, 2013 9:58
sorry written by liberal,for my comment(libtard),but I am 54 years 10th grade ed. and have worked with my hands my whole life.in 1988 I made 120thousand,by1998 I was working more hrs.for half,thanks to the great ronald regan.when he gave the last amnesty it was all down hill for me.and that was going to be the last amnesty,and they were going to secure the border,here we go again.
Marginal immigrants make not affect native born workers
written by Dean, February 01, 2013 10:27
Gary,

the argument would be that you have sufficient occupational segregation that the marginal immigrant would not affect the wages of native born workers (note the years examined). The fact
that many occupations have become almost exclusively dominated by immigrants almost certainly has to mean that there was downward pressure on the wages of native born workers, but that was before 1994. (I am pretty skeptical that this is true for more highly educated immigrants.)
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written by watermelonpunch, February 02, 2013 1:28
@ Jeff - there certainly seems to be more than one ship sailing here.
The same people who come on h1b visas are not the same people vying for jobs in the Holiday Inn housekeeping dept.

I'm not even going to try to fathom what Brooks is thinking or what message he's trying to get across...
And Baker seems to have focused on one part of the issue.

But the issue is this for me...
Do I want any immigrants competing with me for jobs in IT - or in housekeeping for that matter?
Well, no, of course not. I don't really want anyone competing for whatever job I want!! ha ha ha ha
It's not about immigrants, per se.

The way I see it.
The immigrants are here.
I know I have a neighbor with a family member who sometimes rants about how everyone ought to be deported. Well, he's even suggested deporting American born citizens, who he deems as stupid. ha ha
But the whole idea is kind of flawed for all sorts of reasons.

So given that. I would MUCH prefer my job competition immigrants have a stable path to citizenship, and thereby feel safe enough to do societal beneficial things like, report unsafe working conditions, refuse to be paid less than minimum wage, help police when they have information about a crime, join their neighborhood watch or school PTA, send their children to school, speak up about crime or fraud or injustice... etc.

That said, I see absolutely no argument that can be made in favour of encouraging MORE immigrants to come.
I see this as especially without grounds as far as educated skilled immigrants.

My public library finally coughed up a copy of Peter Capelli's book "Why Good People Can't Get Jobs", and I'm about halfway through it, and I'm more convinced than ever that there are no serious qualified applicant shortages.
California hospitals import more RNs; percent Hispanic, African-American RNs falls
written by Rachel, February 02, 2013 7:46

There must be industry-consultants who specialize in this tactic: if the workers go on strike, import more workers. It's true that for one hospital chain in northern California, a chain with a LOT of market clout, the nurses average almost $140,000 a year. So in recent years California hospitals have responded to the strikes and high salaries by importing many more RNs. The net result is that there are fewer of these secure and highly paid RN jobs for talented but disadvantaged minorities.

Of course hospitals have long imported medical residents, as a lower-cost substitute for expensive nurses. This has led to our large percent of overseas doctors, 30%, which has diminished to some degree the excess profits extracted by the medical monopoly. Nonetheless, the net result has been too few opportunities for talented but disadvantaged Americans.
And doctors' salaries are still much too high.

About the issue of too few opportunities for able-bodied but low-skilled people: I remember when the supposedly liberal Robert Reich first arrived at UC Berkeley. He commented on how many thousands of dollars a year the state spent on training each UC student, compared to how very few dollars were spent on mere high school graduates. Mr. Reich even noticed that it seemed a little unfair! Then he conveniently forgot the issue.

But that is life in California: the state increases opportunities for the more privledged and more connected; it tolerates their monopoly powers (or, among the upper reaches of state employees like Robert Reich, their excessive salaries). At the same time it increases taxes and competition for the less privledged.
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written by watermelonpunch, February 02, 2013 11:20
I'm not going to speak about Northern California, because I'm not familiar with that, or their cost of living.

But in southern california at least, nurses are paid pretty well, I guess because of a shortage. But also the cost of living there is also very high, and the housing is also expensive (supposedly because of a shortage - and that hasn't really changed since the bust either).

Basically I'm saying that yes, it's true California has some serious problems... I agree the policies do seem to favour the wealthy there, and do seem to promote a culture where immigrants are seen as a staple ingredient to an affordable labor force.
But there's a lot of issues that make things add up this way.

I can't help but think about how for-profit colleges tend to specialize in things like nursing. And I remember watching a Frontline, where they showed how a lot of people, probably drawn to a career in nursing because they heard about the demand for nurses... and they would go through this nursing programme, and come out underprepared and in some cases completely unqualified. Their degree worth nothing, because employers knew the nursing programme was crap.
I have a feeling that lousy situations like that account for a lot of "shortages".

That and no matter how crazy things get in socal - there seems to be so so many willing participants who insist on staying there, or moving there on purpose. (That's the part that perplexes me the most. But then I'd rather live in any state in the union besides socal - I think it's awful there in every way! haha)

Anyway, I'm pretty sure you can't replace nurses with doctors in residency. They do 2 entirely different jobs. So I can't imagine how that would be a plan??????
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written by liberal, February 02, 2013 11:41
watermelonpunch wrote,
Basically I'm saying that yes, it's true California has some serious problems.


California has exactly one serious problem: Proposition 13. You can stuff that much rent into landowner's pockets and not expect it to have seriously detrimental effects on an economy.
Supply and demand
written by Mike B), February 06, 2013 8:44
Skills are commodities which workers sell on the labour market to employers. As with any commodity, if you increase the supply while the demand remains the same, you lower the price of possible sale. Flooding the labour market with more labour power than can be met with demand from the employing class will ensure that workers wages remain at or below their value i.e. their ability to allow for the successful reproduction of more workers with the same or similar skill levels. The result is downward pressures on wages, working conditions, unionisation and standards of living under the rule of Capital.

The capitalist ruling class of the USA and other countries in the world know this. Having a leaky border in the USA, allows for just the right amount of workers to over supply the labour market. The leaky border could be fixed with draconian penalties for employers combined with a government passport level system required for workers seeking employment. This isn't done because our ruling class sees no need for it. Keeping wages lower (see data on real wages since 1964 up to the present) produces higher rates of exploitation and profit. This fact is obscured by various people with political agendas opposed to the interests of workers or out of ignorance or those who remain within the mental stockade of radical liberalism.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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