Immigrants Lower Immigrants' Wages

Print
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.)