Connect with us

Jobs

Immigrants Raise Wages And Boost Employment Of U.S.-Born Workers

Published

on

New research concludes immigrants raise wages and boost the employment of U.S.-born workers. Americans should care about the findings, which confirm and expand upon earlier analyses, because the study addresses a long-held fear that admitting newcomers creates economic problems for current workers. The research follows other positive reports about immigrants controlling inflation and increasing U.S. economic growth.

“Immigration, thanks to native-immigrant complementarity and college skill content of immigrants, had a positive and significant effect between +1.7% to +2.6% on wages of less educated native workers, over the period 2000-2019 and no significant wage effect on college educated natives,” according to research by Giovanni Peri and Alessandro Caiumi, economists at the University of California, Davis. “We also calculate a positive employment rate effect for most native [U.S.-born] workers.” The National Bureau of Economic Research published the research.

Policymakers should welcome the study’s conclusions. The research covers through 2022, including recent increases in immigration. “Even simulations for the most recent 2019-2022 period suggest small positive effects on wages of non-college natives and no significant crowding out effects on employment,” according to Peri and Caiumi.

Controlling Inflation And Boosting Economic Growth

Peri and Caiumi address the concerns about potential negative impacts, but discussing other ways immigrants benefit Americans is beyond the scope of their paper. “Immigrants are driving the U.S. economic boom,” writes the Washington Post’s Catherine Rampell. “That is: The United States has escaped recession, hiring growth has exceeded expectation, and inflation has cooled faster than predicted—all largely because immigration has boosted the size of the U.S. labor force. Don’t just take my word for it; ask the Federal Reserve chair or Wall Street economists.”

Economists have explained that immigrants help control inflation by expanding the labor supply. “Increasing our ability to produce by increasing the supply of labor is the least painful way to control inflation,” according to Mark Regets, a labor economist and a senior fellow at the National Foundation for American Policy. George Mason University Professor Justin Gest writes in the Wall Street Journal, “Our discovery of the link between migration and inflation highlights the way that immigrants also help labor markets be more responsive to local changes in demand and supply.”

Economists Pia Orrenius and Chloe Smith of the Federal Reserve Bank of Dallas note that a country achieves economic growth with “growth in the labor force and its productivity.” Economic growth, gross domestic product or GDP growth, raises a country’s living standards. Aging and retiring U.S. workers mean that without a significant increase in productivity growth, “less immigration will, therefore, translate directly into slower gross domestic product growth.”

Research by University of North Florida Professor Madeline Zavodny may help us better understand how to think about the recent increase of migrants from Latin America, given the economic effects of slower immigration. Zavodny found that slower growth in the working-age foreign-born population between 2016 and 2022 “reduced U.S. real GDP growth by an estimate of up to 1.3 percentage points in 2022,” according to an NFAP study. “U.S. real GDP would have risen by up to an estimated 3.2 percentage points in 2022 if the working-age foreign-born population had continued to grow at the same rate it did during the first half of the 2010s.” Instead, U.S. real GDP rose by only 1.9 percentage points in 2022.

Understanding Why Immigrants Do Not Depress Wages

In 2014, Giovanni Peri wrote, “A review of the literature finds little evidence of a wage-depressing effect of immigration because immigrants are absorbed into the receiving economy through a series of adjustments by firms and other workers.”

He explained that immigrants typically have different skills from U.S.-born workers, which “may spur innovation, ultimately increasing productivity (and hence wages) of native-born workers.” When immigrants work in manual labor jobs, U.S.-born workers often specialize, such as by moving into “communication-intensive positions.”

An often overlooked fact: “Immigrants are not simply workers but consumers.” By increasing the demand for goods and services, immigrants “can lead to more investment, resulting in greater demand for labor and thus increased wages and employment in the economy.” Immigrants may also increase the demand for labor by starting new businesses. They may help U.S.-born entrepreneurs expand or begin new companies by becoming an available source of labor. “Once these adjustments are accounted for, the wages of native workers, even workers with skills similar to those of immigrants, do not change much in response to immigration,” he wrote.

In their recent study, Peri and Caiumi found immigrants “have a substantial degree of productive complementarity with natives” that offsets the “competition effect” and increases the wages of U.S.-born workers. After 2000, the economists noted that immigrant inflows became more college-educated, and this “complementarity” raised wages for American workers with less education.

“The fact that the inflow of immigrants in the last 20 years helped the wages of the U.S. non-college-educated implies that we could expand the legal immigration of less educated workers to fill several jobs whose markets are very tight now (in the construction sector, hospitality, personal care and health care) without hurting U.S. workers, but rather still allowing their wages to grow,” said Giovanni Peri. “The paper’s results plus the very tight current labor market would suggest this is a very good time to expand legal immigration, make it a more orderly and an employment-driven process, and benefit from it.”

Continue Reading