(Here is a bit more analysis on George J. Borjas and
others by Sarah Kabir )
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Popular belief regarding immigration is that immigrants take away jobs,
especially those from racial minorities, create unemployment and depress
wages. Numerous studies have been done in assessing the impact of
immigration on native wages, but, their results vary significantly.The
impact of immigration on the wages of competing native-born workers is
very small. This is because American economy is extremely large and
complex, running at 7.6 trillion dollars a year, and that a very big
increase in the supply of workers would be required to seriously affect
such an economy. Since, the aggregate increase in the supply of labor
caused by immigration in the U.S. is low, the impact of immigration on
the wages of competing native-born workers is also small. In addition,
the effect seems to be dispersed across the country because competing
native workers migrate out of the areas to which immigrants move.
Although the aggregate increase in the supply of labor due to
immigration might be small at the national level, it might be
significant in the geographical areas with high concentration of
immigrants. Simultaneously, less-educated black workers might feel
heavier impacts due to increased supply because their skills resemble
closely those of most immigrants.There is a numerically weak
relationship between native wages and immigration across all types of
native workers, white and black, skilled and unskilled, male and female.
The only group that have suffered some adverse effects is the earlier
immigrant cohort, but not the black Americans, since the majority of the
latter group happen to reside in states not inhabited by most immigrants
Jorge Borjas argues that shifts in the sources of immigration have had
significant economic consequences, firstly, because the skills of the
successive immigrant cohorts emerging mainly from less-developed nations
were not as strong as their earlier counterparts from industrialized
countries and, secondly, because of these sizable cohort effects, there
was much less convergence between the earnings of immigrants and natives
than was previously believed. According to Borjas, the combination of
relatively low skills and sluggish wage growth suggested that the
immigrants who arrived in the 1970s would not attain wage parity with
the U.S.-born workers during their working lives.The decline in the
relative wages of successive immigrant waves continued into the 1980s
and that the earnings of Mexican and Asian immigrants, the two groups
making up the majority of recent immigration, would not converge to the
earnings of their earlier counterparts of the same origin.
The same is true for a study conducted by Augustine J. Kposowa, who
assessed the impact of immigration on unemployment and earnings among
racial minorities in the U.S. He assumed that employers would hire only
to maximize their profits and lower their costs and would turn to
immigrants instead of native minorities if the former can provide the
same level of skills at a lower price. Hence, a competition between the
two groups might evolve and employers would take advantage by reducing
wages. Kposowa's empirical study showed that increases in immigration in
the 1970s and 1980s have had significant negative effects on
unemployment levels among racial minorities. This is because immigrants
were substitutes for native U.S.-born workers who possessed very low
levels of skills and education.
Since immigrants were willing to accept lower wages, they were preferred
over the natives by profit-driven employers. Immigration has had a
negative impact on minority income in the 1980s even after adjusting for
human capital variables and minority skill levels. Two possible
explanations were offered for this finding. Firstly, immigrants,
especially the low-skilled ones, added to the supply of labor in the
secondary labor market. When supply exceeded demand, employers did not
raise wages, which depressed the native minority earnings because most
minorities were in direct competition with the immigrants for jobs
located at the peripheral sector of the economy. Secondly, some
employers chose immigrants to break strikes, unions etc. because in fear
of unemployment, the immigrants accepted whatever wages the employers
were willing to offer. This, once again, lowered minority wage levels
within the economy. That is why, Kposowa contended, that immigration of
less skilled workers has promoted job loss, lowered earnings and reduced
occupational mobility for native non-whites in the U.S.
Staughton Lewis cited a common misconception that there are fixed number
of jobs in the economy and as immigrants enter the labor market, natives
are displaced on a one-to-one basis. This fallacy does not take into
account the stimulating effect that immigration has on the economy in
terms of technical improvement and capital accumulation and that in the
long run there might be expansion of the economy and that the employment
level might actually increase. According to Lewis, problems might arise
only when there are fixed number of jobs in the economy, the immigrants
are perfect substitutes of the natives in terms of skills and output
capacity, and that immigrants are willing to work for lower wages than
their native counterparts.
A brief theoretical analysis could be reviewed to demonstrate how
classical economics predicts the effects on native earnings after the
inflow of immigrants into the labor market. With the assumption that all
labor consists of two homogenous groups: natives and immigrants, an
increase in substitute immigrant labor would cause an increase in the
total supply of labor and a decrease in native wages. In the short-run,
as substitute immigrants enter the market, wages drop. In the long-run,
native labor supply drops, as natives leave the job market because of
low wages and the immigrants step in to take the jobs performed earlier
by the natives.
A situation different from that shown above would prevail if immigrants
and natives happen to be complements instead of being substitutes. If
they are complements, natives can gain both employment and wages by
specializing in those industries and occupations in which they have a
comparative advantage. Hence, with an increase in immigrant labor,
greater demand is generated for native labor which is reflected in the
labor demand curve shifting upwards. As a result, the equilibrium wage
rate of native labor rises, and the quantity of native labor that is
employed increases.
Lewis attempted to find out whether immigrants are complements or
substitutes for native labor in the U.S..He found that both negative and
positive impacts of immigration on native earnings and employment are
possible. One of Lewis findings was that results of the empirical
evidence vary according to region or industry. For example, in New York
City, black and Hispanic immigrants are substitutes for the natives of
the same origin residing in the U.S., while in the South, illegal
Hispanic immigrants are competing with native Hispanics.
The same nature of variation in the impact of immigration can be
observed across industries since studies show construction,
manufacturing and contract cleaning sectors to be most affected by
immigrants while food service and agriculture being benefited due to the
complementary nature of work undertaken by immigrants and natives.
Although the popular belief is that only the secondary sector is
affected while the primary sector remains unaffected by immigration, in
the long-run, as immigrants gain education and crucial labor skills,
they might be competing for middle management positions in industries in
the primary sector in the years to come. So, over time, the primary
sector might be more affected than the secondary one due to immigration.
Although there seems to agreement as to whether immigrants adversely
affect natives' earnings and employment, there are some clear benefits
of immigration. In the absence of immigration inflow, jobs performed by
immigrants would either have to be filled by natives or would not be
performed at all. The presence of immigration causes a reallocation of
labor across different sectors of the economy which changes the mix of
goods and services that the natives consume and in turn brings about a
fall in prices, even if it takes away jobs from certain natives in the
short-run.
References:
1) George J. Borjas, "Assimilation and Changes in Cohort Quality
Revisited: What Happened to Immigrant Earnings in the 1980s?"
National Bureau of Economic Research, 1996.
2) Augustine J. Kposowa, "The Impact of Immigration on Unemployment and
Earnings among Racial Minorities in the United States", in Ethnic and
Racial Studies, Volume 18, Number 3, July 1995, pp. 605-628.
3) National Research Council, "Immigration's Effect on Jobs and Wages:
Empirical Evidence (Impact of Immigrants on Native Earnings and
Employment)" in The New Americans: Economic, Demographic and Fiscal
Effects of Immigration, edited by James P. Smith and Barry
Edmonsten, National Academy Press, Washington, D.C., 1997, Chapter
5, pp. 219-230 .
4) Staughton Y. Lewis, "Impacts of Immigration on U.S. Natives'
Employment and Earnings: A Summary of the Evidence" in Thomas J.
Espenshade, (editor), A Stone's Throw From Ellis Island: Economic
Implications of Immigration to New Jersey, University Press of
America, Lanham, Maryland, 1994, Chapter 4, pp. 169-215.