Immigration and Wages

by Douglas Holtz-Eakin

Opponents of immigration reform, notably Senator Jeff Sessions, Laura Ingraham, and former Alaska governor Sarah Palin, are raising the argument that it is a mortal danger for working Americans. In making the case, Senator Sessions “cited studies by the Federal Reserve in Atlanta, Harvard economists and the Congressional Budget Office that concluded the Senate’s bill would adversely impact America’s working class.”

Let’s look at what the CBO actually said on this issue: “CBO’s central estimates also show that average wages for the entire labor force would be 0.1 percent lower in 2023.”

Is this an attack on the middle class? Let’s do the math. The CBO projections in the absence of immigration reform indicate that total wage and salary disbursements will be $11,835 billion in 2023. Notice that this includes the salaries of the future Lloyd Blankfiens, Lebron Jameses, and Justin Biebers, as well as middle-class workers. CBO also expects employment of 159 million workers. That means wage and salary earnings per worker will be $74,556 on average. These are the earnings that will be reduced 0.1 percent.


Do the arithmetic: 0.1 percent is about $75. About 20 cents a day.

Now, let’s do a little economics. Those present and working illegally will become fully covered by workplace regulations, minimum-wage laws, and other labor-market protections that are more likely to raise wages than anything else. In a globalized economy, labor competition is already fierce; it doesn’t change a thing when a worker moves across the street, state, or even the sea. One would expect the impact to be essentially zero. Even a minimal impact cannot be blamed on earned legalization or a more rational visa system. 

Instead, as the CBO points out, it is in part because “the amount of capital available to workers would not increase as rapidly as the number of workers.” Put differently, if the critics would save not only their breath, but also a few more dollars, the issue would vanish. Or, more precisely, vanish faster. CBO itself projects that wages would be 0.5 percent higher in 2033, so the supposed attack on the middle class is both ephemeral and temporary. 

The Senate-passed immigration reform creates visas for job-creating investor immigrants, eliminates caps on STEM workers, creates a workable agricultural and temporary worker program, and doubles the high-tech visas. It will be good for growth and incomes — and the middle class.

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