Recently, I had a long conversation with a friend, a sociologist, about the future of the labor market and family life, and we considered the possibility that the rising share of children raised in chaotic home environments and what looks to be the broader evaporation of mid-skill employment opportunities and the deteriorating labor market position of less-skilled workers might lead to a world in which market wages for as much as half of the population might continue to decline, labor force participation might also decline, and efforts to keep people in the workforce might require labor-intensive, and thus very expensive, casework. Lawrence Mead’s Expanding Work Programs for Poor Men observes that even generous wage subsidy programs, like the New Hope Project in Milwaukee, haven’t succeeded in tempting many jobless men into the workforce in limited field experiments. Mead concludes that programs designed to encourage the hard core non-employed to work need to combine both help and hassle, i.e., inducements to work and also rigorous monitoring. Suffice it to say, I’d be delighted if we experienced a revival of stable two-parent families and if some new productivity revolution greatly improved labor market outcomes for all U.S. workers, including the less-skilled. I don’t even discount the possibility that these developments might come to pass over a long time horizon. But assuming these happy outcomes do not come to pass, or rather that they do not come to pass in the very near future, we might be looking at a very challenging social and economic environment in the decades to come. This is the context I have in mind when I look at debates surrounding immigration and education reform, among other issues.
Advocates of a surge in less-skilled immigration to the U.S. are pointing to new research from economists Giovanni Peri and Mette Foged:
Using a database that includes the universe of individuals and establishments in Denmark over the period 1991-2008 we analyze the effect of a large inflow of non-European (EU) immigrants on Danish workers. We first identify a sharp and sustained supply-driven increase in the inflow of non-EU immigrants in Denmark, beginning in 1995 and driven by a sequence of international events such as the Bosnian, Somalian and Iraqi crises. We then look at the response of occupational complexity, job upgrading and downgrading, wage and employment of natives in the short and long run. We find that the increased supply of non-EU low skilled immigrants pushed native workers to pursue more complex occupations. This reallocation happened mainly through movement across firms. Immigration increased mobility of natives across firms and across municipalities but it did not increase their probability of unemployment. We also observe a significant shift in the native labor force towards complex service industries in locations receiving more immigrants. Those mechanisms protected individual wages from immigrants competition and enhanced their wage outcomes. While the highly educated experienced wage gains already in the short-run, the gains of the less educated built up over time as they moved towards jobs that were complementary to those held by the non-EU immigrants.
The takeaway, I assume, is meant to be that we have nothing to fear from a surge in less-skilled immigration, as it will seamlessly lead to an upgrading of the qualifications and the labor market outcomes of the native-born labor force. But consider the following:
Our analysis has four main findings. First, considering native workers who stayed within the same establishment, larger flows of non-EU immigrants in the municipality increased wages and occupational mobility of natives, measured as the probability of changing occupation. This increased mobility was strongly associated to a move towards more complex jobs for workers who also changed establishment. This suggests that the specialization of natives in response to more manual skills in the local labor market materializes mainly across rms. Second, less educated natives experienced positive (not always signicant) wage eects. The positive effects were particularly strong in the complex service sector. The only case in which some incumbent native workers had negative effects on their wages and careers was for the low skilled in the public sector. Third, the cumulated effect on weeks worked shows that immigration increased the mobility, particularly for highly skilled, both across establishments within municipality and towards other municipalities. However, non-EU immigrants did not reduce the cumulated weeks of employment of natives. Therefore immigration increased the cross-establishment and cross-municipality mobility of natives but did not affect the length of their working year. Fourth, following the transition in the short and long run, using an event-study-like method, we observe that less educated workers progressively increased their wage and the complexity of their occupations in response to non-EU immigration reaching the largest effect five to six years after the beginning of the event. This effect is similar for highly educated. Employment effects are not signicant in the short or in the medium-long run on either group. Moreover, the upgrading effects on occupation and wages in response to immigrants appear to be stronger and more persistent for natives who were young and had low-tenure when the immigrant inflow started. [Emphasis added]
As Enrico Moretti has observed, skilled workers in the U.S. are more geographically mobile than less-skilled workers. Less-skilled natives tend to be less geographically mobile than less-skilled immigrants. It is not at all obvious that a pattern that obtains in Denmark, a compact, relatively homogenous society, would also obtain in the U.S. And it also seems unlikely that “upgrading effects” would apply evenly across all native-born U.S. workers, as evidenced by growing gender gaps in educational and labor market outcomes, a phenomenon that appears to be particularly extreme in the United States. Denmark’s relative success can perhaps be attributed to large-scale investments in casework, i.e., the large number of social workers who monitor and cajole recalcitrant individuals to seek and retain employment. Also, Denmark had a relatively small number of less-skilled immigrants with limited Danish fluency prior to 1995. Peri and Foged note that the post-1995 influx primarily consisted on non-Danish-speakers with limited skills, who complemented rather than competed with the native Danish-speaking the population. The U.S., in contrast, is 13 percent foreign-born, and almost 9 percent of U.S. residents speak English “less than very well,” as we have recently discussed. The relevance of the Danish example is not obvious. Of course, we could dramatically increase the ranks of U.S. social workers to address the displacement caused by a large influx of less-skilled workers, in keeping with the Danish example. But advocates of a surge in less-skilled immigration tend not to mention this as a logical outgrowth of their favored policy.