Politics & Policy

Immigrants in, Wages Down

How to do the figuring.

EDITOR’S NOTE: This piece appears in the May 8, 2006, issue of National Review.

D o immigrants harm the employment prospects of native-born Americans? If so, how serious is the harm? Economists have analyzed these questions for the past quarter-century. Most of the early studies concluded that the wage impact of immigration was small. But newly available evidence is slowly breaking down this consensus. In fact, immigration may have depressed the wages of low-skilled workers by 5 to 8 percentage points.

In the last few weeks, the academic discussion of how best to measure the wage impact of immigration has spilled over into the policy debate over tighter borders, a proposed amnesty for 11 million illegal immigrants, and the adoption of a guest-worker program that would admit around 400,000 temporary workers annually. What does economic theory have to say about the impact of immigration on wages?

The laws of supply and demand imply that, other things being equal, an increase in the number of low-skilled immigrants will lower the wages of comparable native workers, at least in the short run, because they now face stiffer competition in the labor market. In contrast, high-skilled workers may gain from the influx of immigrant labor. Not only will they pay less for the services these laborers provide, such as painting the house and mowing the lawn, but by hiring immigrant workers they will be able to specialize in producing the goods and services to which their skills are better suited…

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