The Corner

The Law of Supply and Demand Applies to Immigrant Labor — High- and Low-Skill

Alan Greenspan proposed a solution to income inequality yesterday at the National Association of Business Economics: We can lower higher-end salaries by increasing skilled immigration.

“You don’t have to bring up the bottom if you bring the top down,” he said (at 44:09 in the recording). Greenspan suggests either eliminating the H1B visa program for educated foreigners or expanding it. Leaving aside the wisdom of that policy, it is refreshing to hear an acknowledgement, in the context of immigration policy, that the law of supply and demand applies to labor.

But if bringing in more skilled immigrants will decrease salaries at the higher end, doesn’t the same apply at the lower end, which should be of far greater concern? And if we decrease salaries at the high end while also decreasing salaries at the lower end, we have not shrunk the inequality gap (if that is a priority), we have just moved it down a few notches. 

None of the amnesty proposals to date have included scaling back unskilled immigration, which not only depresses wages for less-educated Americans, but imposes significant social costs on taxpayers as well (through trying to close the achievement gap between the children of uneducated Hispanic immigrants, on the one hand, and whites and Asians, on the other; through subsidized health care; and through police and prison expenditures). 

Significantly reorienting our immigration system towards skilled workers and away from unskilled aliens should be a non-negotiable quid pro quo for amnesty.

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