Are immigrants hurting American workers by driving down wages and taking jobs away? This is probably the most contentious question related to immigration. Most immigration advocates say “No,” while people who advocate for limiting immigration or outright opposing immigration not only say “Yes,” but also use this issue as a linchpin for their stance.
To answer this question truthfully, we need to consider four important aspects.
1. The Short-Term Effect Is Real But Uneven
First, immigrants do lower the wages of competing American workers in the short term, but the impact on occupations is unevenly distributed. Many factors contribute to why new immigrants lower wages for native-borns. New immigrants, who face language and cultural challenges, whose education and professional licenses U.S. employers do not recognize, and who are unfamiliar with American labor practices, have little leverage to negotiate a better salary that better reflects their experiences and skills. To survive, they will do just about anything at any wage.
In addition, many foreigners migrate from poor countries, and even a low wage by American standards is considerably higher than what they could get back home. So the influx of a large number of immigrants who compete for work will no doubt drive down the pay for competing workers in the short term. It’s Economics 101: an increase of supply (labor) drives down the price (wages).
Analysis from Harvard labor economist George Borjas shows that immigrants (both legal and illegal) from 1990 to 2010 reduced the average annual earnings of American workers by $1,396 in the short run. However, the downward pressure of wages caused by new immigrants doesn’t impact the entire American workforce in the same way. Some American populations get hit worse than others, depending on the type of work and its requirements of education, skills, and experience.
Borjas’s analysis shows the less-educated and least-skilled population suffers the most negative impact in the short term when competing against immigrants for the low-paying, least-skilled occupations—such as fruit pickers and restaurant dish washers—and often loses out to immigrants. These types of jobs have high turnover, low barriers to entry, and are less dependent on education and work experience, while the employers in these industries are cost-conscious because any small increase or decrease of labor cost will have a big impact on their bottom line.
Lower-cost immigrants help keep the cost down so these businesses can become profitable. The Americans who used to supply labor for these businesses are often poor Americans without many employment alternatives, so they are particularly vulnerable.
2. Immigration Increases Wages for Complementary Workers
Second, immigration increases the wages of complementary workers. This is the aspect anti-immigration groups refuse to talk about. For businesses that employ both immigrants and native-born American workers, having more immigrants in one skill group—for example, computer programmers—will not only improve business profitability, but also allow the firm to expand employment opportunities for complementary workers in fields such as accounting, marketing, human resources, and compliance.
David Frum, a senior editor from The Atlantic, proposed an interesting immigration reform idea based on such concept: “If we admit a lot of foreign-born surgeons, we could hugely drive down the cost of major medical operations. American-born doctors would shift their labor to fields where their language facility gave them a competitive advantage: away from surgery to general practice. This policy would hugely enhance the relative purchasing power of plumbers and mechanics, enabling them to eat out more often and buy more American-made entertainment, increasing GDP and creating jobs.”
3. Long-Term Wage Effects Are Zero
Third, in the long run, the net negative wage impact on American workers is close to zero. Although the influx of immigrants lowers the wages of native workers in the short run, Borjas’s study on immigration and American workers (which anti-immigration groups often cite) shows such impact becomes statistically negligible in the long run.
In addition, let’s not forget that immigrants have their own desires and aspirations in life. They didn’t leave everything they are familiar with and everyone they love behind so they could stay at the bottom of the economic ladder in a new country. Once they obtain the language skill, education, and work experience they need, or find a way to obtain new occupational licenses, they will demand better pay and move from lower-paying to higher-paying occupations. The better they assimilate, the faster they will move up the economic ladder. That is another factor of why the net negative wage impact on American workers is insignificant in the long run.
4. Immigrants Benefit the U.S. Economy in Other Ways
Fourth, American businesses and workers benefit from immigrants in other ways. Immigrants are consumers. An influx of immigrants increases demand for housing, food, education, and health care, which spurs demand for American businesses, which increases demand for American workers.
In addition, immigrants help American businesses ease the pain of the skilled-worker shortage. The United States faces a skilled-worker shortage in both high-skill and low-skill fields. The National Federation of Independent Businesses’ latest survey reported 44 percent of companies could find “few or no qualified applicants for positions they were trying to fill.” The Wall Street Journal reported the labor shortage has led to costly delays in the U.S. construction industry: “Slowdowns as long as two months as they wait for carpenters, drywall workers, foundation pourers and other specialists.”
Even Apple CEO Tim Cook explained to Charlie Rose in December 2015 that he had moved Apple manufacturing to China not because Chinese laborers are cheap, but because he couldn’t find enough skilled tool and die workers in the United States. In addition, the existing skilled American workforce is getting older. Forbes reported that 53 percent of skilled-trade workers in the United States were 45 years and older as of 2012. Immigration provides American businesses with the younger skilled workers they need to remain in America and, in turn, allows businesses to expand operations and hire more American workers and benefit American consumers.
More importantly, some immigrants are job creators. In fact, immigrants are 13 percent of the U.S. population, but they own 20 percent of small businesses. In Silicon Valley, 44 percent of high-tech businesses have at least one immigrant founder. According to a study by Stanford University, from 2007 to 2012, Latino-owned new business formation increased 47 percent. A Manhattan Institute analysis showed that in 2012 alone, immigrant-founded businesses employed approximately 560,000 workers and generated $63 billion in sales. These immigrant-owned businesses provide many employment opportunities for American workers.
Overall, Borjas’s research concluded that all immigrant workers (legal and illegal) enlarged the U.S. economy by 11 percent, or $1.6 trillion annually. Even though 97.8 percent of this $1.6 trillion goes back to the immigrants themselves as wages and benefits, the remainder constitutes an “immigration surplus,” which equals $35 billion-a-year net benefit to American businesses and workers.
Are immigrants hurting American workers? While immigrants do lower wages of competing American workers in short term, if we take the long term view and evaluate the overall economy, the answer is a resounding “No.”