New study: Immigrants little effect on jobs of US high school dropouts

One of the most contentious arguments in the debate over the economic effects of immigration has been whether the influx new immigrants has had an adverse effect on the wages of native-born workers with the lowest levels of education. It has been widely accepted that for those native workers at the higher levels education and job skills, immigrants generally provide economic benefits, but the debate over how they effect those who labor at low-skill jobs or jobs requiring less educational attainment has fostered debate.

A new study from Giovanni Peri of the University of California, Davis and Chad Sparber of Colgate University has tackled this thorny issue and found that foreign and native-born workers with similarly low educational attainment in fact compliment each other in the workforce rather than compete.

This idea of "complimentary skills" is not a new one and has been examined not only by Professor Peri before, but numerous other economists. This study differs from those in that it contains forty years of data and looked at the actual tasks performed by each class of workers to see what jobs were being done by native-born workers as opposed to foreign born workers.

The study found that foreign born workers perform more manual and physical tasks, while native-born workers do tasks that are more language-intensive and interactive, and that native-born workers benefit from this specialization.

The study also examines the work of economist George Borjas that claimed that immigrant labor decreased the overall wages of less educated native workers by 8%. Peri and Sparber found that overall, the negative effects of foreign workers was only 0.7%.

Documented and undocumented immigration has significantly affected US labor supply during the last few decades, though the economic effects of this immigration remain subject to debate. The most contentious issue is whether the particularly large inflow of immigrants with low levels of schooling has decreased the wage of native-born workers with similarly low educational attainment. If workers’ skills are differentiated only by their level of educational attainment, and workers of different skill levels are imperfectly substitutable, then a large flow of immigrants with limited schooling should reward more educated natives and hurt less educated ones.

This intuitive approach receives support in papers by George Borjas (2003, 2006) and George Borjas and Larry Katz (2005), which argue that immigration reduced real wages paid to native-born workers with no high school degree by four to five percent between 1980 and 2000. In contrast, Card (2001) and Lewis and Card (2005) employ city and state level data and find almost no effect of immigration on the relative wages of less educated workers. Moreover, their results are robust to the migration decisions of native-born workers, as they find that natives do not choose to move to areas with fewer immigrants. Thus, the relationship between immigration and wages appears to be more nuanced.

Ottaviano and Peri (2006) note that the effect of immigration depends crucially on the degree of substitution between native and foreign-born workers within each education group. That is, workers’ skills may be differentiated by more than traditional measurable characteristics such as educational attainment (and experience level). Native and foreign-born workers may have quite different skills, leading them to specialize in different productive tasks. For example, immigrants — particularly those with low levels of formal schooling — are likely to have inadequate language skills, imperfect knowledge of productive networks, and only limited awareness of social norms and intricacies of productive interactions. However, they have manual and physical skills similar to those of native-born workers. Therefore, foreign-born workers have a comparative advantage in occupations performing manual labor intensive tasks. On the other hand, native workers with little education will have a much better mastering of the language, local norms, rules, and networks. Thus, they have an advantage in performing interactive and coordination tasks. If less educated immigrants work in occupations that mostly perform manual tasks, natives move to occupations requiring more interactive tasks, and the two types of tasks are complements in production, then native workers can protect themselves against wage competition and benefit from immigration through specialization.

Though the assumptions in Ottaviano and Peri (2006) seem reasonable and are supported by anecdotal evidence, they require empirical verification. This paper employs US data for all 50 states (plus the District of Columbia) from 1960 to 2000 to determine whether task-specialization among native and foreign-born workers truly occurs.

…snip…

The data strongly support three key implications of our theory, which we formalize in a simple model in the first section of the paper. In states with large inflows of less educated immigrants: i) less educated native-born workers shifted their supply towards interactive tasks; ii) the total supply of manual relative to interactive skills increased at a faster rate than in states with low immigration and iii) the wage paid to manual relative to interactive tasks decreased. Less educated natives have responded to immigration by upgrading their occupations. That is, they leave manual task-intensive occupations for interaction-intensive ones. Given the positive wage effect of specializing in interactive skills, this shift augmented real wages paid to native-born workers.

..snip…

Finally, we use the structure of our model and our empirical results to calculate the effect of immigration and the related adjustment in task supply on average wages paid to native-born workers with a high school degree or less. Task complementarities and changes in native-born task supply together imply that the wage impact of immigration is quite small. These findings agree with those of Card (2001), Card and Lewis (2006), and Ottaviano and Peri (2006). At the same time they enrich the structural framework to analyze the effect of immigration first proposed by Borjas (2003) and then used in Borjas and Katz (2005), Ottaviano and Peri (2006), and Peri (2007).

…snip…

Our empirical analysis employed a dataset developed by Autor, Levy, and Murnane (2003) that measures the task-content of occupations in the United States between 1960 and 2000. We find strong evidence supporting three implications of our theoretical model:

i) On average, less educated immigrants supplied more manual relative to interactive tasks than natives
supplied. This tendency became stronger during the 1980s and 1990s.

ii) In states with large immigration among the less educated labor force, native workers shifted to occupations
intensive in interactive tasks, thereby reducing native workers’ relative supply of manual tasks. In states with
low immigration, native-born workers maintained a higher relative supply of manual tasks.

iii) In states with large immigration among the less educated labor force, there is a larger relative supply
of manual production tasks than in states with low levels of immigration. This implies that immigrants more
than compensate for the reduced manual skill supply among natives, and it ensures that manual task-intensive
occupations earn lower wages.

Since native-born workers respond to inflows of immigrant labor by specializing in interactive tasks, wage losses associated with immigration are minimal. Immigration caused wages paid to native-born workers with less than a high school degree to drop by just 0.7% between 1990 and 2000.

Comparative Advantages and Gains from Immigration Giovanni Peri (University of California, Davis and NBER), Chad Sparber (Colgate University) April, 2007
alternative link

Read More...

Summary only...

New Study: Effects of Immigrant Workers on Wages and Employment.

One of the most heated debates over immigration and immigration reform has not been taking place in Congress or on the campaign trail. Over the last few years in the halls of academia a debate has raged between two opposing schools of labor economists trying to understand the ultimate costs and benefits of immigrant workers to the US economy. One camp claims that immigrants provided a net benefit to the economy and US workers, the other claims immigrants take jobs from US workers, particularly those with the least education and opportunities. Armed with statistical data, mathematical formulas, charts, and analytical theories, they have argued back and forth trying to answer a key question to any successful immigration policy: Are immigrant workers good or bad for the US economy and more importantly how do they effect the wages and job prospects for native-born workers?

The debate has focused mostly on the relationship between immigrant and native-born workers at the bottom of the economic ladder where competition between the two groups would seem to be the most intense. Conventional wisdom would dictate that given the basic laws of supply and demand, an increase in low-skilled workers would increase competition and drive down wages for all those in that job category.

A new report by the Public Policy Institute of California should change the nature of that debate.

Released last week, "How Immigrants Affect California Employment and Wages", by Giovanni Peri, Associate Professor of Economics at the University of California, Davis, looks at over 40 years of data to determine what effect increasing immigrant populations have had on the job market for native Californians.

As the home to almost 30 percent of all foreign-born workers in the United States, California was chosen as the subject of the study not only because of its large immigrant population, with 1/3 of its workforce being foreign-born, but because 2/3 of its immigrant workforce are without high school diplomas – a demographic believed to have the greatest negative effect on native workers with similar educational backgrounds. Additionally, the state's experience with immigrant populations can be viewed as a model for the entire country as immigrant populations begin to disperse into more non-traditional areas and regions.

The study found that increased immigrant populations had an overall positive effect for American workers across all age and educational levels.

• First, there is no evidence that the inflow of immigrants over the period 1960–2004 worsened the employment opportunities of natives with similar education and experience. The study finds no association between the inflow of immigrants and the out-migration of natives within the same education and age group.


• Second, according to our calculations, during 1990–2004, immigration induced a 4 percent real wage increase for the average native worker. This effect ranged from near zero (+0.2%) for wages of native high school dropouts and between 3 and 7 percent for native workers with at least a high school diploma.


• Third, the results indicate that recent immigrants did lower the wages of previous immigrants. Wages of immigrants who entered California before 1990 were 17 to 20 percent lower in 2004 than they would have
  been absent any immmigration between 1990 and 2004

The positive effect of immigrantion for the vast majority US workers and on the overall economy is not a new finding, numerous studies have drawn the same conclusions. Most notably were last years, "Rethinking the Effects of Immigration on Wages." by Università di Bologna's Gianmarco Ottaviano and Giovanni Peri from UC Davis, "Growth in the Foreign-Born Workforce and Employment of the Native Born", by the Pew Hispanic Center, and 2005's "Is the New Immigration Really So Bad?" by Andrew Card of UC Berkeley. All came to the same general conclusion to varying degrees.

What is new, is that Peri's study shows a net positive effect for all workers, even those with limited educations and low skills. Perhaps even more important is that he has managed to document the concept of "imperfect substitutes" and "complimentary" workers first explored in earlier studies.

In essence his hypothesis is that simple supply and demand models are not applicable to the current immigration situation since immigrants bring different skills and experiences to the workplace and rather than being "substitutes" for native workers they are most likely to "compliment" US workers, increasing overall productivity and opportunities for the native born.

In nontechnical terms, the wages of native workers could increase because the increased supply of migrants is likely to put native workers in jobs where they perform supervisory, managerial, training, and in general interactive and coordinating tasks, which makes them more productive. Moreover, the presence of new workers also implies higher demand for consumption, so that immigration might simply increase total production and demand without depressing wages.
PPIC

The concept is not new, economist Rachel M. Friedberg, of Brown University documented it in 1997 in her study of Russian immigrants in Israel, "The Impact of Mass Migration on the Israeli Labor Market". Friedberg found that "… the Russians had, if anything, improved wages of native Israelis. She hypothesized that the immigrants competed more with one another than with natives. The Russians became garage mechanics; Israelis ran the garages."

After analyzing 40 years of census and other data Peri expands on those findings and explains his results with a simple explaination:

Typically, two very important dimensions of workers’ skills are their education and their labor market experience. Workers with different education and experience tend to fill different jobs. Rather than competing with each other in the labor market, they complement each other.

We say that two types of workers are “substitutes” (competitors) if the increased supply of a group decreases the wages of the other (other things equal). They are complements if the increased supply of a group increases the wage of the other.

As an example, think of the construction sector. Workers with a college degree in that sector are likely employed as structural engineers, whereas workers with some college education would be employed in accounting and secretarial jobs, and workers with a high school diploma or less (but with applied skills) might be masons, plumbers, or electricians. The increased supply of masons, plumbers, and electricians would allow more construction companies to start up (or existing ones to expand). In the long run, it would increase the demand for and wages of (complementary) secretaries and engineers.

At the same time, the availability of young, inexperienced masons may increase the need for older, more experienced masons in the role of supervisors, coordinators, and team leaders. Hence, across education and experience groups, the increased supply of one group increases the demand (and productivity) of other groups through these linkages.

….

Even workers with the same education and experience but in different occupations are usually not purely competing with each other. In our previous example, a mason and a plumber, both with a high school diploma and between ages 27 and 36, complement each other to a significant degree: An increased supply of masons allows construction of more homes, increasing the demand for plumbers.

However, if the supply of plumbers becomes small enough (or the supply of masons large enough), some masons may adapt themselves to do plumbing work, implying some degree of competition (substitutability) between the two groups.

Complementarities between different workers are particularly important in evaluating the labor market effect of foreign-born immigrants. Because of their skills, informational constraints, preferences, and history, recent immigrants are usually employed in jobs, occupations, and sectors where previous immigrants were already predominantly employed. Hence, the jobs they compete for are most closely substitutes for those held by other immigrants, whereas they tend to be more complementary to jobs held by natives. For instance, many past and new immigrants are employed as plaster and stucco masons or as agricultural laborers. In contrast, occupations such as plumbers or farm managers require similar degrees of formal education and experience but employ mainly native workers. Therefore, recent immigrants affect the productivity and wages of previous immigrants and natives differently and are potentially beneficial to natives.
PPIC

The importance of Peri's new study cannot be overestimated. In addition to looking at the effects of immigrants on wages he also addresses the theory that as immigrants moved into a workforce, native workers, facing added competition, relocate to other states with fewer immigrants. His results showed that "immigrants do not displace native workers with similar education and age. Natives did not systematically move out as new immigrants moved into California. Instead, the net effect was an increase in the overall supply of California labor in
each age-education group."

As of now, one-third of California’s total labor force consists of immigrants, two-thirds of its uneducated workers come from abroad, and a burgeoning foreign-born population has grown by over 40 percent in the last 14 years.

As a result, one might think that native Californians (particularly the unskilled ones) must have suffered, to an extreme, the negative effects of this “immigration crisis” on their employment opportunities and wages.

The present study seems to say otherwise. Immigrants evidently do not increase the tendency of natives with similar skills (education and experience) to migrate out of state or to lose jobs. Moreover, between 1960 and 2004, immigration had a much more negative effect on the wages of previous immigrants than on those of native workers. This suggests that native and foreign-born workers perform complementary rather than competing tasks in production. In fact, an increase in the number of immigrants evidently increases the demand for tasks performed by native workers and raises their wages. Our median estimates indicate that these complementarities of immigrants spurred wage growth of natives by about 4 percent in 14 years.

These results should certainly be taken into account by policymakers as they consider immigration reform. The findings would seem to defuse one of the most inflammatory issues for those who advocate measures aimed at “protecting the livelihood of American citizens.”

Because California leads the nation in immigration trends, this study may provide glimpses into the future and the potential effects of immigration on wages and employment at the national level. PPIC

Related media coverage
Sacramento Bee
Press Telegram
San Jose Mercury News
LA Times
McClatchy Newspapers
AP

tags: immigration, studies , wages, PPIC

Read More...

Summary only...

New Economic study: Most US workers gain from immigration

With a debate raging in political circles over US immigration policy, economist who have been studying the effects of the growing number of immigrants on native workers wages and job prospects have presented varying views on the topic. A new study released today by the National Bureau of Economic Research entitled, Rethinking the Effects of Immigration on Wages, weights in on the continuing debate on the effects of immigration on the US labor marketand finds that there is "a positive and significant efect of immigration on the average wage of U.S.-born workers" and that there is only "a small negative effect of immigration on wages of uneducated US born workers and a positive wage effect on all other US-born workers."

While agreeing that immigration has a general positive effect on the economy on a whole, some economists have expressed concern over its effects on those native workers with the least skills and education. This study, by Università di Bologna's Gianmarco Ottaviano and Giovanni Peri from UC Davis, looks at the negative effects on that group and finds them to be nearly negligible for a number of reasons.



tags: immigration, Gianmarco Ottaviano, George Borjas , economic studies, NBER, Giovanni Peri


The authors see two reasons for the continued debate amongst economist about the effects of immigration on low-skilled, uneducated, native workers.

From the academic perspective two facts have contributed to feed the debate First, the recent empirical literature about the effects of immigrants on the wages of natives has provided a mixed set of results. Second, the group of uneducated workers (without a high school degree) has become increasingly large among recent immigrants, while at the same time the real wage of uneducated U.S.-born workers has performed very poorly: it even declined in real terms during the recent decades (see, for example, Autor, Katz and Kearny, 2005). It is certainly tempting to attribute the poor wage performance of uneducated U.S. workers to the competition of immigrants, as such connection would provide an easy solution to the problem of wage decline: halt immigration.

Ten years ago an influential survey by Friedberg and Hunt (1995) summarized the literature concluding that, “the effect of immigration on the labor market outcomes of natives is small.” Since then, a number of studies have re-examined the issue refining the estimates by accounting for important problems related to the endogeneity of immigrant inflow and the internal migration of US workers. Even with more accurate and sophisticated estimates at hand, a consensus has yet to be reached: some economists identified only small effects of immigration on wages (Card, 2001) while others found large negative effects (Borjas, Friedman and Katz, 1997).Recently, however, the latter view of a large negative impact of immigration on wages, particularly of uneducated workers, seems to have gained momentum.

Our paper builds on section VII of the article by George Borjas (2003) but takes a fresh look at some critical issues that results in substantial revisions of several results

Link

Building on the work of economist George Borjas, Ottaviano and Peri, use the same "general equilibrium" approach to analyze his previous findings. Their conclusions vary greatly from those of immigration restriction advocate Bojas.

First, the average wage of US-born workers experiences a significant increase (rather than a decrease) as a consequence of immigration. This results is the consequence of the imperfect substitutability between U.S. and Foreign born workers so that immigration increases wages of U.S.-born at the expenses of a decrease in wages of other foreign-born workers (previous immigrants).

Second, the group of least educated U.S.-born workers suffers a significantly smaller wage loss than previously calculated. The fact that uneducated foreign-born do not fully and directly substitute for (compete with) uneducated natives, but partly complement their skills, is the reason for this attenuation.

Thirdly, all the other groups of US-born workers (with at least an high school degree) who accounted for 90% of the U.S.-born labor force in 2004, gain from immigration.

Finally, even considering only the ”relative” effect of immigration on real wages of natives, namely its contribution to the widening of the College-High School Dropouts gap and of the College-High School gap, we find only a small contribution of immigration to the first and an even negative contribution (i.e. reduction of the gap) on the second for the 1990-2004 period. The group whose wage is most negatively affected by immigration is, in our analysis, the group of previous immigrants who, however, probably have the largest non-economic benefits from the immigration of spouses, relatives or friends making them willing to sustain those losses

.
Link

On of the key reasons Ottaviano and Peri find that immigrant workers don't present as great a threat to unskilled native workers as previously thought is because foreign-born workers are not "perfect substitutes" for US workers in the same education and skill class. Foreign labor often brings different and complimentary skills and/or talents to the workforce. Even in the lowest-skilled jobs native workers have certain skills, ie; language and cultural knowledge that immigrants do not. Expanding on the work of David Card and Rachel Friedberg, the authors explain the concept quite simply: "After all, a Chinese cook, an Italian tailor, a French hair-dresser, a Belgian baker or a Brazilian guitarist produce services that are differentiated from those of their U.S.-native counterparts … just as the talent of Indian-born engineers or German-born physicists may be complementary to (and hard to replace by) those of natives."

We find strong and robust evidence that U.S. and foreign-born workers are not perfect substitute within an education experience group, probably due to their choice of jobs and occupations. We also find that investments respond fast and fully to immigration, already within one year. This implies an average benefit to wages of natives from immigration, already in the short run, distributed as a small loss to the group of high school dropouts and significant wage gains for all the other groups of U.S. natives. The group suffering the biggest loss in wage, rather than natives, is the one of previous immigrants, who compete for much more similar jobs and occupations with the new immigrants. Finally, our model implies that it is very hard to claim that immigration has been a significant determinant in the deterioration of wage distribution during the 1990’s and 2000’s. Only one eight of the sub-average wage performance of high-school dropouts in the 1990-2004 period can be attributed to immigration, while immigration helped wages of high school graduates (the second worst performers of the period). As 30% of U.S. workers are in the group of high school graduates (vis-a-vis only 10% in the High school dropout group) it may be reasonable to consider the college-high school wage premium as the most meaningful measure of wage dispersion. In this case immigration actually worked to reduce that wage gap in the 1990-2004 period.
Link

Read More...

Summary only...

Over 500 economists refute right-wing immigration myth.

We all know the drill by now. When science or academics studies don't jive with a right-wing position, they just ignore it, usually finding some "expert" or think tank to formulate an alternative reality for them. Global warming becomes just a natural fluctuation in climate, evolution is just a theory and cavemen really did ride dinosaurs, sex education makes teenage girls get pregnant, and giving rich people huge tax cuts always benefits the poor.

For the past year, Republicans and their media minion have relentlessly waged a campaign to create another alternative reality, this one dealing with the "immigration crisis." Using statistics from right-wing think tanks like CIS, and the Heritage Foundation, or studies from carefully selected academics like George Borjas, they have managed to do with immigration what they've done with other wedge issues; create a narrative that runs contrary to most accepted scientific and academic knowledge. They have created the great immigration myth. Last month 500 leading economists took that myth on and refuted it.



tags: immigration, Economic studies, immigrants jobs



Like parading out a few snowflake babies to cloud the issue with statistically irrelevant anomalies, the right wing has taken a mixture of anecdotal evidence, widely accepted misconceptions, and situations that deviate from the norm and transformed them into the universal truths in their immigration myth. It's a myth that revolves around the great price paid by average hardworking American citizens because of the influx of those who flaunt their disrespect for our laws by their very presence amongst us.

We've all heard the claims before, repeated nightly on the evening news, or screaming from the headlines of newspapers or weeklies. We've been told of the threat to American workers from cheap-labor undocumented workers, or the raising costs of healthcare and education due to the "illegals" in our mist. All have heard about the economic drain and social upheaval caused by a horde uninvited guests suckling on the national teat.

It's a compelling myth. It's a myth that serves the same purpose all myth has served since the beginning of time. It explains to a people, with a mix of fantasy and simplicity, the causation of that which they fear or creates anxieties.

In this case it addresses a core insecurity that prevails in much of working and middle-class America. It's a myth about the causes of their growing apprehension that the current economic system is no longer working to their advantage.

Like all mythology, the right-wing immigration myth cannot hold up to scientific or academic investigation. This is why they must rely on their own "experts" to perpetuate it. But like the "science" that explains creationism or intelligent design, the vast majority mainstream academics find their claims to be faulty.

Last month, the challenging of the right-wing immigration myth took the form of an open letter to President Bush and Congress signed by a collection of the nations top economists. Entitled, "Open Letter on Immigration," the letter contained a list of over 500 signatories, including those of 5 Nobel Laureates-Thomas C. Schelling (University of Maryland), Robert Lucas (University of Chicago),Daniel McFadden (University of California, Berkeley), Vernon Smith (George Mason University), and James Heckman (University of Chicago).

Throughout our history as an immigrant nation, those who were already here have worried about the impact of newcomers. Yet, over time, immigrants have become part of a richer America, richer both economically and culturally. The current debate over immigration is a healthy part of a democratic society, but as economists and other social scientists we are concerned that some of the fundamental economics of immigration are too often obscured by misguided commentary.

Overall, immigration has been a net gain for American citizens, though a modest one in proportion to the size of our 13 trillion-dollar economy.

Immigrants do not take American jobs. The American economy can create as many jobs as there are workers willing to work so long as labor markets remain free, flexible and open to all workers on an equal basis.

In recent decades, immigration of low-skilled workers may have lowered the wages of domestic low-skilled workers, but the effect is likely to have been small, with estimates of wage reductions for high-school dropouts ranging from eight percent to as little as zero percent.

While a small percentage of native-born Americans may be harmed by immigration, vastly more Americans benefit from the contributions that immigrants make to our economy, including lower consumer prices. As with trade in goods and services, the gains from immigration outweigh the losses. The effect of all immigration on low-skilled workers is very likely positive as many immigrants bring skills, capital and entrepreneurship to the American economy.

Legitimate concerns about the impact of immigration on the poorest Americans should not be addressed by penalizing even poorer immigrants. Instead, we should promote policies, such as improving our education system, that enable Americans to be more productive with high-wage skills.

Link

Representing the bipartisan nature of the letter, signatories include noted economists that have worked for both Republican and Democratic administrations. These included, N. Gregory Mankiw (Harvard University), former Chairman of President Bush’s Council of Economic Advisers, and J. Bradford DeLong (University of California, Berkeley), Deputy Assistant Secretary of the Treasury under President Bill Clinton, as well as Alfred Kahn (Cornell University), Chairman of the Civil Aeronautics Board under President Jimmy Carter, and Paul McCracken (University of Michigan), Chairman of the Council of Economic Advisors under President Richard Nixon.

When these eminent economists talk about are their "concerned that some of the fundamental economics of immigration are too often obscured by misguided commentary," they speak directly to the right-wing immigration myth-makers. Just as is the case with global warming and evolution, the Republican mythologists present their fringe beliefs as having equal credibility with mainstream scientific and academic knowledge. They present their views as accepted fact.

For every academically sound economic study on immigration presented by a well respected social scientist, the mythmakers counter with one of their dubious reports put out by a right-wing think tank. The American people rarely read economic journals, or academic papers, but they do watch their nightly news, and it is here where the mythmakers make their mark. The right-wing needs but one talking-head from CIS to make the rounds of the evening news to counter the work of hundreds of academic studies and surveys sitting on dusty library shelves.

Hopefully the words of these 500+ economists and social scientist will somehow make an impact on this debate and finally force the conversation to move from the realm of the mythological to the world of the logical. Perhaps those who control the means of information dissemination will finally allow the American people to form their opinions based on facts readily available as opposed to fantasies and mythologies spun by masters of deception.

Read More...

Summary only...

The Immigration Equation: Summer reading for wonks

For the time being the immigration issue has moved from the front pages to be replaced by more pressing world affairs. Yet with both houses of Congress out on the road holding public hearings on the topic, it will only be a matter of time before the big wedge issue of 2006 returns. Looming large on the midterm election horizon, the debate over immigration reform has been the subject of numerous studies, polls and research papers, many of them highly partisan and of dubious academic merit. Recently the New York Times Magazine separated the wheat from the chaff when it published an article recapping the work done by leading labor economists on the issue.

While most look at the summer as a time to catch up on some light reading, something frivolous and entertaining; for the wonkish it's the perfect time to bone up on some solid academic research on immigration and it's real effects on our economy.

The Times article, "The Immigration Equation" is a great primer on the subject and looks at the two competing schools of thought of leading labor economists on immigration and how their work plays out in the current debate.



tags: immigration, George Borjas, David Card , economic studies, HR4437, S.2611

To Borjas, a Cuban immigrant and the pre-eminent scholar in his field, the truth is pretty obvious: immigrants hurt the economic prospects of the Americans they compete with. And now that the biggest contingent of immigrants are poorly educated Mexicans, they hurt poorer Americans, especially African-Americans, the most.
Borjas has been making this case — which is based on the familiar concept of supply and demand — for more than a decade. But the more elegantly he has made it, it seems, the less his colleagues concur. ‘‘I think I have proved it,’’ he eventually told me, admitting his frustration. ‘‘What I don’t understand is why people don't agree with me.''

It turns out that Borjas's seemingly self-evident premise — that more job seekers from abroad mean fewer opportunities, or lower wages, for native workers — is one of the most controversial ideas in labor economics. It lies at the heart of a national debate, which has been encapsulated (if not articulated) by two very different immigration bills: one, passed by the House of Representatives, which would toughen laws against undocumented workers and probably force many of them to leave the country; and one in the Senate, a measure that would let most of them stay.

You can find economists to substantiate the position of either chamber, but the consensus of most is that, on balance, immigration is good for the country. Immigrants provide scarce labor, which lowers prices in much the same way global trade does. And overall, the newcomers modestly raise Americans' per capita income. But the impact is unevenly distributed; people with means pay less for taxi rides and household help while the less-affluent command lower wages and probably pay more for rent.

The debate among economists is whether low-income workers are hurt a lot or just a little — and over what the answer implies for U.S. policy. If you believe Borjas, the answer is troubling. A policy designed with only Americans' economic well-being in mind would admit far fewer Mexicans, who now account for about 3 in 10 immigrants.

-snip-

Easily the most influential of Borjas's critics is David Card, a Canadian who teaches at Berkeley. He has said repeatedly that, from an economic standpoint, immigration is no big deal and that a lot of the opposition to it is most likely social or cultural. "If Mexicans were taller and whiter, it would probably be a lot easier to deal with," he says pointedly.

Economists in Card's camp tend to frame the issue as a puzzle — a great economic mystery because of its very success. The puzzle is this: how is the U.S. able to absorb its immigrants so easily?

After all, 21 million immigrants, about 15 percent of the labor force, hold jobs in the U.S., but the country has nothing close to that many unemployed. (The actual number is only seven million.) So the majority of immigrants can't literally have "taken" jobs; they must be doing jobs that wouldn't have existed had the immigrants not been here.

The economists who agree with Card also make an intuitive point, inevitably colored by their own experience. To the Israeli-born economist whose father lived through the Holocaust or the Italian who marvels at America's ability to integrate workers from around the world, America's diversity — its knack for synthesizing newly arrived parts into a more vibrant whole — is a secret of its strength.

-snip-

In a recent paper, "Is the New Immigration Really So Bad?" Card took indirect aim at Borjas and, once again, plumbed a labor-market surprise. Despite the recent onslaught of immigrants, he pointed out, U.S. cities still have fewer unskilled workers than they had in 1980. Immigrants may be depriving native dropouts of the scarcity value they might have enjoyed, but at least in a historical sense, unskilled labor is not in surplus. America has become so educated that immigrants merely mitigate some of the decline in the homegrown unskilled population. Thus, in 1980, 24 percent of the work force in metropolitan areas were dropouts; in 2000, only 18 percent were.

Card also observed that cities with more immigrants, like those in the Sun Belt close to the Mexican border, have a far higher proportion of dropouts. This has led to a weird unbalancing of local labor markets. For example, 10 percent of the work force in Pittsburgh and 15 percent in Cleveland are high-school dropouts; in Houston the figure is 25 percent, in Los Angeles, 30 percent. The immigrants aren't dispersing, or not very quickly.

So where do all the dropouts work? Los Angeles does have a lot of apparel manufacturers but not enough of such immigrant-intensive businesses to account for all of its unskilled workers. Studies also suggest that immigration is correlated with a slight increase in unemployment. But again, the effect is small. So the mystery is how cities absorb so many unskilled. Card's theory is that the same businesses operate differently when immigrants are present; they spend less on machines and more on labor. Still, he admitted, "We are left with the puzzle of explaining the remarkable flexibility of employment demand."

alternate link

The article also references other academic studies and reports and gives good historical background on the topic. It's a great starting point for acquiring a good understanding of current debate amongst social scientists in the field.

With all the hyperbole and partisan rhetoric passing for information in the immigration debate, this little lull in activity presents an ideal opportunity for those truly interested in immigration reform to bone up on some solid reality-based information.

For further reading see:

Is the New Immigration Really So Bad?
David Card, Department of Economics, UC Berkeley, January 2005

This paper reviews the recent evidence on U.S. immigration, focusing on two key questions: (1) Does immigration reduce the labor market opportunities of less-skilled natives? (2) Have immigrants who arrived after the 1965 Immigration Reform Act successfully assimilated?

Looking across major cities, differential immigrant inflows are strongly correlated with the relative supply of high school dropouts. Nevertheless, data from the 2000 Census shows that relative wages of native dropouts are uncorrelated with the relative supply of less-educated workers, as they were in earlier years. At the aggregate level, the wage gap between dropouts and high school graduates has remained nearly constant since 1980, despite supply pressure from immigration and the rise of other education-related wage gaps. Overall, evidence that immigrants have harmed the opportunities of less educated natives is scant. On the question of assimilation, the success of the U.S.-born children of immigrants is a key yardstick. By this metric, post-1965 immigrants are doing reasonably well: second generation sons and daughters have higher education and wages than the children of natives. Even children of the least educated immigrant origin groups have closed most of the education gap with the children of natives.

"The Impact of Immigration and the Labor Market" , George J. Borjas, Harvard University, January 2006

Not surprisingly, the impact of immigration on the host country’s labor market is now being heatedly debated in many countries. In the U.S. context, this concern has motivated a great deal of research that attempts to document how the U.S. labor market has adjusted to the largescale immigration of the past few decades. Three central questions have dominated much of the research: What is the contribution of immigration to the skill endowment of the workforce? How do the employment opportunities of native workers respond to immigration? And, who benefits and who loses?

The policy significance of these questions is evident. For example, immigrants who have high levels of productivity and who adapt rapidly to conditions in the host country’s labor market can make a significant contribution to economic growth. Conversely, if immigrants lack the skills that employers demand and find it difficult to adapt, immigration may increase the size of the population that requires public assistance and exacerbate ethnic and racial inequality. Similarly, the debate over immigration policy has long been fueled by the widespread perception that immigration has an adverse effect on the employment opportunities of natives.
Which native workers are most adversely affected by immigration and how large is the decline in the native wage?

The Impact of Mass Migration on the Israeli Labor Market, Rachel M. Friedberg, Brown University and NBER, August 1997

Rachel Friedberg, an economist at Brown, added an interesting twist to the approach. Rather than compare the effect of immigration across cities, she compared it across various occupations. Friedberg's curiosity had been piqued in childhood; born in Israel, she moved to the U.S. as an infant and grew up amid refugee grandparents who were a constant reminder of the immigrant experience.

She focused on an another natural experiment — the exodus of 600,000 Russian Jews to Israel, which increased the population by 14 percent in the early 1990's. She wanted to see if Israelis who worked in occupations in which the Russians were heavily represented had lost ground relative to other Israelis. And in fact, they had. But that didn't settle the issue. What if, Friedberg wondered, the Russians had entered less-attractive fields precisely because, as immigrants, they were at the bottom of the pecking order and hadn't been able to find better work? And in fact, she concluded that the Russians hadn't caused wage growth to slacken; they had merely gravitated to positions that were less attractive. Indeed, Friedberg's conclusion was counterintuitive: the Russians had, if anything, improved wages of native Israelis. She hypothesized that the immigrants competed more with one another than with natives. The Russians became garage mechanics; Israelis ran the garages.

After plowing through these studies, a good romance novel, or a spy thriller might be in order, but you'll be glad you put in the effort.



here's some additional reading for those who can't get enough economic studies


Borjas, George J., and Lawrence F. Katz. 2006. Evolution of the Mexican-Born Workforce in the United States. NBER Working Paper No. 11281. Cambridge, Mass.: National Bureau of Economic Research.

Card, David. 2005. Is the New Immigration Really So Bad? NBER Working Paper No. 11547. Cambridge, Mass.: National Bureau of Economic Research.

Card, David, and Ethan G. Lewis. 2005. The Diffusion of Mexican Immigrants During the 1990s: Explanations and Impacts. NBER Working Paper No. 11552. Cambridge, Mass.: National Bureau of Economic Research.

Couch, Jim F., Brett A. King, William H. Wells, and Peter M. Williams. June 2001. Nation of Origin Bias and the Enforcement of Immigration Laws by the Immigration and Naturalization Service. Independent Institute Working Paper. Oakland, Calif.: The Independent Institute.

Cowen, Tyler, and Daniel Rothschild. May 15, 2006. Hey, Don't Bad-mouth Unskilled Immigrants: You Don't Have to Be a Computer Genius to Be Good for the U.S. Los Angeles Times.

__________. June 12, 2006. Blending In, Moving Up. Washington Post.

Friedberg, Rachel M. 2001. The Impact of Mass Migration on the Israeli Labor Market. The Quarterly Journal of Economics 116 (4): 1373-1408.

Friedberg, Rachel M., and Jennifer Hunt. 1995. The Impact of Immigrants on Host Country Wages, Employment and Growth, Journal of Economic Perspectives 9 (4): 23-44.

Gallaway, Lowell E., Stephen Moore, and Richard K. Vedder. 2000. The Immigration Problem: Then and Now. The Independent Review 4 (3): 347-364.

Gandal, Neil, Gordon H. Hanson, and Matthew J. Slaughter. 2000. Technology, Trade, and Adjustment to Immigration in Israel. NBER Working Paper No. 7962. Cambridge, Mass.: National Bureau of Economic Research.

Krueger, Alan B. April 6, 2006. Two Labor Economic Issues for the Immigration Debate. Washington, D.C.: Center for American Progress.

Ottaviano, Gianmarco I.P., and Giovanni Peri. 2006. Rethinking the Gains from Immigration: Theory and Evidence from the U.S. NBER Working Paper No. 11672. Cambridge, Mass.: National Bureau of Economic Research.

Powell, Benjamin. April 30, 2005. Immigration, Economic Growth, and the Welfare State. Oakland, Calif.: The Independent institute.

__________. May 18, 2005. Immigration Reform that Both Sides Can Support. San Francisco Business Times.

___________. April 4, 2006. How To Reform Immigration Laws. Atlanta Journal-Constitution.

___________. December 22, 2005. The Pseudo Economic Problems of Immigration. San Diego Union-Tribune.

Powell, Benjamin, and Peter Laufer. September 21, 2005. Immigration Wars: Open or Closed Borders for America? Transcript of Independent Policy Forum. Oakland, Calif.: The Independent Institute.

Simon, Julian. 1999. The Economic Consequences of Immigration, 2nd ed. Ann Arbor, Mich.: University of Michigan Press.

_______. 1990. Population Matters: People, Resources, Environment, and Immigration. New Brunswick,
N.J.: Transaction Publishers.

Smith, James P., and Barry Edmonston. 1998. The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration. Washington, D.C.: National Academies Press.

Tabarrok, Alexander. 2000. Economic and Moral Factors in Favor of Open Immigration. Oakland, Calif.: The Independent Institute.

Vedder, Richard K., and Lowell E. Gallaway. 1993. Out of Work: Unemployment and Government in Twentieth-Century America, rev. ed. New York: New York University Press for The Independent Institute.

Read More...

Summary only...