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Immigrant Workers: Competition or Complementary?

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An unauothrized immigrant in North Carolina gets ready for his landscaping job.  Photo by Laura Elizabeth Pohl/Bread for the World

Those emails forwarded by your grandpa or cousin might say otherwise, but economic research has actually settled the question of the impact of unauthorized immigration on the U.S. economy: overall, it’s a positive effect.

As discussed in a previous post, objective economic studies of immigration to the United States point to an overall fiscal benefit as well as a labor-market benefit for U.S. workers. In this post we’ll look at the labor-market impact of unauthorized immigrants on U.S.-born workers, including low-wage U.S. workers.

The presence of unauthorized immigrants typically helps rather than hinders most U.S. workers. The main reason is that immigrants usually complement U.S. workers, rather than compete with them. As President George W. Bush’s Council of Economic Advisors stated in 2007, “Differences between natives and immigrants lead to production complementarities that benefit natives.”

The Council report explains what this means using an example from the construction industry, which employs large numbers of unauthorized immigrants: “The presence of unskilled foreign-born construction laborers allows skilled U.S. craftsmen and contractors to build more homes at lower cost than otherwise – therefore the U.S. natives’ productivity and income rise…Thus, when immigrants are added to the U.S. labor force, they increase the economy’s total output, which is split between immigrants (who receive wages) and natives (who receive wages and also earn income from their ownership of physical and human capital).”

In a nutshell: “Natives benefit from immigration because the complementarities associated with immigrants outweigh any losses from added labor market competition.”

The main reason that unauthorized immigrants don’t compete for jobs with U.S.-born workers is that they have low levels of formal education. The Pew Hispanic Center reported in 2009 that 47 percent of unauthorized immigrants had less than a high school education. Only 15 percent had a bachelor’s degree or higher. Even those who do arrive with a college degree or specialized training generally cannot compete with U.S. workers for skilled jobs -- their undocumented status prevents them from being hired.

In recent decades, the number of U.S.-born workers with less than a high school education has declined, which is one reason that immigrants have filled the low-wage jobs that Americans with little formal education used to take.  

Given unauthorized immigrants’ socioeconomic profile, we’d expect that U.S.-born high school dropouts would be the most vulnerable to competition from them. On this issue, the evidence on the impact of unauthorized immigration is mixed:  some research shows a small negative impact on the wages of high school dropouts from immigration, while other research indicates that even very low-skill U.S. workers        benefit from immigration, at least in the long run.  

One example of such economic research comes from Prof. Giovanni Peri at the University of California-Davis, who reports, “Net immigration during economic upturns does not seem to affect employment of the less educated in the short run. … In the long run there is some evidence that immigrants lead to positive job creation, even for less-educated natives.”

Prof. George Borjas of Harvard University is a leading researcher on the adverse impact of immigrants on low-skill U.S. workers. But even his most pessimistic scenario finds that immigration leads to a reduction in wages of the lowest-skilled U.S. workers of 7.4 percent in the short run and 4 percent to 5 percent in the long run.

The report from the George W. Bush-era Council of Economic Advisors notes the seriousness of the problems facing U.S. high school dropouts, but in the end, it finds, “Immigration is not a central cause of those difficulties, nor is reducing immigration a well-targeted way to help these low-wage natives.”

Education in the United States is closely associated with income – and lack of education is linked to poverty. High school dropouts face steep barriers to success in the U.S. labor market. Since competition from immigrants is not a central part of these challenges, public policy solutions should be sought elsewhere. Policies to help keep teenagers from dropping out of high school in the first place would be one area to consider.

The main difficulty with immigration and the labor market is how to integrate immigrants into the labor force during economic downtowns, such as the one we are experiencing now. It is at these times that immigrants are more likely to “crowd out” U.S. workers with low levels of education.

Fortunately, unauthorized immigration is self-regulating – meaning that it responds to the U.S. economic cycle. During the 1990s and early 2000s when the economy was growing, unauthorized immigration also grew to fill available jobs. During the recession, immigration has declined; in fact, many analysts now place net immigration from Mexico at zero. This is primarily due to the lack of job openings in the United States. The natural ebb and flow of unauthorized immigration actually helps to meet overall U.S. labor market needs.



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