While politicians haggle over immigration reform, the US economy’s demand for workers, foreign and domestic, continues to grow. On Monday, officials began accepting applications for the 85,000 available H-1B visas (for foreign professionals) for the fiscal year starting in October. By Tuesday, the quota was filled. This is the third straight year that the cap was reached before the fiscal year had even begun. It’s another example of the disconnect between immigration policy and labour market realities. A common assumption is that alien workers are either stealing American jobs or reducing home-grown wages. Both notions are flawed, says a new study by Giovanni Peri for the Public Policy Institute of California. Peri analysed the effects of immigrant labour on California, home to 30% of all foreign-born workers in the US. He found “no evidence that the inflow of immigrants (during) 1960-2004 worsened the (job) opportunities of natives with similar education and experience.” Immigration also induced a 4% real wage rise for the average native worker. This effect ranged from near zero (+0.2%) for high-school dropouts and between 3% and 7% for workers with at least a high-school diploma.
So, immigrants not only aren’t “stealing” jobs; they’re helping to boost the pay of native US workers. These findings aren’t (so) shocking once you consider the abilities immigrants bring here, and how they compare with those of US natives. Most immigrants fall into one of two categories: Unskilled labourers with less than a high-school diploma, and skilled professionals with advanced degrees. In 2004, 67% of California workers who lacked a high-school diploma were foreign born, as were 42% of those with doctorates. By contrast, across the entire US, natives are concentrated between those two extremes: They comprise just under a third of workers without a high-school diploma and only 28% of those with Ph.Ds.
This means immigrants on balance serve as complements rather than perfect substitutes for US workers. For the most part the two aren’t competing for the same jobs, so rather than displacement we’re getting a bigger economic pie. This dynamic has resulted in a more efficient domestic labour market, greater investment, higher economic growth and more choices for consumers. Also, “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.” More workers also mean more consumption, so “immigration might simply increase total production and demand without depressing wages.”
Immigrants compete most directly with other recent immigrants. “Foreign-born workers here sustain the largest losses in real wages, losing between 17% and 20% of their real wage” from 1990 to 2004, says Peri. Though most immigrants compete for jobs more directly with low-skill US natives, the job preferences differ, with foreigners more likely to be in agriculture, while less-educated natives tend towards manufacturing. Peri finds that even unskilled foreign workers have a slight positive effect on the wages of their native counterparts. Other economists, such as George Borjas of Harvard, have found a slight negative effect in this cohort. In any case, and considering the net economic gains, any immigration reform designed to protect this small (and shrinking) subset of unskilled native workers would seem short-sighted at best.
As Congress prepares to give immigration policy another go, expect to hear lots of talk about the dire consequences of immigrant labour. The facts—and the California experience—argue otherwise.