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Increased migration to US holds back wages
By Andrew Balls in Washington
Published: November 10 2005 19:33 | Last updated: November 10 2005 19:33

Increased immigration of low-skilled workers from Mexico and Central America helps explain the pattern of low average wage growth in the US, the Congressional Budget Office said in a report released on Thursday.

Latin American workers, with less education than US natives and earning lower wages, have cut average earnings. But given the growth in immigration, the increase in the earnings gap between US workers with more and less education may be less than often suggested.

“Commonly cited statistics on earnings growth can be misleading if used as indicators of progress during a period in which an increasing share of the workforce is foreign born,� the CBO said in a study commissioned by the Senate Finance Committee.

On average, the earnings of men from Mexico and Latin America were about 50 per cent of those of native-born Americans, with employment concentrated in construction, restaurants, food manufacturing, janitorial and maintenance work and the textiles sector. Foreign-born workers from other regions tend to match the earnings of US workers.

Over the past decade, the number of foreign-born workers increased from 13m to 21m, accounting for about half the growth of the US workforce. About a third of the total are illegal immigrants, studies suggest.

About 40 per cent of recent immigrants were from Mexico and Central America, with low educational attainment compared with US natives and immigrants from the rest of the world. Among workers who lack a high school diploma, nearly half are immigrants from Mexico and Central America.

From 1994 to 2004, the average earnings of male high school dropouts rose by 2 per cent, adjusted for inflation, while the average earnings of university graduates rose 12 per cent in the period. But the gaps between earnings of US-born workers with different levels of education was less than the earnings gap for the whole population. The real average wages of US-born high school dropouts rose by 5.4 per cent in the period.

Immigrants with limited education compete for jobs with US unskilled workers, and may have contributed to the widening earnings gap based on education. But there are also likely to be secondary effects, including US natives making a greater effort to graduate from high school, or new investment in areas where immigrants are concentrated. The CBO said studies provided no clear evidence of a negative impact of immigration on US workers over a long period.

The retirement of the baby boom generation means US labour force growth is set to slow from the 1.5 per cent annual rate of the past 50 years. Immigrants and their children will continue to increase as a share of the workforce.