Future immigration could lower current immigrants’ wages

June 12, 2013
Joseph Lawler

Economics Writer/
The Washington Examine

As contentious as the debate has been over the economic effects of immigration, researchers on all sides of the issue agree on one thing: New immigration would put pressure on the wages of immigrants who are already in the United States.

Although many economists agree that immigration on net increases gross domestic product, it’s less clear whether it also creates economic “winners” and “losers” by introducing competition for low-skilled workers and lowers their wages.

The Harvard economist George Borjas, in particular, is known for examining the wages of workers in job categories in competition with immigrants and finding that large-scale immigration can harm the economic prospects of low-skilled native workers even as it benefits immigrants and businesses. Other researchers, working with data taken from natural experiments, have found otherwise. For instance, the Berkeley economist David Card used data from the Mariel boatlift — when 120,000 Cubans unexpectedly arrived in Miami with little warning in 1980 — to establish that native workers see their wages benefit from an influx of newcomers.

Despite the conflicting results, both kinds of studies appear to have one common conclusion, namely that large-scale immigration can lower the wages of previously-arrived immigrants.

There are a number of possible explanations for why immigrants compete mostly with other immigrants. They often work in similar low-skill occupations, such as working at fast food restaurants or on construction sites. Another is that newcomers to the U.S. are likely to locate where friends and relatives from their country of origin have already settled. The end result is that they compete for the same jobs as other immigrants with similar skills and abilities.

Two researchers, Gianmarco Ottaviano and Giovanni Peri, found thatin the period 1990-2006, immigration lowered the wages of previous immigrants by about 6 percent in the long run, while having little effect on native wages, including those of people who didn’t finish high school.

The immigration bill currently working its way through the U.S. Senate could expose foreign-born U.S. workers to increased competition if it becomes law.

Although no official estimates of the effects of the law have yet published, Numbers USA, a group that wants to slow the rate of immigration to the U.S., estimated that it would result in 33 million immigrants entering the U.S. in the next 10 years. The left-of-center Center for American Progress tallied up the provisions of the bill and concluded it would increase the rate of legal immigration while drastically curtailing illegal entries, thereby slowing the overall rate of migration into the U.S.

Depending on the ultimate impact of the bill on immigration flows, the biggest “losers” of the process, in economic terms, could be naturalized recent immigrants.

Currently undocumented immigrants would likely see wage increases following reform, as legal status allowed them more job opportunities and a higher likelihood of finding a good match of employer. For those born outside of the U.S. but working here legally, however, the law could “imply for them a slower wage growth than if we had kept the lower numbers,” according to Peri. Peri also noted that the effects of increased specialization, efficiency, and cost-cutting that would result from the bill would likely “balance” the loss of wage growth for previous immigrants.

Despite the fact that research indicates that legal immigrants’ economic prospects are more threatened by the Senate bill than other groups’, polls indicate that immigrants and immigrant families overwhelmingly favor comprehensive immigration reform. A Latino Decisions poll from earlier this month indicated that roughly 80 percent of naturalized Hispanics want Congress to pass an immigration bill this year.