Jeff & Konnor's Blog

For some reason, immigration seems to be the latest topic being used by the government and the media to keep the American public living in a constant state of fear. The supposed problems with immigration are “obvious,” specifically, that immigration takes jobs away from native-born U.S. citizens and lowers wages. These are easy sound bites to throw out, but they never seem to be accompanied by any evidence. Why? Simple. Nearly all the economic evidence, both theoretical and empirical, shows that immigration (legal or illegal) is a net benefit to the United States, does not cause native-born citizens to lose jobs, and has no real effect on wages.

First, the theoretical. Saying that an immigrant takes away a job from a U.S. citizen assumes that there is a fixed number of jobs in the U.S., which simply isn’t true. When people enter the workforce, they earn income. When they earn income, they spend it on goods and services. In order to produce these extra goods and services, firms have to hire more workers. In other words, workers create the need for their own jobs by spending their income. The economy has the capacity to have an infinite number of jobs.

Addressing the question of wages, here’s a statement we hear a lot: “Economics 101 tells you that increasing the supply of labor causes wages to fall.” Well, not really. The first page in the chapter on labor in your Economics 101 book will say something like, “Increasing the supply of labor will cause wages to fall, all other things being held constant.” If we read the rest of the chapter, however, we’ll learn that not all other things are constant. As explained above, the extra worker causes an increase not only the supply of labor, but also the demand for labor by firms who have to produce the goods that this worker will purchase. Supply and demand remain in balance and wages go nowhere.

Even if it were true that immigrants cause wages to fall, we would then have firms that are able to produce at a lower cost. When firms have lower costs, they charge lower prices – a natural result of competition. So, if your wages were to fall by 5%, and all prices were also to fall by 5%, would you care? No.

Granted, that’s all theoretical, and a few things can go wrong in reality. For example, workers could send money to their native country instead of spending it. Wages on average might not change, but they could change in specific industries where there is a large immigrant population. Firms in markets that aren’t competitive wouldn’t have to lower prices in response to a decrease in wages. To make sure theory holds up in reality, we need to look at conclusions drawn from actual data.

In a 2006 paper, economist Alan Kruger states that, “Studies that claim to find a deleterious effect of immigration on natives’ wages are typically based on theoretical predictions, not actual experience.” In reality, he concludes that immigration “leads to higher wages and employment for all workers in the U.S. And many immigrants become entrepreneurs, creating jobs for other immigrants and natives.” (Two Labor Economic Issues for the Immigration Debate)

Last year, economist David Card, summarizing his own studies and that of other economists, concludes that “Overall, evidence that immigrants have harmed the opportunities of less educated natives is scant.” (Is the New Immigration Really So Bad)

Economists Rachel Friedberg and Jennifer Hunt come to the same conclusion. “Despite the popular belief that immigrants have a large adverse impact on the wages and employment opportunities of the native-born population, the literature on the question does not provide much support for this conclusion. There is no evidence of economically significant reductions in native employment.” (The Impact of Immigrants on Host Country Wages, Employment and Growth)

These are not cherry-picked studies from a few economists. These are the conclusions of economists who have looked at all of the available empirical studies in addition to their own. As economist and researcher Alexander Tabarrok put it, “Virtually all economists agree that immigration increases the wealth of the United States.” (Economic and Moral Factors in Favor of Open Immigration)

George Borjas, an economist who favors restricting immigration, found in a 2006 study that immigration does reduce the wages of high school dropouts by about 4.8%, but raises the wages of high school graduates. Even he has calculated a net benefit to the U.S. economy of about $7 billion a year. (Evolution of the Mexican-Born Workforce in the United States). Most economists put a conservative estimate of the gain to the nation’s economy at about $20 billion. (Benjamin Powell, The Pseudo Economic Problems of Immigration, 2005).

So why do so many people believe that immigration takes away American jobs, lowers wages, and harms the economy? Unfortunately, as is true with so many political issues, it’s easy to promote “Immigration = Bad” in a ten-second sound bite. On the other hand, explaining reality and actually providing evidence takes some time. And there aren’t many people who will take the time to learn the truth when the ten-second snippet is so convenient to believe.