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Immigration does not necessarily decrease wages

Saturday, September 12, 2015

When Rick Santorum announced his candidacy for president in May, he laid the blame for stagnant wages in the United States squarely on the shoulders of immigrants. Santorum says, “Over the last 20 years, we’ve brought into this country… 35 million mostly unskilled workers. And the result over that same period of time? Workers’ wages and family incomes have flatlined.”
Santorum is not the only politician who has pointed toward immigration as a primary culprit for flattened wages in the U.S. Others, ranging from Wisconsin governor Scott Walker to President Obama, who did so in a 2011 speech, have also made a connection. The economics behind such assertions, according to the Wall Street Journal, are murky.
The Journal points out that those who criticize immigration’s effect on wages often look to the work George Borjas, a Harvard economics professor, has done in the area. Borjas has correlated a 2 to 5 percent wage reduction for U.S.-born high school dropouts with increased immigration. The reduction is due to the competition for low-wage jobs that unskilled laborers often face from immigrants. However, this portion of the job market is an extremely narrow slice of the income pie.
In fact, several other studies indicate that the U.S. economy benefits on a wide scale from immigration. For example, in a 2006 study, the comptroller of Texas – a state in the vanguard of the immigration debate – found that a decrease in immigrant workers would actually lead to a decline in the value of the state’s exports. Meanwhile, in 2013, the Congressional Budget Office found that immigration reform in the U.S. would lead to an overall increase in the rate of return on capital.
A 2015 paper found that immigrants increase the availability of certain local services in many areas. This, in turn, increases employment. The study’s authors, Gihoon Hong, an economics professor at Indiana University South Bend, and John McLaren, an economics professor at the University of Virginia, wrote “[I]mmigrants can raise native workers’ real wages…: Each immigrant creates 1.2 local jobs for local workers, most of them going to native workers…. Overall, it appears that local workers benefit from the arrival of more immigrants.”
Finally, the Wall Street Journal notes that many of the presumptions about wages and immigrations are premised on the notion of unskilled workers crossing the border from Mexico and other Latin countries. However, China and India have now taken the lead as the leading immigrant-supplying nations to the U.S. Many such immigrants tend to be skilled and educated at a greater level than previous immigrant groups. The overall effect that such skilled immigrants will have on the economy remains to be seen – but it will likely be hotly debated.

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