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Immigration economics
Wage war
‘Who are the main economic losers from low-skilled immigration?
Aug 27th 2016 | From the print edition
ILLEGAL immigration from Mexico is not quite a
century old. A law of 1917 was the first to regulate the
southern border. Stricter controls gradually followed all
through the 2oth century, often during the low points of
a recurring cycle of sentiment towards immigrants.
Economic booms have lured workers across the Rio
Grande, encouraged by American firms. Downturns have
led to demonisation of “wetbacks”. The 1930s and 1950s
both saw indiscriminate mass-deportations; in 1976 President Gerald Ford wondered how best to “get
rid of those six to eight million aliens who are interfering with our economic prosperity”.
The latest bout of Trumpian immigrant-bashing fits the mould in one respect: it comes on the heels of
an economic downturn. But it is also strange, because the undocumented population levelled off after
2007. In 2015 there were just 188,000 apprehensions of Mexicans at the border, down from 1.6m in
2000 (see chart). This is partly because the recession reduced the magnetism of America’s labour
market. But it also reflects a much more secure border—the number of border agents quintupled
between 1992 and 2010—and changing demography in Mexico, where the birth rate has been falling
since the early 1970s
Nonetheless, undocumented immigrants still constitute 5% of America’s labour force. Distinguishing
their impact from that of other immigrants is hard, because they are tricky to identify. Instead,
researchers typically just rely on nationality. There is almost no way for low-skilled Mexicans who lack
American relatives to migrate north legally. As a result, Mexicans make up about half of all illegal
immigrants, but only a fifth of all legal ones.
Mexi
ins tend to be less educated than other immigrants. In 2014 nearly 60% had less than a high-
school education, compared with less than 20% of immigrants from other countries, according to the
Pew Research Centre, a think-tank. Undocumented migrants are more likely than legal ones to work in
unskilled occupations like services and construction.
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There isa I
“ee Not so eager
and
temper 4 Mexican migrants apprehended Border Patrol
tae at the US border, m agents, ‘000
among 1.8 24
academics
about the 1.5 20
impact of
low-skilled 12 16
migration,
doth legal 0.9 12
and illegal,
on wages. 0.6 8
Most
recently this 0.3 4
has centred
ona dispute 0 0
between two 1992 95 2000 05 10 5)
economists,
David Card Sources: US Border Patrol;
atthe Department of Homeland Security
University of
California, Economist.com
Berkeley,
and George Borjas, at Harvard University, over the effect of an unexpected surge in Cuban migrants to
Miami in 1980 (the so-called “Mariel boatlift”). In 1990 Mr Card found this influx had no effect on the
wages of low-skilled workers in Miami; Mr Borjas has now revisited the analysis, and claims that wages
of high-school dropouts in fact fell substantially.
This dispute, however, is only part of a much broader debate. Most other research finds that immigrant
flows harm at least some workers, as economic theory usually predicts they should when immigration
changes the balance of skills in an economy. The debate is over precisely who suffers, and how much.
‘The findings depend on two factors. The first is how to define unskilled workers. Mr Card and others
like to include both high-school graduates and dropouts. In 2014, there were 64m such workers aged
between 25 and 64 in America. Mr Borjas prefers to treat high-school dropouts separately in his
research, so that the lowest-skilled migrants compete with fewer existing workers: 20m, at last count.
hhipihww ecoremistcommada270S68aprintepa016 Wage war |The Economist
The second
factor is l Where they work
whether,
among those Migrants by industry, United States, %, 2012
with similar
education, Mil Professional & administrative Ml Services
migrants M8 Construction & production Sales
and native .
workers are Transport Ml Farming
substitutes or
0 20 40 60 80 100
complements
for each
other. In Legal |
zo1.a study
by
Gianmarco Illegal ]
Ottaviano
and 5
}ource: Pew Research Centre
Giovanni,
Peri, two Economist.com
economists,
found that
immigrants seem to compete mostly with other immigrants, even when controlling for age and
education. One possible explanation is that unskilled natives respond to an inerease in migration by
specialising in work that makes better use of their command of English. Messrs Ottaviano and Peri
concluded that between 1990 and 2006 immigration had a small positive effect on the wages of
unskilled American-born workers, but reduced the wages of previous generations of migrants by 6.7%.
Mr Card says the “worst-case scenario” is that immigration has cut the wages of high-school dropouts
by about 5% over 20 years, which, compared with the effect of technology and other trends, is not
much. Mr Borjas says larger effects are possible. But everyone agrees that the more workers and new
immigrants can substitute for each other, the more likely it is that immigration will change relative
wages.
Tf the worker:
have seen their wages depressed by illegal migration. Any such effect would probably have been
compounded by the fact that firms who hire undocumented workers off-the-books need not pay them
the minimum wage or adhere to other regulations. One survey of low-wage workers in Chicago, Los
Angeles and New York in 2008 found that 37% of undocumented workers had been paid less than the
minimum wage, compared with 21% of legal migrant workers.
most comparable to illegal Mexican immigrants are legal ones, they will be most likely to
hhipihww ecoremistcommada270S68aprintaraz016 ‘Wage war | The Economist
legal migrants also may find it hard to move jobs, especially in states that require employers to check
their papers. Their immobility could reduce their bargaining power. It certainly seems to stunt their
wage growth, In 2009 Pew found that among those who had been in the country for less than ten
years, legal migrants earned 18% more than illegal ones; among those with more than a decade under
their belts, the gap was fully 42%. It is possible, though, that the wages of both these groups had
been dragged down relative to those of native workers.
‘The flipside of low wages for illegal immigrants, though, is greater economic benefits for those who are
not competing with them for work. A rare study of the effect of illegal immigrants specifically found
that in Georgia, a one-percentage-point increase in undocumented workers in firms boosted wages by
about 0.1%. One explanation is that such firms benefit from a richer mix of skills within their
workforce. Another explanation is that they are sharing the spoils of the savings that stem from hiring
workers on the black market.
Were a President Trump to deport all illegal immigrants, the economy would suffer greatly. Just ask
Arizona, where a crackdown on illegal immigrants in 2007 shrank the economy by 2%, according to a
private analysis by Moody’, a ratings ageney, for the Wall Street Journal. The incomes of most.
workers would fall. Yet strangely enough, those best placed to benefit from a mass deportation would
be those who had crossed the border legally.
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