Immigration Stuff

by Russ Roberts on May 20, 2005

in Inequality

I want to clear up a little confusion about the immigration data I reported yesterday.  One reader emailed me presuming that the increase in immigrants as a proportion of the workforce from 5% in 1970 to 13% in 2000 was due to high birth rates.  Actually, I think that’s not the case.  Check this out:


It’s from a Congressional Budget Office study of immigation.  It’s the number of immigrants admitted into the US over time.  Basically, immgration rises steadily through the 19th century, plummets at the beginning of the 20th, then from 1950 on, rises steadily, particularly in the 1980s.  The chart ends in 1990, but the 1990s also have large increases.  So while birth rate may have something to do with the increase over time in the immigrant foreign-born workforce, it’s dominated by increase in the numbers admitted.

Half Sigma suggests that the increase in the number of immigrants drives down wages:

Pro-immigration people have argued that immigration is nothing new
and that the United States has always had immigration. However,
Roberts’ statistics show that the percent of immigrant workers more
than doubled over a twenty year period.

Roberts also explains that the average immigrant has a lower wage than
the average American. The obvious conclusion is that immigrants are
lowering salaries in the U.S. for people who were born here because
employers can turn to a substitute good, a foreign born employee
willing to work for less money.

The chart above suggests that the pro-immigration people are right after all.  Immigration is nothing new.  As for the "obvious conclusion" that immigrants are lowering wages for people born here, as I mentioned in yesterday’s post, it’s not clear what the net impact of immigration is on wages.  Yes, lower-skilled immigrants do compete with low-skilled native-born workers and that may lower their wages.  That presumes that the only thing new immigrants do is compete with similarly-skilled workers.  But some of those immigrants are entrepreneurs who bring new ideas and new businesses to America.  But even if low-skilled immigrants do hurt similarly-skilled native-born Americans, you have to take into account the effect on the higher-skilled native born.  Their wages can rise if their skills are complementary with low-skilled workers.  For a pessimistic view of the effect on low-skill native-born workers, see the work of George Borjas, though he argues here that the net overall effect on wages is slightly positive.   A more optimistic view from my colleage Alex Tabarrok is here.

Look at the chart again.  The last half of the 20th century was a time of great growth and creativity for the American economy.  Same for the 19th century.  Did immigration keep it from being even greater?  Or did immigration help expand US skills and innovation by increasing our labor force and adding the diverse creativity and talents of the newcomers?

Finally, any conclusion of the impact of immigration on wages is usually forced to assume a pretty static model of the economy.  The economic status of immigrants changes very quickly over time as I will discuss in the next inequality post.


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