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More on immigration and wages

Here’s a nice overview from the Economist of the empirical evidence on immigration and the underlying economics (Ht: Joshua Hill):

Mr Borjas divides people into categories, according to their
education and work experience. He assumes that workers of different
types are not easily substitutable for each other, but that immigrants
and natives within each category are. By comparing wage trends in
categories with lots of immigrants against those in groups with only a
few, he derives an estimate of immigration’s effect. His headline
conclusion is that, between 1980 and 2000, immigration caused average
wages to be some 3% lower than they would otherwise have been. Wages
for high-school drop-outs were dragged down by around 8%.

Immigration’s critics therefore count Mr Borjas as an ally. But hold
on. These figures take no account of the offsetting impact of extra
investment. If the capital stock is assumed to adjust, Mr Borjas
reports, overall wages are unaffected and the loss of wages for
high-school drop-outs is cut to below 5%.

Gianmarco Ottaviano, of the University of Bologna, and Giovanni
Peri, of the University of California, Davis, argue that Mr Borjas’s
findings should be adjusted further. They think that, even within the
same skill category, immigrants and natives need not be perfect
substitutes, pointing out that the two groups tend to end up in
different jobs. Mexicans are found in gardening, housework and
construction, while low-skilled natives dominate other occupations,
such as logging. Taking this into account, the authors claim that
between 1980 and 2000 immigration pushed down the wages of American
high-school drop-outs by at most 0.4%.

This should give Nicholas Kristof pause. He argues it’s compassionate to keep out pitifully poor immigrants to keep the wages of American high school dropout high. So the total impact on the poorest Americans is either a decrease of a little more than 8%, less than 5% or less than 1%. For that, Kristof is willing to condemn Mexicans to the Mexican economy. Where’s the compassion?


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