In this post , I asked Cafe Hayek readers to discuss this concern about the effects of competition from immigrants:
Individual native workers are less likely to be
affected if the immigrants resemble the society they are joining — not
physically but in the same mix of skills and educational backgrounds.
For instance, if every immigrant were a doctor, the theory is, it would
be bad for doctors already here. Or as Borjas asked pointedly of me,
what if the U.S. created a special visa just for magazine writers? All
those foreign-born writers would eat more meals, sure, but (once they
mastered English, anyway), they would be supplying only one type of
service — my type. Bye-bye fancy assignments.
There were a lot of interesting comments but no one mentioned what I thought was the most important missing point—if there were an influx of foreign magazine writers, it would encourage entrepreneurs not just to open restaurants for them to eat in but also magazines for them to work at. Why would you assume that the number of jobs writing interesting magazine stories is fixed? So it wouldn’t be bye-bye fancy assignments; there probably would be more assignments to choose from.
But the wages would probably be lower. I say "probably" because the quoted paragraph implicitly makes the absurd assumption that foreign magazine writers are perfect substitutes for native-born writers. Ignoring the language problems, it’s imaginable that foreign magazine writers would bring a fresh perspective to the magazines that employ them. So the number of magazine readers might expand as well without a decrease in the price of magazines.
The analysis is more likely to hold for people who work for a lawn service or who put up dry wall. An increase in close substitutes will lower your wages, though there’s no reason to think it will make you unemployed. And how much wages will fall depends on the elasticity of demand–how many new lawn service or home improvement companies get started in response to the increase in supply of workers. That in turn depends on how the demand for those underlying services and how responsive they are to price.
The quoted paragraph assumes that all demand curves are vertical.
But as one commenter (Maxim) pointed out, immigration is much like trade in goods and services. Allowing steel to come to America is good for most Americans but makes life more challenging for steel companies and their workers. Do we want to make America poorer to insure that particular groups have a protected standard of living? Much better to improve education if we think immigrants make the lives of a particular group of Americans more challenging.