Do Surges in Less-Skilled Immigration Have Important Wage Effects?
Published on: Mar 08, 2007

4. Conclusions

This paper has surveyed a small part of a vast professional literature on the labor market effects new immigrants, focusing on recent studies that have employed various econometric techniques to estimate the wage effects of less-skilled immigrants during the two great American immigration surges (1870-1914 and 1980 to the present). To say that this is a highly contentious literature would be an understatement. But while the interchanges have been heated and even hostile, a birds-eye view suggests that there is a rough consensus, not dissimilar to that found by several influential surveys published in the 1990s (Smith and Edmonston, 1997; Friedberg and Hunt, 1995, 1999). Based on the econometric studies surveyed here, it seems safe to say that there is considerable evidence that large surges of less-skilled immigration have generated at least small negative wage effects for less advantaged members of the labor force: less-educated blacks, native-born Hispanics, and immigrants themselves, particularly in the major immigrant-receiving metropolitan areas.

Given that high unemployment and jobless rates for less skilled native-born workers persist in the main immigration gateway cities even in the best of times (the late 1990s, for example), the main question for researchers might be why there isn’t a more consistent finding of substantial wage and employment effects. On opposite ends of this debate, both Borjas (2003) and Card (2005) seem still puzzled by the weakness of most findings. Given the strength of his own factor proportions (1997) and time series results (2003), Borjas asks, but has no answer, for “why the spatial correlation approach fails to find these effects” (p. 36). On the other side, failing to find either wage flexibility or industry mix flexibility in response to large supply shocks uncompensated for by native outflows, Card and Lewis (2005) are forced to conclude that employers must be adjusting skill intensity in the workplace with a “remarkable flexibility” (p. 26).

The reality may be that there are sizable but hard-to-measure wage and employment effects because of the very nature of the problem – a large share of less-skilled new immigrants are undocumented workers who are self-employed or are employed by individuals or small family businesses. For many years, public policy has more than tolerated the employment of undocumented immigrants fearful of both employers and public authorities. In this setting, it may be too much to ask of the aggregate data to tease out precise and robust employment and wage effects. But we should also recognize that there may be equally important effects on the quality of jobs and the employment relationship. As Sum et al. put it, “The growing inflow of illegal-immigrant workers has contributed to a fundamental breakdown in the nation’s labor laws and labor standards as the sheer volume of illegal hiring activity overwhelms what has amounted to meager enforcement levels…” (p. 10).

Although the strength of our desire for social protection waxes and wanes over the course of time, the history of wage labor over the last two centuries is replete with evidence that increasing new supplies of less-skilled labor is harmful to current workers. In Volume I of Capital, Marx documented the role played by women and children in undermining male worker bargaining power in the early stages of the industrial revolution. The recent dependence of many employers on undocumented new immigrants while at the same time advocating for an even more de-regulated labor market suggests that a similar role is played today by immigrant workers.

On balance, the findings of recent econometric research seem consistent with the anecdotal evidence of rising wages and increasing job opportunities for local African-American workers in the recent enforcement episode in Stillmore, Georgia: the post-1980 surge in less skilled and heavily undocumented immigrants in largely unregulated labor markets contributes to downward wage and employment rates at the bottom of the labor market. While many consumers and employers (individuals and firms) have certainly benefited substantially from the surge in undocumented low-skilled workers since the mid-1980s,  these research findings suggest a need for policy interventions that ensure socially acceptable wage levels, employment opportunities, and working conditions for our least advantaged workers, both native- and foreign born.  

Endnotes

1 Louis Uchitelle, New York Times, March 9, 2001 (p. A1)

2 David Barboza, New York Times, December 21, 2001 (p. A26)

3 Rebecca Blank, “A Review of the Labor /Market Discussion in the 2006 Economic Report of the President,” Journal of Economic Literature, Sept. 2006 (669-673)

4 Philip Brasher, “ID theft probe began in Marshalltown,” The Des Moines Register, Dec. 13, 2006. 

5 Evan Perez and Corey Dade, “An Immigration Raid Aids Blacks – For a Time,” The Wall Street Journal, p. 1.

6 The assumption here is that we do not live in a world characterized by what economists call “factor price equalization,” in which unhindered trade ensures that all factors (including low skill workers) are everywhere paid the same (have the same price). This has the interesting consequence that there is no economic incentive for labor migration in the first place (see Friedberg and Hunt, 1999, p. 344).

7 On the unfortunate role that theoretical priors appear to play in other areas of recent empirical research, see Freeman (2005).

8 There are several advantages to this “jobs” approach. First, if wage-setting is best understood as a response to supply, demand and institutional forces at the jobs level in a particular sector, using jobs as the unit of analysis (for example, laborers in construction firms, or cashiers in retail outlets) should be preferable education or education-experience groups. 

9 Borjas seems to concede here that the evidence does not show large native outflows in response to immigrant inflows.

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