Immigration Policy: No, That Immigrant Is Not Taking Your Job Or Keeping You From One

July 30, 2014 3:15pm NYSE:DIA

immigrationJonathan H. Todd:  I would be delighted to follow up my appearance on Midpoint: Question Everything with Ed Berliner, in which Ed and I discussed the economic issues around immigration policy, with a few points and references.


On the question of exactly how low-skill, low-wage migrant workers can improve the economy – even in spite of the fact that there is a large pool of already low-skill, low-wage American workers – one must look at exactly how each of those labor pools function, and in which industries and segments of the economy in which they tend to cluster. According to research done by the Brookings Institute, immigrant workers tend to take jobs in industries such as food services, construction, agriculture, and private household labor, whereas domestic workers skew towards utilities, public administration, and arts and entertainment. That is to say, these labor pools operate almost completely distinctively from each other, so by and large, domestic workers and foreign workers are not competing for the same job. That’s a view shared by the American Enterprise Institute, as well.

Distinctly different labor pools for domestic vs. foreign workers Source: Brookings

Distinctly different labor pools for domestic vs. foreign workers
Source: Brookings

Another statistic that I came across in my research is that 6 million jobs have been created since the year 2000. Since then, 5.9 million jobs have been filled by immigrants – legal or illegal. That is a somewhat misleading statistic, because this effect is largely driven by demographics. That is, baby boomers, who first reached retirement age around 2007, have been leaving the workforce in droves – by 10,000 a day, by some measures – and they are largely a native-born population. In their place, younger workers, who have a larger share of immigrants in their population, have been filling in those jobs left, so by definition, the workforce is becoming more immigrant-heavy.

Also, according to the CBO, the native born labor force has grown by less than 1%, compared to over 5% in the first half of the 2000s, down to a bit over 2% now. Regardless, economic growth depends on two factors – growth in the labor force, and growth in productivity. Because productivity growth has fallen below average, and labor force growth has fallen off sharply in recent years, we have to fix either side of the equation to sustain long-term economic growth.

Are immigrants displacing Americans from jobs?

It’s a bit misleading to say that immigrants have taken all the jobs – it’s more of a function of an aging native-born population.

Of course, this demographic factor that can’t be the exclusive cause of this. Another reason immigrants have been more successful in the job market (they have higher labor force participation rates, and by some measures lower rates of unemployment), is that they are a much more flexible portion of the labor force than native workers. That is, in recent years, employment has remained high in states like Rhode Island, and has fallen to exceptionally low numbers in states like Utah and North Dakota. The jobs in those states are increasingly being given to immigrants – because they are more mobile, for a variety of reasons. Perhaps native workers can’t leave a house they own, or they are nearby family. Whatever the reason, the flexibility of immigrants has proven a huge boon to economic growth in the past few years.

Source: Vox

Source: Vox

What is the cost of immigrants on Americans?

Assuming that legislation goes through that allows an amnesty provision, the cost per immigrant has been estimated at nearly $600,000, net of taxes. That is certainly not an inconsequential cost.

But that only factors in one part of the equation. Considering the economic benefits changes the calculus. Take a 2006 study by the state comptroller of Texas, who estimated that undocumented workers cost the state $1.16 billion dollars in services, but that the state would have lost $17.7 billion in GDP that year.

Another integral part of the argument has to do with the second-order effects of immigration. For example, immigrant workers, who disproportionately make up those who work in private households (think landscaping, child and elderly care, etc.), have allowed the labor force participation rate in the U.S. to rise. More households have dual income earners as a result. And consider the wage tradeoff – would it not be better to pay willing low-wage takers in our economy domestically, rather than offshore jobs?

So of course there is a cost – and it is indeed substantial. But in order to properly frame the argument, we need to consider the costs AND the benefits.

Immigration policy is certainly complex, but a good jump-off point is the work done by economists like Giovanni Peri at UC Davis, and George Borjas, who show that immigration may have short-term disruptions for native born workers in job markets, but in the long run, they increase the number of jobs available and increase wages.

This article is brought to you courtesy of Jonathan Todd.


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