Labor and Economics

Jobs, Wages and Immigration

Institute for Sound Public Policy is committed to the creation of a just and flourishing society in the United States: one that provides ample economic opportunities for all Americans and where workers across all sectors of the economy can earn a decent living. We deplore the great increase in economic inequality in the United States in recent decades and support efforts to reverse it through progressive taxation, and progressive health care and economic policies. We believe that reducing current excessive immigration levels is one key to reversing the declining economic fortunes of the American worker.

As Harvard economist George Borjas reminds us, any immigration policy will have both winners and losers. Under current policy, benefits flow primarily to affluent Americans while the costs are mostly borne by the poor. Three basic facts about our current immigration policy determine its economic impacts.

First, immigrant inflows into the U.S. labor market are very large, compared to historic levels or to current levels in other mature economies. Immigration accounts for over half of U.S. labor force growth. Such large numbers inevitably mean that immigration has had large effects. We can argue about what those effects might be, but we cannot pretend that they have not occurred.

Second, unlike earlier generations of immigrants, today’s immigrants are especially likely to have low levels of education and skills. About 30% of all foreign born workers (and about 60% of those from Mexico and Central America) do not hold a high school degree. Illegal immigrants are even more likely to have low levels of education. While some immigrants are highly educated, their generally low level of educational attainment concentrates their impact in the low-wage sectors of the labor market.

Third, immigrant workers are spread throughout the country’s occupational distribution. Less than 2% of all foreign-born workers are farm workers. The largest shares of foreign workers are in production and construction occupations. Workers from Mexico and Central America are also especially likely to be in buildings and grounds maintenance, transportation, and food service jobs. Immigrant workers are not isolated in a separate labor market. The assertion that immigrants “take jobs that Americans don’t want” is a myth.

The upshot is that immigrant workers increase job competition for American workers, driving down their wages and employment opportunities. According to George Borjas, from 1980 to 2000, immigration reduced the weekly wages of all native workers by 4%, with even higher wage reductions for high school drop-outs, black and Hispanic workers, and younger workers.

There is also good evidence that immigration has decreased the employment of these same groups of American workers. According to Professor Andrew Sum and his colleagues at Northeastern University, a one percentage point increase in a state’s labor force caused by immigration results in a 1.2 percentage point decline in the employment rate of 16-24 year olds, and a decline of twice that amount among younger African Americans. Professor Sum has also shown that almost all of U.S. job growth between 2000 and 2004 went to immigrants—not to unemployed American workers.

Younger workers, minority workers, and workers without a high school degree have unemployment rates that are much higher than other workers. This is the opposite of what one would expect if low-wage occupations faced labor shortages, as the advocates for open borders often argue. In fact, the U.S. already has an excess supply of labor in low wage occupations — that is why they continue to pay such low wages.

Reliance on foreign workers in low-wage, low-skill occupations, such as hospitality or restaurant work, takes away any incentive for employers in those sectors to improve pay and working conditions for their workers. Our government’s continued failure to enforce immigration laws also harms businesses and employers trying to do the right thing, by hiring only legal workers and paying their fair share of taxes and employee benefits.

In summary, our current immigration policies are regressive, just like tax cuts for the wealthy or right-to-work laws. Like a reverse Robin Hood, they redistribute income from the poor and give it to the rich. Progressives who advocate for low-wage workers need to rethink our reflexive support for mass immigration.

IFSPP advocates immigration reforms designed to help American workers and decrease economic inequality in the United States. We support mandating the use of the federal E-verify program for all new hires in the U.S. We also support substantial civil and criminal penalties for companies which repeatedly violate the law and hire illegal immigrants. And we oppose any further amnesties for those who enter the United States illegally in order to work. Eight amnesties since 1986 have only served to suppress the wages of working Americans and increase unemployment among our most disadvantaged citizens—while incentivizing higher levels of illegal immigration.

Most important, IFSPP believes current, excessive immigration levels must be cut substantially, from about 1.2 million annually to one-third to one-half of that level. With tens of millions of U.S. citizens unemployed or underemployed, and wages stagnant for the vast majority of Americans, the era of mass immigration into the United States needs to be brought to a close.

Admission of less-skilled, less-educated workers should be greatly reduced, while the admission of foreign workers in highly-skilled occupations (e.g., computer programming or engineering) should remain capped at relatively low levels. If labor shortages exist in any economic sector, we should expand educational and training programs here in the United States to meet those shortages. This will help provide jobs for unemployed Americans and help keep wages high, allowing workers to support their families.

Political progressives who balk at these proposed policy changes need to explain how they expect to improve wages and working conditions in an environment of perpetually swamped labor pools. As in foreign policy, we need to face up to the reality that America cannot solve all the world’s problems. Excessive populations of young workers in other countries cannot all move to the United States to find work. Nor can progressives ignore our failure, over the past four decades, to fight effectively against increasing income inequality. IFSPP believes it is time to get labor markets working for American workers.