The Economic Effect of Immigration: Implications for Income and Employment of Low-Skill Labor in the United States

On Tuesday, June 3, the Wilson Center's Comparative Urban Studies Project and the Division of United States Studies co-hosted a colloquium with the Merage Foundation for the American Dream to examine the economic effects of immigration on low-skilled labor in the United States. Tamar Jacoby, President of ImmigrationWorks USA, argued that immigrants make an essential contribution to economic growth in the United States. Mark Krikorian, Executive Director of the Center for Immigration Studies, countered that a reduction in immigration is necessary to improve economic prospects for native-born Americans.

Tamar Jacoby opened with a discussion of changes in demographic trends, explaining that because Americans are more educated than ever, they are overqualified and less willing to perform low-skill jobs. This creates a shortage of low-skill labor and a surplus of high-skilled labor. To buffer this phenomenon and keep high-skilled workers employed, the country needs a low-skilled labor force that is willing to fill the jobs that Americans are unwilling to take. Jacoby used the term "complementarity" (as opposed to substitution) to describe this effect, whereby immigrants complement rather than compete in the existing labor market. In the case of a restaurant, for example, the labor required to build the restaurant and fill low-skill jobs, such as bussing tables and dishwashing, facilitates the high skilled jobs required to design, manage and finance the restaurant. Immigrants are mobile. They are willing to go where the market demands their services and use broad communication networks that make it possible for them to know where and when there is an immediate need for labor.

Jacoby cited the work of George Borjas, Professor of Economics and Social Policy at the Kennedy School of Government, Harvard University, to argue that a vast majority of Americans benefit economically from immigration. Borjas shows that over a twenty-year period, low-skilled labor in the United States experienced a nine percent loss in wages. Jacoby acknowledged that a small minority of Americans suffer economically as a result of immigration, but she pointed out that Borjas' model assumes that capital is constant. When capital changes are factored in, there is only a four to five percent loss. Furthermore, Jacoby added, 90 percent of Americans benefit from immigrants performing low-skilled jobs. Instead of ignoring our low-skilled workers, the government should introduce policies to manage the decrease in wages and use laws to embrace immigration. With 75 million baby boomers retiring over the next decade, an expected demand for two million new housing units per year and a predicted 20 percent growth in demand for restaurants accompanied by only a 10 percent growth in the workforce, Jacoby emphasized that we will continue to need low-skilled workers. Immigrants are the ideal candidates to fill these jobs, she concluded.

Mark Krikorian outlined what he viewed as five effects of immigration:

First, immigration does make the economy bigger, but brings only a .22 percent increase in gross national product. A growing economy does not necessarily create economic benefits for native-born Americans, said Krikorian, advocating a shift in focus toward policies designed to improve economic prospects for native-born Americans. Second, according to Krikorian, the economic benefits from immigration drive down the income of the lowest-paid 10 percent of American workers. Ultimately, immigration poses the ethical question of whether we want to make the rich richer or the poor poorer. We are obliged to preserve opportunity for non-professional workers, he argued. Third, immigration has caused a significant displacement of younger, native-born American workers. Declines in youth employment are matched almost exactly one for one with growth in foreign employment in America. Fourth immigration has resulted in job loss and wage deflation for legal immigrants. Fifth, immigration inhibits innovation as a surplus of low-skilled labor reduces the incentives for developing new technologies in the sectors where immigrants work, because it is less expensive to pay for cheap labor than to invest in finding more efficient technology. This substitution of labor for capital makes mass immigration incompatible with progress and modern society, concluded Krikorian, suggesting that immigration is not a viable or sustainable model as Americans become dependent on foreign workers.