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2017-08-09 13:26:03
Economic Scene: The Danger From Low-Skilled Immigrants: Not Having Them

Let’s just say it plainly: The United States needs more low-skilled immigrants.

You might consider, for starters, the enormous demand for low-skilled workers, which could well go unmet as the baby boom generation ages out of the labor force, eroding the labor supply. Eight of the 15 occupations expected to experience the fastest growth between 2014 and 2024 — personal care and home health aides, food preparation workers, janitors and the like — require no schooling at all.

“Ten years from now, there are going to be lots of older people with relatively few low-skilled workers to change their bedpans,” said David Card, a professor of economics at the University of California, Berkeley. “That is going to be a huge problem.”

But the argument for low-skilled immigration is not just about filling an employment hole. The millions of immigrants of little skill who swept into the work force in the 25 years up to the onset of the Great Recession — the men washing dishes in the back of the restaurant, the women emptying the trash bins in office buildings — have largely improved the lives of Americans.

The politics of immigration are driven, to this day, by the proposition that immigrant laborers take the jobs and depress the wages of Americans competing with them in the work force. It is a mechanical statement of the law of supply and demand: More workers spilling in over the border will inevitably reduce the price of work.

This proposition underpins President Trump’s threat to get rid of the 11 million unauthorized immigrants living in the country. It is used to justify his plan to cut legal immigration into the country by half and create a point system to ensure that only immigrants with high skills are allowed entrance in the future.

But it is largely wrong. It misses many things: that less-skilled immigrants are also consumers of American-made goods and services; that their cheap labor raises economic output and also reduces prices. It misses the fact that their children tend to have substantially more skills. In fact, the children of immigrants contribute more to state fiscal coffers than do other native-born Americans, according to a report by the National Academies.

What is critical to understand, in light of the current political debate, is that contrary to conventional wisdom, less-skilled immigration does not just knock less-educated Americans out of their jobs. It often leads to the creation of new jobs — at better wages — for natives, too. Notably, it can help many Americans to move up the income ladder. And by stimulating investment and reallocating work, it increases productivity.

Immigration’s bad reputation is largely due to a subtle yet critical omission: It overlooks the fact that immigrants and natives are different in consistent ways. This difference shields even some of the least-skilled American-born workers from foreign competition.

It’s more intuitive than it seems. Even American high school dropouts have a critical advantage over the millions of immigrants of little skill who trudged over the border from Mexico and points south from the 1980s through the middle of the last decade: English.

Not speaking English, the newcomers might bump their American peers from manual jobs — say, washing dishes. But they couldn’t aspire to jobs that require communicating with consumers or suppliers. Those jobs are still reserved for the American-born. As employers invest more to take advantage of the new source of cheap labor, they will also open new communications-heavy job opportunities for the natives.

For instance, many servers and hosts in New York restaurants owe their jobs to the lower-paid immigrants washing the dishes and chopping the onions. There are many more restaurants in New York than, say, in Oslo because Norway’s high wages make eating out much more expensive for the average Norwegian.

Similar dynamics operate in other industries. The strawberry crop on the California coast owes its existence to cheap immigrant pickers. They are, in a way, sustaining better-paid American workers in the strawberry patch-to-market chain who would have to find a job somewhere else if the United States imported the strawberries from Mexico instead.

One study found that when the Bracero Program that allowed farmers to import Mexican workers ended in 1964, the sudden stop in the supply of cheap foreign labor did nothing to raise the wages of American farmworkers. From the cotton crop to the beet crop and the tomato crop, farmers brought in machines rather than pay higher wages.

Another found that manufacturing plants in regions of the United States that received lots of low-skill immigrants in the 1980s and 1990s were much slower to mechanize than plants in low-immigration regions.

A critical insight of the new research into the impact of immigration is that employers are not the only ones to adapt to the arrival of cheap foreign workers by, say, investing in a new restaurant or a new strawberry-packing plant. American-born workers react, too, moving into occupations that are better shielded from the newcomers, and even upgrading their own skills.

“The benefits of immigration really come from occupational specialization,” said Ethan Lewis, an associate professor of economics at Dartmouth College. “Immigrants who are relatively concentrated in less interactive and more manual jobs free up natives to specialize in what they are relatively good at, which are communication-intensive jobs.”

Looking at data from 1940 through 2010, Jennifer Hunt, a professor of economics at Rutgers, concluded that raising the share of less-skilled immigrants in the population by one percentage point increases the high school completion rate of Americans by 0.8 percentage point, on average, and even more for minorities.

Two economists, Giovanni Peri of the University of California, Davis, and Chad Sparber of Colgate University, compared the labor markets of states that received lots of low-skilled immigrants between 1960 and 2000 and those that received few. In the states that received many such immigrants, less-educated American-born workers tended to shift out of lower-skilled jobs — like, say, fast-food cooks — and into work requiring more communications skills, like customer-service representatives.

Interestingly, the most vulnerable groups of American-born workers — men, the young, high school dropouts and African-Americans — experienced a greater shift than other groups. And the wages of communications-heavy jobs they moved into increased relative to those requiring only manual labor.

It is not crazy for American workers who feel their wages going nowhere, and their job opportunities stuck, to fear immigration as yet another threat to their livelihoods. And yet for all the alarm about the prospect of poor, uneducated immigrants flocking across the border, this immigration has been mostly benign.

Take the Congressional Budget Office’s analysis of the immigration reform bill submitted without success by a bipartisan group of eight senators in 2013. By 2033, it estimated, the plan would have increased average wages by 0.5 percent, and do next to nothing to the wages of the least skilled. It would have made the economy some 5 percent bigger, over the long term, mainly because there would be 16 million more people.

If there is anything to fear, it is not a horde of less-educated workers ready to jump over the border. The United States’ main immigration problem, looking into the future, is that too few low-skilled immigrants may be willing to come.

As the National Academies noted about its report, “The inflow of labor supply has helped the United States avoid the problems facing other economies that have stagnated as a result of unfavorable demographics, particularly the effects of an aging work force and reduced consumption by older residents.” There will be an employment hole to fill.