Are immigrants hurting American workers by driving down wages and taking jobs away? This question is probably the most contentious subject related to immigration. Most immigration advocates say “no,” while people who advocate for limiting immigration or are outright anti-immigration not only say “yes,” but also use this issue as a linchpin for their anti-immigration movement. To answer this question truthfully, we need to consider four important aspects.
First, immigrants do lower the wages of competing American workers on a short-term basis, but the impact on occupations is unevenly distributed. There are many contributing factors to why new immigrants lower wages for native-borns. New immigrants, who face language and cultural challenges, whose education and professional licenses are not recognized by U.S. employers, and who are unfamiliar with American labor practices, have little leverage to negotiate a better salary—one that is more reflective of their experiences and skills. In order to survive, they will do just about anything at any wage. In addition, many foreigners migrate from poor countries, and even a low wage by American standards is considerably higher than what they could get back home. So the influx of a large number of immigrants who compete for work will no doubt drive down the pay for everyone in the short term. It’s Economics 101: an increase of supply (labor) drives down the price (wages).
Analysis from Harvard labor economist George Borjas shows that immigrants (both legal and illegal) from 1990 to 2010 reduced the average annual earnings of American workers by $1,396 in the short run. However, the downward pressure of wages caused by new immigrants doesn’t impact the entire American workforce in the same way. Some American populations get hit worse than others, depending on the type of work and the requirements on education, skills, and experience. Professor Borjas’s analysis shows the less-educated and least-skilled population suffers the most negative impact in the short term when competing against immigrants for the low-paying, least-skilled occupations—such as fruit pickers and restaurant dish washers—and often loses out to immigrants. These types of jobs have high turnover, low barriers to entry, and are less dependent on education and work experience, while the employers of these occupations are cost-conscious because any small increase or decrease of labor cost will have a big impact on their bottom line. Lower cost immigrants help keep the cost down so these businesses can become profitable. The Americans who used to supply labor for these businesses are often the poor Americans without many employment alternatives, so they are particularly vulnerable.
Second, immigration increases the wages of complementary workers. This is the aspect that anti-immigration groups refuse to talk about. For businesses that employ both immigrants and native-born American workers, having more immigrants in one skill group—for example, computer programmers—will not only help improve business profitability, but it will also allow the firm to expand employment opportunities for complementary workers in fields such as accounting, marketing, human resources and compliance.
David Frum, a senior editor from The Atlantic, proposed an interesting immigration reform idea:
If we admit a lot of foreign-born surgeons, we could hugely drive down the cost of major medical operations. American-born doctors would shift their labor to fields where their language facility gave them a competitive advantage: away from surgery to general practice. This policy would hugely enhance the relative purchasing power of plumbers and mechanics, enabling them to eat out more often and buy more American-made entertainment, increasing GDP and creating jobs.
Third, in the long run, the net negative wage impact on American workers is close to zero. Although it’s evident that the influx of immigrants has a negative impact on the wages of native workers in the short run, Harvard professor Borjas’s study on immigration and American workers (which is often cited by anti-immigration groups) shows such impact becomes statistically negligible in the long run.
In addition, let’s not forget that immigrants have their own desires and aspirations in life. They didn’t leave everything they are familiar with and everyone they love behind so they could stay at the bottom of the economic ladder in a new country. Once they obtain the language skill, education, and work experience they need, or once they find a way to obtain new occupational licenses, they will demand better pay and move from lower-paying to higher-paying occupations. The better they assimilate, the faster they will move up the economic ladder. That is another factor of why the net negative wage impact on American workers is insignificant in the long run.
Fourth, American businesses and workers benefit from immigrants in other ways. Immigrants are consumers. An influx of immigrants increases demand for housing, food, education, and healthcare, which spurs demand for American businesses, which in turn increases demand for American workers.
In addition, immigrants help American businesses ease the pain of the skilled-worker shortage. The U.S. faces a skilled-worker shortage in both high-skill and low-skill fields. The National Federation of Independent Businesses’ latest survey reported 44% companies could find “few or no qualified applicants for positions they were trying to fill.”
The Wall Street Journal reported that the labor shortage has led to costly delays in the U.S. construction industry: “Slowdowns as long as two months as they wait for carpenters, drywall workers, foundation pourers and other specialists.” Even Apple CEO Tim Cook explained to Charlie Rose in December 2015 that he moved Apple manufacturing to China not because Chinese laborers are cheap, but because he couldn’t find enough skilled tool and die workers in the U.S. In addition, the existing skilled American workforce is getting older. Forbes reported that 53% of skilled-trade workers in the U.S. were 45 years and older as of 2012. Immigration provides American businesses with the younger skilled workers they need to remain in America and, in turn, allows businesses to expand operations and hire more American workers and benefit American consumers.
More importantly, some immigrants are job creators. In fact, immigrants are 13% of the U.S. population, but they own 20% of small businesses. In Silicon Valley, 44% of the high-tech businesses have at least one immigrant founder. According to a study by Stanford University, from 2007 to 2012, Latino-owned new business formation increased 47%. A Manhattan Institute analysis showed that in 2012 alone, immigrant-founded businesses employed approximately 560,000 workers and generated $63 billion in sales. These immigrant-owned businesses provide many employment opportunities for American workers.
Overall, Professor Borjas’s research concluded that all immigrant workers (legal and illegal) enlarged the U.S. economy by 11%, or $1.6 trillion annually. Even though 97.8% of this $1.6 trillion goes back to the immigrants themselves in the form of wages and benefits, the remainder constitutes the “immigration surplus,” which equals $35 billion a year net benefit to American businesses and workers.
Are immigrants hurting American workers? If we take the long term view and evaluate the overall economy, the answer is a resounding "No."