[Paleopsych] NYT: Postrel: Yes, Immigration May Lift Wages
checker at panix.com
Wed Nov 16 22:39:43 UTC 2005
Yes, Immigration May Lift Wages
[I'll be checking the Times for responses.]
By VIRGINIA POSTREL
FROM 1990 to 2000, the number of people working in the United States
grew by more than nine million, or around 8 percent, from immigration
alone. What effect did all those new foreign-born workers have on the
wages of native-born Americans?
The answer seems obvious at first. An increase in the supply of
workers should push down wages, just as a bumper crop of wheat drives
down wheat prices.
That is exactly what some influential economic studies, notably by
George J. Borjas at Harvard, have found. In a 2003 article, for
instance, Professor Borjas calculated that immigrants had depressed
the average wage of American-born workers by about 3 percent in the
But workers are not as uniform as wheat, and 10 years is a long time -
long enough for employers to invest in new production and take on more
workers. The model of surging supply meeting fixed demand is not
As economists know all too well, changing the assumptions of a model
can often change the results. In a new working paper for the National
Bureau of Economic Research, two other economists using methodology
similar to Professor Borjas's but different assumptions get the
In "Rethinking the Gains From Immigration: Theory and Evidence From
the U.S.," Gianmarco I. P. Ottaviano of the University of Bologna and
Giovanni Peri of the University of California, Davis estimate that
immigration in the 1990's increased the average wage of American-born
workers by 2.7 percent. (The paper is available at
Although it still relies on a highly stylized model of the economy,
their paper adds two complexities that bring it closer to reality.
First, the two economists assume that businesses can make additional
capital investments to take advantage of the expanded supply of
workers. Companies may open new restaurants or stores, add new factory
lines or build more houses.
In their model, as in the real world, "investment adjusts not to keep
fixed the amount of capital but to keep fixed the return to capital,"
Professor Peri said. As long as businesses can profitably add new
production, they hire more workers, and wages do not necessarily go
down. Instead, he said, "more workers means more business."
As businesses expand, hiring foreign-born workers to do one job may
also require hiring more native-born workers with complementary
skills. Immigrant engineers, for instance, may create demand for
native-born patent lawyers and marketing executives.
That is the paper's second refinement. It assumes that immigrants do
not always compete for the same jobs as American-born workers. The two
groups are not "perfect substitutes," even when they have similar
education and the same occupation. A Chinese cook is not the same as a
Texas barbecue chef.
Immigrants often bring different skills to the American labor force,
and concentrate on different occupations from natives. Among high
school dropouts, the paper notes, the "foreign-born are highly
overrepresented in professions like tailors (54 percent were
foreign-born in 2000) and plaster-stucco masons (44 percent were
foreign-born in 2000)." By contrast, American-born workers make up
more than 99 percent of all crane operators and sewer-pipe cleaners.
The same is true at the highest educational levels, where foreign-born
college graduates make up 44 percent of all medical scientists but
only 4 percent of lawyers. (Immigrants tend to be concentrated at the
highest and lowest levels of income and education.)
Immigrants do, of course, compete to some extent with native-born
workers. The question is how much.
To measure wage competition, the economists looked at how much an
increase in the number of foreign-born workers affects the wages of
other foreign-born workers versus American-born workers with the same
educational background. If the groups were perfect substitutes, the
change would be the same.
But there is a difference. When the number of immigrant college
graduates goes up by 4 percent, their wages drop by 1 percent more
than the wages of native-born college graduates. Immigrants, in other
words, compete more with each other than with American-born workers.
Professors Ottaviano and Peri find that recent immigration has had the
most negative effects on the least educated.
Immigration in the 1990's, they estimate, raised the wages of
native-born high school graduates, college dropouts and college
graduates by at least 2.5 percent. By contrast, they estimate that the
wages of American-born high school dropouts fell by 2.4 percent
because of immigration.
In an interview, however, Professor Peri noted that Americans are
increasingly well educated, so that high school dropouts make up a
small, rapidly declining portion of today's native-born work force. In
2000, he said, only 9 percent of American-born workers did not have a
high school degree.
"If you look at the U.S. labor force," he said, "those people born in
the U.S., I am talking about a negative effect for about 9 percent of
the population and a positive effect for 91 percent of the
Virginia Postrel (dynamist.com) is the author of "The Substance of
Style: How the Rise of Aesthetic Value Is Remaking Commerce, Culture
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