Immigrant Labor Improves Job Prospects For the Native Born

Facts or no facts, many people simply do not want to believe that undocumented immigrants coming to this country don’t steal jobs and undermine the American economy. When economic studies come along that challenge their preconceptions, they don’t take kindly to the troublesome conclusions.

Recently, economist Giovanni Peri -- an associate professor at the University of California, Davis and visiting scholar at the Federal Reserve Bank of San Francisco -- wrote a paper for the Fed summarizing recent research in immigration economics. Evaluating the data, Peri concluded that, “on net, immigrants expand the U.S. economy’s productive capacity, stimulate investment, and promote specialization that in the long run boosts productivity. Consistent with previous research, there is no evidence that these effects take place at the expense of jobs for workers born in the United States.”

In other words, immigrants aren’t stealing jobs that would otherwise go to native-born U.S. citizens, and in fact they are stimulating the economy in a way that results, on average, in higher wages for U.S. workers.

As the paper’s findings disseminated on political blogs, some commentators reacted negatively and raised criticisms of Peri, believing that his findings contradicted basic economic laws of supply and demand. While a portion of naysayers were not interested in engaging with the economic research -- their objections being politically motivated -- other readers raised legitimate questions. And even Americans who identify as progressives might wonder if immigration does not threaten unions and undermine standards set by organized labor.

FPIF senior analyst Mark Engler discussed these topics with Professor Peri, asking him to clarify his findings and respond to some common criticisms.

Engler: A common objection to your conclusions about immigrants in the U.S. economy is that the findings seem to violate the law of supply and demand. If the supply of low-wage workers in the economy is increasing, why doesn’t that drive down wages?

Peri: People seem to understand the story of supply and demand. What is a little harder to understand is the idea of “complementarity” versus substitution, which is just as basic in economics.

If two workers are completely identical, supply and demand takes effect -- just as if you put more corn on the market, the price of corn will decrease. But if you have workers who do jobs that are not the same, and if they specialize in types of tasks that are complementary, this can increase wages and productivity for both.

An extreme example of this would be if you have an engineer and you add a construction worker. With the engineer by himself you’re not going to do much. But with an engineer plus a construction worker, you can build a building. Therefore, the productivity of the engineer goes up a lot. And the wages for both workers increase.

What I try to address in much of my research is how immigrants are really taking jobs that complement the skills of a lot of native workers. And in fact, the inflow of immigrants pushes some of these native workers to take complementary jobs. That can have positive effects. In economics, this story of complementarity is, in its essence, just as simple as the story of demand and supply.

Engler: Nevertheless many native-born workers don’t see themselves as complementary. They see themselves as threatened, as competing for the same jobs.

Peri: One of the differences between immigrant workers and native-born workers is that the native worker is likely to have a better understanding of the language. This by itself differentiates the tasks that a native worker can do.