Immigrant Labor Improves Job Prospects For the Native Born
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Individually, you will have a lot of personal stories of people feeling threatened. But if you look at the data about what types of occupations Americans have taken in the last 40 years, in particular in states where there are lots of immigrants, the trend has been toward native-born Americans taking on the types of occupations that are more in the line of “construction supervisor” or “taxi dispatcher,” rather than “construction worker” or “taxi driver.” This, on average, has produced gains.
At an individual level, if you were a native-born agricultural worker in California 30 years ago and you’re still picking strawberries today, you might have lost out. But you have to really look hard to find native-born workers still doing these jobs. It’s far more common to see these workers taking jobs a little further up the scale -- working, for example, as a farm manager.
The aggregate data shows that the average American worker may have upgraded his or her job because of immigration -- that therefore there has been a reward for the native worker.
Engler: I think part of the confusion is that people perceive the economy as having a set, finite number of jobs. When someone new comes in to the economy, the idea is that this person takes away a job from someone else. How would you address this?
Peri: Right. The labor market in the United States is a very dynamic market. Every month, hundreds of thousands of jobs are destroyed and hundreds of thousands are created. Of course, in a recession, you have more of the former. But, in general, when a new worker comes into a dynamic set-up, the presence of more workers creates more opportunities for firms and more opportunities for investment. So the natural effect of more workers in the economy is that more firms are created, more supply is generated, and more workers receive a salary, increasing demand. In equilibrium, the economy expands.
There is no reason in the long run that one more worker would decrease wages. Just look at U.S. employment in the last 40 years. The number of people working has doubled. And wages have also increased 30 or 40 percent.
The question is: How long does it take for an extra worker to generate the needed investment of the firm and to ultimately create demand, so that one extra worker becomes an expansion of the economy and not one less job for a native worker? My analysis indicates that these mechanisms are relatively fast. So even within one or two years, you don’t observe much job loss, but instead, states with more immigration simply expand their economies a little faster. And over four to 10 years, you also observe the extra investment needed so that capital per worker doesn’t change that much and you have a productivity effect.
Engler: But real wages for non-managerial workers in the United States haven’t increased much in the last 30 or 40 years. They’ve been almost stagnant.
Peri: Here you have to distinguish median wage from average wage. The wages of highly educated workers have actually increased quite a bit in the last 30 years. What have done badly are wages for workers at lower levels of education. Economists are trying to understand the reasons why. Two big candidates are the impacts of technology and the impacts of trade and off-shoring.
Some people are also looking at immigration as a possible reason -- including me, David Card of Berkeley, Christian Dustmann of University College London, and others. Yet the studies don’t seem to find much of a negative impact of immigration on wages. In fact, some find no impact on employment and a little bit of a positive impact on wages. And the aggregate data shows no impact in terms of displacement.