Politicians of both parties have a knack for telling crowds that immigration is bad for American workers.
Scott Walker did it. Rick Santorum did it. President Barack Obama did it.
While they may approach it differently, they all make similar arguments: Immigrant workers, specifically undocumented workers, drive down wages by creating a glut in the labour supply.
But according to a recent study, these claims are far from true.
Economics professor John McLaren, of the University of Virginia, and Gihoon Hong, of the University of Indiana at South Bend, found that an influx of immigrant workers created jobs and wages did not go down.
In summarizing their findings, McLaren and Hong present a stark repudiation of the argument that immigrants have a negative economic effect (emphasis added):
Using US Census data from 1980 to 2000, we find considerable evidence for these effects: Each immigrant creates 1.2 local jobs for local workers, most of them going to native workers, and 62% of these jobs are in non-traded services. Immigrants appear to raise local non-tradeables sector wages and to attract native-born workers from elsewhere in the country.
The debate has drawn attention because of the sheer increase in the number of immigrants living in the US.
According to the Pew Research Center, data shows that in 2011 there were 40.4 million immigrants living in the US, 11.1 million of whom were undocumented. This is up from 31.1 and 8.4 million, respectively, in 2000.
The idea that the researchers seized upon is that if an inflow of new workers increased the labour supply, then it must also increase the labour demand in a town. With more people there is more need for businesses and jobs to support the larger population.
The report says (emphasis ours): “We find that 1,000 new immigrants to a US Metropolitan Area generate approximately 1,200 new local jobs, about 62% of which are in the non-traded sector.” Additionally, most of these new jobs go to native workers.
The jobs do come, however, in particular industries. McLaren and Hoong differentiate between “tradeable” and “nontradeable” industries — basically goods-created and services. They found that most of the new jobs created come in the service industries. Additionally, wages increase in the services industries, while they do fall in the goods-creating jobs.
In total, however, the immigrant effect, called the “shot in the arm effect,” can raise wages. “Depending on how strong the shot-in-the-arm effect is, it may raise real wages in terms of the overall consumer price index, raising utility for all local workers,” said the report.
This increase in jobs and wages will then attract other native workers, increasing the benefits:
“In that case, immigration into a town will tend to attract other native workers from elsewhere in the country, who will then create an additional ‘shot in the arm’ of their own, resulting in a virtuous cycle in which employment in the town has increased by more than the direct rise in the local labour force due to the immigrants.”
This study is one of a wave of studies done in recent years that seem to show little or net positive effects of immigration. Giovanni Peri at the University of California-Davis found little effect of immigrants on workers wages. William Olney at Williams College found that immigrants have a positive effect on US businesses. This applies around the globe, from Denmark to Israel.
Immigration, as Jeb Bush reminded everyone Monday, is going to continue to be a focus, but perhaps all the candidates should take a closer look at the numbers before pronouncing its economic effect.