By Michael Hicks
Immigration and its effect on wages and employment often is viewed as a parallel discussion to international trade. After all, the much maligned forces of globalization are far more apparent through immigration than they are through trade.
So, it may be useful to think through some of the economic consequences of immigration and how they differ across skill and education levels.
At the outset it is important to know that the immigrant share of the U.S. population is today lower than it was at any time between 1870 and 1910. Also, today’s immigrants are far better educated and more commonly speak English. They diffuse across the nation more evenly, tend to do better on employment rates, educational attainment and family formation than those of us native-born Americans.
Still, they also represent all skill levels from migrant agricultural workers to all the American Nobel prize winners this year, except Bob Dylan (a third-generation American). This immigration has an economic effect.
To illustrate the impact of immigrants, let us discuss two representative groups; economists and farm workers. Both of these industries are human-capital intensive service occupations. Economists average between 18 and 20 years of formal education, the latter between eight and 12. Wages for economists are high and growing; wages for farm laborers are low and static.
As it happens, both occupations are overwhelmingly represented by immigrants. The data aren’t perfect, but most migrant farm workers are immigrants, and in the most recent year, 68 percent of economics doctorates awarded in the U.S. were to immigrants. So, with immigrants comprising half or more of prospective employees in both occupations, what accounts for the stunning differences in economic outcomes?
Labor markets set wages based on the productivity of the worker (the demand side) and the worker’s willingness offer labor (supply). Thus both the level and growth rates of wages are influenced by these two factors.
Because wages and growth rates of these two occupations are very different despite overwhelming availability of immigrant labor, something other than labor supply must be at work. And yes, it is naturally labor demand.
At the individual level, I, like other native-born economists and farm laborers, compete with immigrants. Conceivably, that may suppress our wage growth. But, the productivity effect of foreign labor appears to play a very different role in both industries. The presence of immigrant economists makes research centers, universities and banks more productive, hence raising demand.
Different approaches to economic training, language and other less observable skills immigrants bring have been a long term panacea, not only to economics, but all American science.
In 1939, Great Britain and Europe were home to all the world’s leading universities. Most of the U.S. was an academic and scientific backwater. Today, 16 of the top 20 universities in the world are American, and 32 of the last 33 economics Nobels were awarded to Americans, nine of whom were immigrants. Half the recent winners of the John Bates Clark Award (the young Nobel) were foreign-born. Immigration has, and continues, to make us a better and stronger nation.
The question today is all about who to let in, and who to keep out. It seems to make sense to admit highly educated workers in large numbers and constrain the number of low-skilled workers.
There are at least two practical problems with this. Firstly, even if it has yet to happen, it is possible that American workers in some highly skilled occupations could see wages stalled if there is a great deal of immigrant competition. Second, it isn’t clear that low-skilled workers are low in other measures of human capital. The truth of this is apparent in the success of second generation Americans for more than three centuries.
The debate about immigration is complex and emotional. It involves changes to culture and national security that are older than the nation itself.
Moreover, other topics cloud the debate, such as the deplorable continuance of identity politics and concentrated job losses due to technology.
Still, anyone wishing to better understand what to think on the matter needs to understand the benefits of immigration, as well as the costs.
Michael Hicks is the director of the Center for Business and Economic Research and an associate professor of economics in the Miller College of Business at Ball State University. Send comments to firstname.lastname@example.org.