The Economics of Illegal Immigrant Labor

[Omaha Steve]

http://scienceblogs.com/grrlscientist/2007/05/the_economics_of_immigrant_lab.php

As Congress debates an overhaul of the nation's immigration laws, several economists and news media pundits have sounded the alarm, contending that immigrants are causing harm to Americans in the competition for jobs. But are they?

A more careful examination of the economic data suggests that the argument is, at the very least, overstated. There is scant evidence that illegal immigrants have caused any significant damage to the wages of American workers.

The number that has been getting the most attention lately was produced by George J. Borjas and Lawrence F. Katz, two Harvard economists, in a paper published last year. They estimated that the wave of illegal Mexican immigrants who arrived from 1980 to 2000 had reduced the wages of high school dropouts in the United States by 8.2 percent. But the economists acknowledge that the number does not consider other economic forces, such as the fact that certain businesses would not exist in the United States without cheap immigrant labor. If it had accounted for such things, immigration's impact would be likely to look less than half as big.

In their paper, they found;


* Over the last quarter-century, the number of people without any college education, including high school dropouts, has fallen sharply

* Businesses and other economic agents have adjusted to immigration, by making changes that have muted much of immigration's impact on American workers

* No wage differences could be attributed to the presence of illegal immigrants

Borjas said that while the numbers were not large, the impact at the bottom end of the skill range was significant. "It is not a big deal for the whole economy, but that hides a big distributional impact," he said.

Others disagree. "If you're a native high school dropout in this economy, you've got a slew of problems of which immigrant competition is but one, and a lesser one at that," said Jared Bernstein of the Economic Policy Institute, a liberal research group.

FULL article at link.

[whistle]

1. The Economics of Illegal Immigrant Labor is the economics of slavery

...but far more ruthless because there is no responsibility attached, it is pure exploitation.

[leftofthedial]

6. current metastisized capitalism is based on the economics of slavery

drastically reduce wages and benefits

force workers to work multiple jobs and more and more and more hours just to barely survive

create a pervasive atmosphere of perpetual insecurity about the future

Voila!

Slavery, but without the costs of feeding, housing and caring for the slaves, since those costs are externalized onto the slaves themselves or onto the "government" (which is increasingly just a sham proxy for the slaveowners). Or the slaves just die off, which is no problem since it is a slave buyers' job market.

America's current capitalist economy is Slavery 2.0.

[Viva_La_Revolution]

2. I don't believe it

When I tried to get back into Warehousing (I used to be a manager) wages had dropped from $2 to $4 per hour for all positions. Being bi-lingual would help me get a position again, but my rusty Spanglish is not good enough.

I'm currently painting houses, and the wages have been depressed from $17-$20 to $10-$15 per hour, because we have to bid against other co's that hire illegals.

It IS depressing wages in SEVERAL employment sectors.

[unlawflcombatnt]

3. You're absolutely wrong, and your source is lying

" No wage differences could be attributed to the presence of illegal immigrants"

Borjas never said any such thing. I've read and quoted his papers multiple times. He's estimated that immigrant labor (illegal + legal) has suppressed wages over 4% annually in a 2004 study. In another study from August 2006 he stated a wage reduction of 3% with a 10% increase in the labor force size.

Here is a direct quote from a Borjas article on the wage suppressing effects of illegal immigration from August of 2006:

"What happens when immigrants enter the labor market? The 1964 edition of Paul Samuelson's influential introductory economics textbook gives the common-sense answer: "By keeping labor supply down, immigration policy tends to keep wages high. Let us underline this basic principle: Limitation of the supply of any grade of labor relative to all other productive factors can be expected to raise its wage rate; an increase in supply will, other things being equal, tend to depress wage rates." Mr. Samuelson wrote this just before the 1965 policy shift that sparked the resurgence of immigration, so he emphasized that restrictions "keep wages high." Today we are concerned with the mirror-image implication: As immigration increases the size of a skill group (such as low-educated workers), the wage paid to that group should fall....

Because local labor markets adjust to immigration, I have argued that the impact of immigration is best measured at the national level. In fact, by examining national wage trends for narrowly defined skill groups for the last 40 years, the wage effects of immigration become quite visible. These trends suggest that a 10% increase in the size of a skill group (for example, a 10% increase in the number of workers who are high school graduates and are around 30 years old) reduces the wage of that group by 3% to 4%."

Below is quote from Borjas Study in 2004, stating that immigrants suppress annual wages 4%. This study was widely circulated in the press and is no secret to anyone.

"President Bush and some members of Congress have proposed legalizing illegal aliens and substantially increasing legal immigration. Economic theory predicts that increasing the supply of labor in this way will reduce earnings for natives in competition with immigrants. This study examines the economic impact of increases in the number of immigrant workers by their education level and experience
in the work force, using Census data from 1960 through 2000. Statistical analysis shows that when immigration increases the supply of workers in a skill category, the earnings of native-born workers in that same category fall. The negative effect will occur regardless of whether the immigrant workers are legal or illegal, temporary or permanent. Any sizable increase in the number of immigrants will inevitably lower wages for some American workers. Conversely, reducing the supply of labor by strict immigration enforcement and reduced legal immigration would increase the earnings of native workers.

Among this Backgrounder’s findings:

• By increasing the supply of labor between 1980 and 2000, immigration reduced the average annual earnings of native-born men by an estimated $1,700 or roughly 4 percent.

• Among natives without a high school education, who roughly correspond to the poorest tenth of the workforce, the estimated impact was even larger, reducing their wages by 7.4 percent...."

You're quoted source doesn't know what she's talking about. Borjas's studies are readily available. And there's nothing even close to what you've stated, or what your source stated. Interestingly enough, she quoted parts of Borjas's study, but the part about there being no wage effect is her own dishonest interpretation. What a surprise. And now you've quoted her undocumented falsehood, as if it actually came from Borjas's study.

Go read the studies at the links I generously provided and check it out for yourself. Your source is lying. Worse still, she's attributing her lie to a legitimate source -
economics professor George Borjas.

Economic Populist Forum

[Unvanguard]

4. I think you're missing a crucial bit in the article.

"The number that has been getting the most attention lately was produced by George J. Borjas and Lawrence F. Katz, two Harvard economists, in a paper published last year. They estimated that the wave of illegal Mexican immigrants who arrived from 1980 to 2000 had reduced the wages of high school dropouts in the United States by 8.2 percent. But the economists acknowledge that the number does not consider other economic forces, such as the fact that certain businesses would not exist in the United States without cheap immigrant labor. If it had accounted for such things, immigration's impact would be likely to look less than half as big."

[amandabeech]

11. If the only reason that a business is here is cheap immigrant labor

then what good is it doing the rest of us?

Not that much, I would presume.

[Unvanguard]

5. Not to mention the fact that you're quoting the wrong study.

Evolution of the Mexican-Born Workforce in the United States

"The bottom panel of Table 11 uses equation (12) to predict the long-run impact of the 1980-2000 immigrant influx. As expected, the wage impact of immigration is muted in the longrun, as capital adjusts to the increased workforce. Although the average wage in the economy is unaffected by immigration, the unbalanced nature of the immigrant supply shock in terms of the skill distribution implies that there are still distributional effects. The first column of the table reveals that high school dropouts still experience a sizable wage reduction, even in the long run, of about 4.8 percentage points. The long-run increase in the capital stock, however, removes almost the entire wage loss from immigration suffered by college graduates and leads to wage improvements for high graduates and those with some college."

(Quote is from pages 42 and 43 by pdf, 40 and 41 by page numbering.)

[primative1]

8. Are you reading what you are writing?

You highlight this line?

The long-run increase in the capital stock, however, removes almost the entire wage loss from immigration suffered by college graduates and leads to wage improvements for high graduates and those with some college


So are you also in the camp that espouses the view that a rising stock market justifies any evil?

[Unvanguard]

10. There was no normative content in my post.

I was not trying to justify anything. I was merely supporting the challenged portions of the article's interpretation (which did note the difference in effects between those at the bottom and top of the income latter) - in particular as to how those at the bottom could be harmed without an overall depressive effect on wages.

The effects of illegal immigration on those on the bottom of the income ladder are far and away its worst consequence, but the solution is not to scapegoat immigrant workers but to challenge the economic order that pits Mexican and US workers against each other to maximize the profits of the few.

Not because more money for the already-privileged "justifies any evil", but because poor workers from Mexico are not somehow less worthy of consideration than poor workers from the United States.

[Omaha Steve]

7. I didn't expect this great exchange of thoughts for this post

Keep up the good work. The DU has some great thinkers that know what they are saying.

[w4rma]

9. Please tell me that noone is defending **illegal** immigration here. (nt)