costs/benefits of immigration
Source Jim Devine
Date 06/04/16/22:38

April 16, 2006/New York TIMES

Economic View
Cost of Illegal Immigration May Be Less Than Meets the Eye

CALIFORNIA may seem the best place to study the impact of illegal
immigration on the prospects of American workers. Hordes of immigrants
rushed into the state in the last 25 years, competing for jobs with
the least educated among the native population. The wages of high
school dropouts in California fell 17 percent from 1980 to 2004.

But before concluding that immigrants are undercutting the wages of
the least fortunate Americans, perhaps one should consider Ohio.
Unlike California, Ohio remains mostly free of illegal immigrants. And
what happened to the wages of Ohio's high school dropouts from 1980 to
2004? They fell 31 percent.

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

Yet 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.

Mr. Katz was somewhat taken aback by the attention the study has
received. "This was not intended," he said.

At first blush, the preoccupation over immigration seems reasonable.
Since 1980, eight million illegal immigrants have entered the work
force. Two-thirds of them never completed high school. It is sensible
to expect that, because they were willing to work for low wages, they
would undercut the position in the labor market of American high
school dropouts.

This common sense, however, ignores half the picture. Over the last
quarter-century, the number of people without any college education,
including high school dropouts, has fallen sharply. This has reduced
the pool of workers who are most vulnerable to competition from
illegal immigrants.

In addition, as businesses and other economic agents have adjusted to
immigration, they have made changes that have muted much of
immigration's impact on American workers.

For instance, the availability of foreign workers at low wages in the
Nebraska poultry industry made companies realize that they had the
personnel to expand. So they invested in new equipment, generating
jobs that would not otherwise be there. In California's strawberry
patches, illegal immigrants are not competing against native workers;
they are competing against pickers in Michoacán, Mexico. If the
immigrant pickers did not come north across the border, the
strawberries would.

"Immigrants come in and the industries that use this type of labor
grow," said David Card, an economist at the University of California,
Berkeley. "Taking all into account, the effects of immigration are
much, much lower."

In a study published last year that compared cities that have lots of
less educated immigrants with cities that have very few, Mr. Card
found no wage differences that could be attributed to the presence of

Other research has also cast doubt on illegal immigration's supposed
damage to the nation's disadvantaged. A study published earlier this
year by three economists — David H. Autor of the Massachusetts
Institute of Technology, Mr. Katz of Harvard and Melissa S. Kearney of
the Brookings Institution — observed that income inequality in the
bottom half of the wage scale has not grown since around the

Even economists striving hardest to find evidence of immigration's
effect on domestic workers are finding that, at most, the surge of
illegal immigrants probably had only a small impact on wages of the
least-educated Americans — an effect that was likely swamped by all
the other things that hit the economy, from the revolution in
technology to the erosion of the minimum wage's buying power.

When Mr. Borjas and Mr. Katz assumed that businesses reacted to the
extra workers with a corresponding increase in investment — as has
happened in Nebraska — their estimate of the decline in wages of high
school dropouts attributed to illegal immigrants was shaved to 4.8
percent. And they have since downgraded that number, acknowledging
that the original analysis used some statistically flimsy data.

Assuming a jump in capital investment, they found that the surge in
illegal immigration reduced the wages of high school dropouts by just
3.6 percent. Across the entire labor force, the effect of illegal
immigrants was zero, because the presence of uneducated immigrants
actually increased the earnings of more educated workers, including
high school graduates. For instance, higher-skilled workers could hire
foreigners at low wages to mow their lawns and care for their
children, freeing time for these workers to earn more. And businesses
that exist because of the availability of cheap labor might also need
to employ managers.

Mr. 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.

Mr. Katz agreed that the impact was modest, and it might fall further
if changes in trade flows were taken into account — specifically, that
without illegal immigrants, some products now made in the United
States would likely be imported. "Illegal immigration had a little bit
of a role reinforcing adverse trends for the least advantaged," he
said, "but there are much stronger forces operating over the last 25

Copyright 2006 The New York Times Company

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