Labor Day: Immigrants Build the U.S. Economy

Labor Day: Immigrants Build the U.S. Economy

Mark Engler: Labor Day and Immigration

Undocumented immigrants streaming into this country from south of the border drive down wages and steal jobs that could otherwise go to out-of-work Americans. Right?

Wrong. As it turns out, immigrant workers play an important role in building our economy and bolstering institutions such as social security. In other words, they’re raising your wages and paying for your retirement. So this Labor Day might be a good opportunity to show a little gratitude.

Just in time for the holiday weekend, the Federal Reserve Bank of San Francisco released a research summary entitled, “The Effect of Immigrants on U.S. Employment and Productivity.” Its conclusion was not what most people (or at least most people who attend Glenn Beck rallies) expect.

The author, Giovanni Peri, writes:

Statistical analysis of state-level data shows that immigrants expand the economy’s productive capacity by stimulating investment and promoting specialization. This produces efficiency gains and boosts income per worker. At the same time, evidence is scant that immigrants diminish the employment opportunities of U.S.-born workers.

The paper compares states in the United States with high immigration to those with lower rates of immigration. It then controls for other factors such as spending on research and technology adoption. In the end, the paper concludes, “there is no evidence that immigrants crowd out U.S.-born workers in either the short or long run.”

What’s more, the effect of immigration on wages has been markedly positive–equivalent to a $5,100 annual raise for workers on average between 1990 and 2007 (as measured in constant 2005 dollars).

A $5K-per-year salary bump sounds pretty good to me. But I did have some skepticism. Even coming from a pro-immigrant rights perspective, I was wary of an argument saying that a large influx of low-skilled labor into a given area wouldn’t drive down wages for the people at the lower end of the pay scale there. Wouldn’t such a pool of unorganized labor undermine union standards, for example?

I chatted with an economist friend about it. He noted that the paper did not address distribution–meaning that the well off are likely to be collecting a lot more than their $5,100 share of wage benefits, while selected groups of workers might feel a more negative impact. But overall, he was not surprised by the paper’s conclusion, particularly about immigration creating more demand and more employment in the economy. That broadly benefits working people.

Here’s the paper’s explanation of how it works:

As young immigrants with low schooling levels take manually intensive construction jobs, the construction companies that employ them have opportunities to expand. This increases the demand for construction supervisors, coordinators, designers, and so on. Those are occupations with greater communication intensity and are typically staffed by U.S.-born workers who have moved away from manual construction jobs. This complementary task specialization typically pushes U.S.-born workers toward better-paying jobs, enhances the efficiency of production, and creates jobs.

On a somewhat similar theme, the United Farm Workers (UFW) ran a “Take Our Jobs!” campaign this summer. At the Web site, they invited U.S. citizens in need of work to take over for them in the fields:

Farm workers are ready to welcome citizens and legal residents who wish to replace them in the field. We will use our knowledge and staff to help connect the unemployed with farm employers.

Of course, the union notes in the fine print:

Job may include using hand tools such as knives, hoes, shovels, etc. Duties may include tilling the soil, transplanting, weeding, thinning, picking, cutting, sorting & packing of harvested produce. May set up & operate irrigation equip. Work is performed outside in all weather conditions (Summertime 90+ degree weather) & is physically demanding requiring workers to bend, stoop, lift & carry up to 50 lbs on a regular basis.

They didn’t expect a huge wave of applicants, and they didn’t get one. The basic idea: immigrants are doing work that others will not, and are helping the economy as a whole in the process.

Obviously, these sort of conclusions present big problems for Minutemen and other anti-immigration folks who want to believe that unless we seal off the border, our economy is headed for ruin. A lot of these people are also deficit hawks who believe that liberal spenders are destroying social security. But once again, looking at the facts presents serious risk of cognitive dissonance.

A few years back, the New York Times ran a story detailing how “Illegal Immigrants Are Bolstering Social Security With Billions.” Basically, workers using fake social security numbers to get jobs here are paying into the system, yet they are never collecting the benefits. As a result,

…the estimated seven million or so illegal immigrant workers in the United States are now providing the system with a subsidy of as much as $7 billion a year….Illegal immigration, Marcelo Suarez-Orozco, co-director of immigration studies at New York University, noted sardonically, could provide “the fastest way to shore up the long-term finances of Social Security.”

In tough economic times, undocumented immigrants are convenient scapegoats for stagnation and unemployment. But the economic reality doesn’t match up. And there’s no better time than Labor Day to set the record straight.