suzanne wang

Economic Impact of "Low-Skill" Immigration

May 03, 2018

It’s no secret that Trump is not the biggest fan of immigration. His campaign rhetoric, tweets, and policy proposals reveal a distaste for immigrants, especially those who work in low-skilled jobs such as manufacturing. Commonly referred to as low-skill immigrants, these documented and undocumented workers are criticized for taking the jobs of native-born Americans, lowering wages, and relying on social welfare programs. While some of this criticism is backed by research, by and large economists show that low-skill immigrants benefit the U.S. economy, especially in 2018 and beyond.

On his campaign trail, Trump often presented the narrative of immigrants lowering American workers’ wages, and some research does suggest that low-skill immigrants leave native-born Americans at a disadvantage. George Borjas, an economist at Harvard, is ardently anti-low-skill immigration. In a study published in 2003, he finds that immigration lowered wages in the U.S. by 3-4% overall. For native-born Americans with less than a high school education, the negative effect was over twice as strong. Based on current average hourly wages, they experience a $2.39 hourly decrease. But this result is hotly debated, and many other economists come to different conclusions.

Borjas’ study has one especially notable flaw. He assumes that immigrants and native-born workers are perfectly interchangeable: an immigrant high school dropout and native-born high school dropout could do exactly the same jobs. This is not typically the case. Low-skill immigrants often have a language barrier that would limit them from certain jobs that nativeborn Americans, including those without a high school diploma, could easily do. A 2012 study by Oxford and UC Davis economists corrects for this assumption, among others, in their model. They find that between 1990-2004, immigration decreased the wages of native-born high school dropouts by just 16-45 cents per hour, while having no effect on native-born workers with higher levels of education. The Economic Policy Institute, a nonpartisan think tank, even finds a positive effect: an 8-cent increase in hourly wages for native-born Americans with less than a high school education. Their analysis focuses on an additional population: recent immigrants. Instead of native-born Americans, recent low-skill immigrants—who often also lack English proficiency—were the ones to lose out instead.

Other trends in the labor market reflect the significance of English proficiency. A 2009 study published in the American Economics Journal shows that immigrants led less educated, native13 born Americans to find more specialized jobs that require more communication skills. Low-skill immigrants specialize in manufacturing and labor-intensive jobs. Research also shows that American-born workers respond to increases in low-skilled immigrants by moving into better occupations. Jennifer Hunt, an economist at Rutgers University, finds that less-skilled immigrants increased the native-born American high school completion rate between 1940-2010. Americans workers are clearly not stagnant, but actively responding to changes due to immigration. From attaining more education to finding less physically taxing jobs, these changes could even make them better off.

Not only are low-skill immigrants not harming American-born workers, but Americans actually need them. Businesses in many regions of the United States are facing a worker shortage. While the unemployment rate has remained steady at a 17-year record low of 4.1% over the past months, the number of job openings has increased, indicating a tight labor market: workers are employed, but then they are also harder for businesses to find, hire, and retain. In the Midwest, there would still be over 180,000 unfilled positions even if every unemployed person were assigned an open job, according to the Labor Department. Iowa has many free workertraining programs—which Trump himself has backed—but not enough people to fill them. With a dearth of workers, these businesses struggle to fill orders, limiting their ability to grow.

An aging population and low birthrate mean that there will be even fewer workers. By 2035, the number of Americans over age 65 will be greater than those under 18 years old for the first time in U.S. history. As more workers retire leaving a smaller workforce, growth in the economy will stall. The labor supply from immigrants has historically helped the U.S. avoid stagnation as a result of an aging workforce, unlike countries with stricter immigration policies like Japan, as noted by experts in the National Academy of Sciences’ (NAS) 2017 report. Immigrant workers, including the lower-skilled, can help to fill this increasing employment hole from the tighter labor market and changing demographics.

Beyond economics, greater openness to low-skill immigration means compassion towards those persecuted by their governments, oppressed economically, or seeking to reunite with family. Even when looking at the United States through a purely economic lens, substantial evidence shows that low-skill immigration has an overall positive impact on the economy, especially in the long term. If Trump truly wants to put “America First,” he should rethink his stance.