Immigration: The Demographic and Economic Facts

5. Effects of Immigration on Natives' Earnings


The Fix-Passel Review of Effects on Aggregate Earnings

Fix and Passel reviewed the studies concerning the effect of
immigration on wages of natives across industries and without
distinguishing among groups of natives. They summarize as
follows.


Immigration has no discernible effect on wages overall. . . .
Wage growth and decline appear to be unrelated to immigration--a
finding that holds for both unskilled and skilled workers (1994,
48).

     Here is another summary among many, particularly relevant
because it is by George Borjas, an economist whose work is often
cited favorably by anti-immigration groups. "The empirical
evidence indicates that immigrants only have a minor effect on
the earnings and employment opportunities of natives." About
illegals in particular, he writes, "There is no evidence . . .
that illegal immigration had a significant adverse effect on the
earnings opportunities of any native group, including blacks"
(1990, 221, 90).

     Many of the relevant studies now will be mentioned
separately.


DeFreitas and Marshall on Manufacturing Employment

     DeFreitas and Marshall related the percentage in 1980 of
manual workers in metropolitan manufacturing sectors who were
born abroad to the average annual rate of change from 1970 to
1978 in the hourly earnings of manufacturing production workers
in those metropolitan areas. They found that higher concentrations 
of foreign-born manual workers have a statistically significant 
negative impact on wage growth rates. However, the magnitude 
of the estimated impact is relatively modest (less than one 
percentage point slower wage growth with every 10 percent 
increase in the immigrant share of manufacturing jobs), and it is 
significant only in metropolitan areas in which 20 percent or more 
of manual workers are immigrants (1983, 155).


Butcher and Card on Wages across Cities

     Butcher and Card "track[ed] wages in 24 major cities during
the period from 1979 to 1989" using microdata from the U.S.
Census and Current Population Surveys. They conclude,


[T]he evidence we have assembled for the 1980s confirms the
conclusions from earlier studies of 1970 and 1980 census data. In
particular, we find little indication of an adverse wage effect
of immigration, either cross-sectionally or within cities over
time. Even for workers at the 10th percentile of the wage
distribution, there is no evidence of a significant decline in
wages in response to immigrant inflows (1991, 296).


LaLonde and Topel on Natives' and Immigrants' Earnings

     LaLonde and Topel studied immigrants' and natives' earnings
and education in the 1970 and 1980 U.S. censuses and found that
although it is true that immigration has small effects on
equilibrium wages, virtually all of this burden falls on
immigrants themselves. Labor market effects for nonimmigrants are
negligible. Taken together, these results suggest that any
adverse effects of current immigration flows on the U.S. labor
market and on native welfare will be small (LaLonde and Topel,
1991, 302).


. . . the decline in the native wage attributable to an increase
in the supply of immigrants is numerically small. For instance, a
10-percent increase in the size of the immigrant population
reduces native earnings by .2 percent. A doubling of the number
of immigrants in the local labor market, therefore, reduces the
native wage rate by only 2 percent. The overwhelming consensus of
the literature seems to be that native and immigrant workers are,
on average, weak substitutes in production. Despite all of the
worry and discussion over the presumed large adverse impact of
immigration on native earnings opportunities, careful empirical
research suggests that this concern is not justified. The
earnings of the typical native are barely affected by the entry
of immigrants into the local labor market. Moreover, the studies
summarized in Table 5.1 indicate that disaggregating the labor
force by sex, age, race, and ethnicity does not alter this basic
finding. . . .


It is often argued that blacks are the one group whose economic
progress is most likely to be hampered by the entry of immigrants
into the United States. Perhaps the most surprising insight
provided by the recent econometric evidence is that no study
finds any evidence to support this claim. . . .


Recent econometric research, therefore, has not been able to
establish a single instance in which the increase in the supply
of immigrants had a significant adverse impact on the earnings of
natives (1990, 86-88).


. . . the entry of Mexican-born illegal aliens barely affects the
earnings of natives. A 10-percent increase in the size of the
Mexican illegal-alien population reduces the earnings of
Mexican-American men by .1 percent; does not change the earnings
of black men; reduces the earnings of other men by .1 percent;
and increases the earnings of women by .2 percent. There is no
evidence, therefore, to suggest that illegal immigration had a
significant adverse impact on the earnings opportunities of any
native group, including blacks (1990, 90).


Smith-Newman Study of Wages in Texas

     Smith and Newman (l977) performed the first convincing study
of the effect of immigration upon wages, analyzing the effects of
legal Mexican immigrants in various Texas cities with differing
proportions of Mexicans in the population and at different
distances from the border. They found that wages (actually,
yearly incomes with adjustments for hours and weeks worked, as
well as for age, education, occupation, and migration history)
were 20 percent lower near the border, where the Mexican
population is proportionally greater, than away from the border.
But when they adjusted for the cost-of-living differences between
these cities, the differential was reduced to 8 percent.


Grossman's Study of 19 Metropolitan Areas

     In theory, immigrants will lower the wages of natives (a) to
the extent that there is substitution between capital and labor;
if the quantity of labor is relatively large with respect to the
quantity of capital, the output per worker is relatively small,
and hence wages are relatively lower; and (b) to the extent that
there is substitution between immigrants and natives; if
immigrants and natives can do the same job, in the presence of
condition (a), the wages of natives will be depressed by
immigrants. To the extent that the two kinds of labor do not
substitute for each other, the effect of the capital constraint
upon natives is mitigated.

     Grossman (1982) estimated the effect of foreign-born workers
upon second-generation workers, and upon native workers, in a
sample of 19 metropolitan areas. In addition to the proportions
of these groups in the labor force, she introduced a variable for
quantity of capital. Her results implied a slight negative effect
of immigration upon native wages. Her results must be qualified
by the smallness of the number of observation, by the fact that
the foreign born represent all ages and lengths of time in the
United States, and by the puzzling fact that the number of
natives seems to have a strong negative effect upon their own
wages--puzzling because larger cities are observed to have higher
rather than lower wages.


Chiswick-Chiswick-Miller

Cross-Country Comparison

     B. Chiswick, C. Chiswick, and Miller (1985) examined the
ratio of skill-adjusted immigrant wages to native wages in five
countries where the proportions of immigrants differ
markedly--the United States, Britain, Canada, Australia, and
Israel. The fewness of the observations (five countries) causes
doubt about the validity of the analysis. They found that
immigrants and natives are close (though not perfect)
substitutes. But this does not imply that immigrants increase
native unemployment, for reasons given in Simon (1989, chapters
11 and 12).


Effects on Wages of Minorities and the Poor

Fix and Passel Summary of Effects on African-Americans

     Immigration has no negative impacts for black workers taken
as a whole, according to the evidence. But less skilled black
workers and black workers in high immigration areas with stagnant
economies are negatively affected. Given the far higher
unemployment rates of African-American males than white males, it
is not surprising that this is one of the most frequently
examined issues in the economics of immigration and benefits from
the most recent research. Particular findings that inform this
issue include:


Native African-Americans in areas of high immigration fared
better than native African-Americans in low-immigration areas in
terms of wage and employment growth. In high-immigration areas,
however, native African-American wages do not keep pace with the
rising wage trends that immigration brings for Anglos and
Hispanics [citing Enchautegui 1993].

     Immigrants increase the labor market opportunities of
African-Americans in strong local economies but reduce them where
labor demand is weak [citing Bean, Fossett, and Park 1993]. Thus,
increased immigration may hurt African-Americans in recessionary
periods and help them in periods of growth. This finding
qualifies the results of two studies of high-immigration
regions--New Jersey [citing Espenshade 1993] and Miami [citing
Card 1990]--which found no effects.

     Immigration increases the percentage of the overall labor
force that is employed but reduces the weekly earnings of less
skilled African-American men and women [citing Altonji and Card
1991].

     Selected ethnographic studies find that employers prefer
immigrants to native black workers, particularly in low skilled
jobs [citing Kirschenman and Neckerman 1991]. They also find that
employers rely on informal networks when looking for new hires in
immigrant-dominated sectors of the economy. Use of immigrant
networks reduces the employer's recruitment costs at the same
time that it effectively excludes African-Americans and other
non-immigrants from the hiring process [citing Waldinger 1993;
Fix and Passel 1994 and forthcoming, 49-50].
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Urban Institute Study of Los Angeles County

     From the data in Table 5.1, Muller concludes that the
picture with respect to wages is different from what he found
about unemployment.


There is little doubt that wages in several occupations and
industries rose more slowly in Los Angeles than elsewhere as low
skilled immigrants, primarily Hispanics, entered the labor force
. . . most notabl[y] in the manufacturing sector, particularly
among production workers in industries where wages have been
traditionally low such as in apparel and textile production and
in relatively low-wage industries such as restaurants, personal
services, and hotels where many Mexicans are employed.

     The relative declines in low-skill wages are especially
noteworthy because wages in general rose 9 percent more rapidly
in Los Angeles than in the rest of the country between 1972 and
1980.

     Table 5.2 shows a lack of effect upon blacks in three of the
four lower-pay categories. And this finding seems not to be a
statistical artifact; Muller and Espenshade conducted analyses
similar to those described above for unemployment and for wages
of blacks, and found an effect that was statistically significant
but very small in magnitude--$85 yearly, if the proportion of
Hispanics would be 7.5 percent rather than 5 percent in the given
area, to be compared to average black family income of $15,818 in
that year. Muller and Espenshade suggest that Hispanics and
blacks are not close competitors in labor markets; yet this
finding needs more explanation.
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DeFreitas on Wages of Various Groups

     DeFreitas (1986) found no negative effect of immigrants upon
the wages of any group except black females.


For all low-skilled native men the results indicate that there
are no significant negative effects on their wage levels from
recent Hispanic immigration. In fact, such migration has a
significantly positive influence on the Anglo-male earnings. . .
. The only persons whose wages appear to have been somewhat
adversely affected by illegal migration since the mid-70s are
black women. . . (p. 23).

     The effect DeFreitas found is "relatively small" (p. 23). It
must be noted, however, that the immigrants DeFreitas studied had
been in the country up to five years; if the effect is mainly in
the first year or so, rather than being more permanent, these
data could not be expected to show it.
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Bean-Lowell-Taylor

     Bean, Lowell, and Taylor (1986) estimated the effect of the
number of undocumented Mexican workers (1980) in the labor
markets across the Southwestern United States upon annual
earnings in 1979 of six labor force groups--(a) undocumented, (b)
legal, and (c) native-born Mexican-origin males; (d) black males;
(e) non-Mexican origin white males; and (f) females. The
(statistically significant) effects of illegal Mexican immigrants
are negative upon white males' wages (substitution) and positive
(complementarity) upon females' wages. The effects of legal
Mexican immigrants upon native-born Mexican males and black males
are positive. The magnitudes of the effects are hard to interpret
but the authors refer to them as "not very sizable. The concern
that undocumented immigration may be depressing the earnings of
native-born workers does not appear to be borne out by these
results" (p. 15).
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Sorensen-Bean-Ku-Zimmerman Study of Metropolitan Areas

     Sorensen et al. (1992) used the same technique mentioned
above (in connection with their study of hours worked) to examine
the effects of immigration on earnings. Their "basic finding is
that immigration has a very small effect on native earnings" (p.
91). The elasticities (with respect to the proportion of foreign
born) are +.03, -.07, and -.04 for native white males, black
males, and Hispanic males, respectively. But my interpretation,
contrary to the language used by Sorensen et al., is that these
effects may not be negligible. A foreign-born population of 20
percent rather than 4 percent (conceivable proportions) would
mean 35 percent lower wages for blacks, according to this
analysis.


Effects in Particular Industries

     Both theory and the econometric studies cited above suggest
that the overall wage level is affected little, if at all, by
aggregate immigration. Special demographic groups (such as
blacks) show little or no effect. In contrast, occupations and
occupational strata that receive disproportionate increases in
immigration should reasonably be affected upward or downward in
incomes, depending on whether the occupation receives immigrants
at a higher or lower rate than average.

     Immigrant doctors constitute 20.5 percent of the total of
U.S. physicians, much higher than the overall percentage of
immigrants in the labor force (perhaps 1 person in 10); in
contrast, immigrant lawyers (and judges) constitute only 3.5
percent of U.S. lawyers, much lower than the average percentage
(Washington Post, April 18, 1994, A6). As a consequence, the
earnings of American-born physicians surely are somewhat lower
than if there had been no immigration, and surely the earnings of
American-born lawyers are at least slightly higher than
otherwise. There undoubtedly has been an increase in the demand
for lawyers' services because of the larger rate of increase of
potential immigrant clients than of immigrant lawyers to service
them. The middle-education class (in which immigrants are
disproportionately few) also should benefit by immigration,
whereas high- and low-education groups might be expected to
suffer somewhat in their earnings from the relatively high rate
of immigration compared with the native labor force.

     However, a review of studies of particular industries by Fix
and Passel concluded as follows.


The majority find no more evidence of displacement than is
revealed by the aggregate data. Even studies of more highly
skilled occupations, such as registered nurses, find no strong
evidence of displacement (p. 51, citing Levine, Fox, and
Danielson, 1993, on nurses).

     The entire set of findings concerning earnings is summarized
by a table of Borjas's that I have adapted as Table 5.3. He
summarizes in words as follows: "[I]mmigrants have a negligible
impact on native employment opportunities" (p. 91).


Self-Employment

     Considering the entire stock of immigrants in the United
States as of 1980, Borjas (1990, 165) found that they are
slightly more likely to be self-employed than natives--12.2
percent to 11.4 percent. And those who are self-employed make
slightly more money than self-employed natives. (See Table 5.4; a
modest interpretation indicates no meaningful differences.) To
the extent that self-employed persons create jobs for others,
these numbers suggest that immigrants create jobs in similar
proportion to the extent to which they fill jobs. This in part
explains how it can be that a larger number of immigrants does
not imply increased unemployment among natives.

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