August 21, 2017

Economic Scene: The Danger From Low-Skilled Immigrants: Not Having Them

This proposition underpins President Trump’s threat to get rid of the 11 million unauthorized immigrants living in the country. It is used to justify his plan to cut legal immigration into the country by half and create a point system to ensure that only immigrants with high skills are allowed entrance in the future.

But it is largely wrong. It misses many things: that less-skilled immigrants are also consumers of American-made goods and services; that their cheap labor raises economic output and also reduces prices. It misses the fact that their children tend to have substantially more skills. In fact, the children of immigrants contribute more to state fiscal coffers than do other native-born Americans, according to a report by the National Academies.

What is critical to understand, in light of the current political debate, is that contrary to conventional wisdom, less-skilled immigration does not just knock less-educated Americans out of their jobs. It often leads to the creation of new jobs — at better wages — for natives, too. Notably, it can help many Americans to move up the income ladder. And by stimulating investment and reallocating work, it increases productivity.

Immigration’s bad reputation is largely due to a subtle yet critical omission: It overlooks the fact that immigrants and natives are different in consistent ways. This difference shields even some of the least-skilled American-born workers from foreign competition.

It’s more intuitive than it seems. Even American high school dropouts have a critical advantage over the millions of immigrants of little skill who trudged over the border from Mexico and points south from the 1980s through the middle of the last decade: English.

Not speaking English, the newcomers might bump their American peers from manual jobs — say, washing dishes. But they couldn’t aspire to jobs that require communicating with consumers or suppliers. Those jobs are still reserved for the American-born. As employers invest more to take advantage of the new source of cheap labor, they will also open new communications-heavy job opportunities for the natives.

For instance, many servers and hosts in New York restaurants owe their jobs to the lower-paid immigrants washing the dishes and chopping the onions. There are many more restaurants in New York than, say, in Oslo because Norway’s high wages make eating out much more expensive for the average Norwegian.

Where Immigrants Do the Work

Immigrants take up a disproportionate share of many lower-skill occupations — such as farm or janitorial work — as well as some higher-skill ones, like computer science.

Top 10 occupational groups by

immigrant share of workers, 2014

UNAUTHORIZED

IMMIGRANTS

LEGAL

IMMIGRANTS

TOTAL

Farming, fishing and forestry

26

%

20

%

46

%

Building/grounds cleaning and maintenance

16

19

35

Construction and extraction

15

12

27

Computer and mathematical science

5

19

25

Production

9

14

23

Food preparation and related service

10

12

22

Life, physical and social science

4

18

22

Personal care and service

5

16

21

Health care support

4

16

20

Transportation and material moving

6

13

19

Top 10 occupational groups by

immigrant share of workers, 2014

OCCUPATIONAL

GROUP

UNAUTHORIZED

IMMIGRANTS

LEGAL

IMMIGRANTS

TOTAL

Farming, fishing

and forestry

26

%

20

%

46

%

Building/grounds

maintenance

16

19

35

Construction

and extraction

15

12

27

Computer and

mathematical science

5

19

25

Production

9

14

23

Food preparation

and related service

10

12

22

Life, physical and

social science

4

18

22

Personal care

and service

5

16

21

Health care support

4

16

20

Transportation and

material moving

6

13

19

By The New York Times

Similar dynamics operate in other industries. The strawberry crop on the California coast owes its existence to cheap immigrant pickers. They are, in a way, sustaining better-paid American workers in the strawberry patch-to-market chain who would have to find a job somewhere else if the United States imported the strawberries from Mexico instead.

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One study found that when the Bracero Program that allowed farmers to import Mexican workers ended in 1964, the sudden stop in the supply of cheap foreign labor did nothing to raise the wages of American farmworkers. From the cotton crop to the beet crop and the tomato crop, farmers brought in machines rather than pay higher wages.

Another found that manufacturing plants in regions of the United States that received lots of low-skill immigrants in the 1980s and 1990s were much slower to mechanize than plants in low-immigration regions.

A critical insight of the new research into the impact of immigration is that employers are not the only ones to adapt to the arrival of cheap foreign workers by, say, investing in a new restaurant or a new strawberry-packing plant. American-born workers react, too, moving into occupations that are better shielded from the newcomers, and even upgrading their own skills.

“The benefits of immigration really come from occupational specialization,” said Ethan Lewis, an associate professor of economics at Dartmouth College. “Immigrants who are relatively concentrated in less interactive and more manual jobs free up natives to specialize in what they are relatively good at, which are communication-intensive jobs.”

Looking at data from 1940 through 2010, Jennifer Hunt, a professor of economics at Rutgers, concluded that raising the share of less-skilled immigrants in the population by one percentage point increases the high school completion rate of Americans by 0.8 percentage point, on average, and even more for minorities.

Photo
A janitor cleaning the jury assembly room at the Bronx County Courthouse. Immigrants could help fill the tremendous demand expected in coming years for low-skilled workers. Credit Michael Appleton for The New York Times

Two economists, Giovanni Peri of the University of California, Davis, and Chad Sparber of Colgate University, compared the labor markets of states that received lots of low-skilled immigrants between 1960 and 2000 and those that received few. In the states that received many such immigrants, less-educated American-born workers tended to shift out of lower-skilled jobs — like, say, fast-food cooks — and into work requiring more communications skills, like customer-service representatives.

Interestingly, the most vulnerable groups of American-born workers — men, the young, high school dropouts and African-Americans — experienced a greater shift than other groups. And the wages of communications-heavy jobs they moved into increased relative to those requiring only manual labor.

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It is not crazy for American workers who feel their wages going nowhere, and their job opportunities stuck, to fear immigration as yet another threat to their livelihoods. And yet for all the alarm about the prospect of poor, uneducated immigrants flocking across the border, this immigration has been mostly benign.

Take the Congressional Budget Office’s analysis of the immigration reform bill submitted without success by a bipartisan group of eight senators in 2013. By 2033, it estimated, the plan would have increased average wages by 0.5 percent, and do next to nothing to the wages of the least skilled. It would have made the economy some 5 percent bigger, over the long term, mainly because there would be 16 million more people.

If there is anything to fear, it is not a horde of less-educated workers ready to jump over the border. The United States’ main immigration problem, looking into the future, is that too few low-skilled immigrants may be willing to come.

As the National Academies noted about its report, “The inflow of labor supply has helped the United States avoid the problems facing other economies that have stagnated as a result of unfavorable demographics, particularly the effects of an aging work force and reduced consumption by older residents.” There will be an employment hole to fill.

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Article source: https://www.nytimes.com/2017/08/08/business/economy/immigrants-skills-economy-jobs.html?partner=rss&emc=rss

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