Immigration and the Labor Market
Discussion Sponsored by Center for Immigration Studies and Center for Public Policy & Contemporary Issues

CIS Paper #9
November 1994

List of Participants

Virginia Abernathy, Vanderbilt University School of Medicine
Richard A. Barff, Dartmouth College
Vernon Briggs, Jr., Cornell University
Gary Burtless, Brookings Institution
William Frey, Population Studies Center
Lawrence Harrison, Center for International Affairs
George B. High, Center for Immigration Studies
Richard Lamm, Center for Public Policy and Contemporary Issues
John L. Martin, Center for Immigration Studies
Benjamin Matta, New Mexico State University
Lawrence Mishel, Economic Policy Institute
Frank L. Morris, Sr., Morgan State University
Milton Morris, Joint Center for Political and Economic Studies
David North, Independent Researcher
Markley Roberts, AFL-CIO

Introduction

The United States is experiencing the greatest wave of immigration in its history. By 1994, there were 22.6 million immigrants in the U.S., according to the Census Bureau, 20 percent of them having arrived in the past five years. Nearly one in 11 people living in the U.S. was born somewhere else, nearly double the proportion in 1970 and the highest level since before World War II.

In addition to causing more than a third of U.S. population growth (37 percent in 1994), immigration is skewing the nation toward a low-skilled, poorly educated workforce. Although many of the foreign born have college educations, an alarming number of others are ill-prepared to compete in a modern economy, with immigrants more than twice as likely as native-born Americans to be high school dropouts.

The increased competition from immigrants for low-skilled jobs has come at an inopportune time. The United States labor market has undergone major changes over the past 30 years. The demand for labor has changed because of technological innovation, increased international competition, and changes in consumer spending, among other reasons. Manufacturing employment is in decline, while low-paying service occupations expand.

At the same time, the supply of labor has been growing rapidly, even without immigration, and women and American-born minorities have been among the fastest-growing segments of the workforce. Unfortunately, these new entrants into the labor force are disproportionately represented in the same low-paying occupations as unskilled immigrants.

Has mass unskilled immigration helped to depress the wages of the most vulnerable of our fellow citizens? Does immigration of people with little education and few job skills contribute to widening gap between rich and poor? Do immigrants displace unskilled Americans from their jobs?

To explore, if not answer, these questions, the Center for Immigration Studies and the Center for Public Policy and Contemporary Issues sponsored a Nov. 1, 1994 gathering of 15 experts representing a variety of disciplines, including economics, demography, geography, social issues, and development. Although there were significant differences in emphasis, there was some broad agreement about the economic impact of immigration on Americans with low levels of skill and education.

This publication is a distillation of the discussion that took place at that gathering, prepared in the hopes of furthering understanding of immigration's impact on America's labor market.

Discussion

Technological and other changes have offered alternatives to employers' traditional reliance on labor, thus weakening the bargaining power of unskilled workers:

"The labor market is different today than it was at the turn of the century ... Immigration stopped around 1914, and the assembly line was introduced the year before in 1913 and changed the whole technology."  Vernon Briggs

"Our labor market has been in a state of very radical transformation due to the issues of technology and the fact of international competition, changing consumption patterns toward services, the unexpected end of the Cold War, and now a sudden cutback in the defense industry."  Vernon Briggs

At the same time, mass immigration has added to the stock of unskilled workers, to the detriment of Americans who compete for similar jobs:

"It is ironic that at the exact time that immigration opens up in the mid-1960s is the exact year that the baby boom generation hits the labor market, 1964-1965. So it has not been a period in which we have had a shortage of labor in any aggregate sense."  Vernon Briggs

"So it does seem to me that if we are going to be faced ... with a problem of job generation, that one of the elements of the recipe here has got to be ... a governor on the flow of low-skilled people from outside, to assure that what maybe a somewhat aggravated job generation problem does not get out of hand."  Larry Harrison

"The wage structure of the United States has moved very greatly against the least skilled workers precisely where there has been an increase in immigration, where the increase in immigration has been the strongest. And I think that that increase in immigration there has offset what society has attempted to do through increasing graduation rates of native-born Americans and putting people into skills-training programs, increasing the proportion of people who receive at least some community college education and so forth. And it is one of the most important factors which I think has continued to keep up the supply of relatively less-skilled U.S. labor."  Gary Burtless

"We have a lot of support for remedial programs in our country, for education and training and trying to bring people into the labor market, and now we are suddenly adding to those numbers through our immigration policy."  Vernon Briggs

"We don't have any say over the distribution of resources to people who immigrate into the United States, and our only control over their skill distribution is by exercising control over who is permitted into the United States. And on that score, the evidence is very clear that we have accepted much, much more immigration of less-skilled workers."  Gary Burtless

And this is the case even if there is no aggregate oversupply of labor caused by immigration, only an increase in the number of workers with low skills:

"I believe that [immigration] has some adverse impacts on the various segments of the labor force. [However,] we are not suffering from an oversupply of labor driven by immigration in the aggregate. [At the same time,] the shrinkage of the low-skill labor force would have been greater in the '80s had we not had immigration."  Lawrence Mishel

"I don't see anything the matter with having 900,000 immigrants enter the United States every year, if that's what the population would like. However, my own private view is that it's much better for those people to compete against people like me than to compete against people who have deteriorating labor market circumstances over the last 20 years."  Gary Burtless

The result is lower wages for those competing against the unskilled immigrants for the poorest-paying jobs. This wage depression contributes to the growing disparity in incomes between the haves and have-nots:

"When you increase the supply of workers [in the low-skill wage market], you have got to depress wages in order to absorb them into the labor market. All things being equal, that's the way you evaluate immigration policy."  Benjamin Matta

"If there is an excess of this kind of [foreign] worker, and they are concentrated in a particular labor market, they tend to depress wages and working conditions, which is troublesome to the people who are competing with them."  David North

"Immigration has some very unpleasant, unhappy effects. Now, these effects are not evenly distributed across a society, but they are concentrated geographically and across socioeconomic segments of the population, and there is need to be attentive to it."  Milton Morris

The larger pool of unskilled workers caused by immigration helps reduce the likelihood of a labor shortage; such a shortage could help low-skilled workers improve their wages and working conditions:

[Illegal immigration] "impacts the most vulnerable sector of the American labor force — the unskilled workers. And I think if government has any role to play in the United States economy in terms of the labor market, it is protecting the unskilled workers, because they are the most vulnerable to exploitation and to competition from everybody else."  Vernon Briggs

"If you don't flood the labor market, employers would turn to more capital-intensive, more high-technology-intensive production."  Markley Roberts

"There is no way that you are ever going to have any hope of providing unionization, to ever be able to provide any effort to increase wages and hours and working conditions at all when you have got an unlimited supply of labor."  Vernon Briggs

"The only time African Americans — urban or even rural blacks — have any kind of upward mobility is in times of labor shortage, which most often is at the time of war, or at times when immigration is restricted."  Vernon Briggs

"It is not surprising to me that Hispanic poverty is going up in the United States ... I attribute that heavily to immigration. Many Hispanic scholars say no, it is not immigration. I don't know how you can avoid the impact of what immigration has done to the increase in poverty amongst Hispanics in the United States. I think it is unavoidable."  Milton Morris

"I can think of many reasons why almost all of us — maybe all of us — in this room would favor [a high wage strategy for the United States]. To us, it is a notion of equity; it seems to offer more opportunity to people from all sectors ... I think that the only sound, market-based strategy for promoting a high-wage economy ... is let a labor shortage develop."  Virginia Abernathy

There may, however, be factors in addition to mass immigration helping prevent a labor shortage, and the attendant higher wages for the unskilled:

"The chief barrier to a labor shortage or low unemployment these days is the power of the bond market on investment and on the Democratic Party and on the Republican Party and on the Federal Reserve Board ... I am not trying to disparage the immigration thing, but if you want to talk about labor shortages, that is the key issue."  Lawrence Mishel

Since the depression of wages takes place predominantly at the lower end of the wage scale, one participant suggested it might be more accurate to describe the principal effect of unskilled immigration as one that increases income disparity. This is because some segments of the population enjoy increasing wages and lower prices made possible by mass unskilled immigration, while the wages of low-skilled workers stagnate:

"If depression in wages means the overall structure [of wages] is reduced by immigration, I find that a little hard to believe. After all, some of us benefit from immigration. It may not look that way, but the fact that I can purchase a restaurant meal or stay in a hotel or have my clothes dry-cleaned and laundered at a very cheap price relative to what I could in Japan is a real benefit to me and raises my real wage."  Gary Burtless

The major area of disagreement was job displacement — several participants balked at the simplest articulation of the concept; i.e., that there are fewer jobs for Americans when immigrants get work:

"We should be very cautious about making blanket statements about displacement, because you might find [displacement in certain] labor markets, maybe like parking attendants, and you might have case study work that would suggest that that has been the case in one or two labor markets. But to extrapolate that across a whole series of jobs would be too much."  Richard Barff

"The immigrants have added greatly, I think, to the amount of labor force growth we have seen over the last 25 years, but it seems as though employment has been created for everyone, whether immigrant or nonimmigrant."  Gary Burtless

"I think that the question of displacement is a somewhat different question [from wage depression] ... I don't think that you can compare these two things. It is an apples-and-oranges sort of thing. You can't say, well, we've got so much depression and so much displacement, and this is three times as important as the other ... I think that the income disparity issue is probably more significant and probably more measurable, or perhaps more obvious, than the displacement issue."  David North

"Now, if you think that immigrants substitute for labor in the work force, and then you think that substituted labor moves out, I think that's a little far-fetched notion of labor market operations. First of all, you have got to accept pure substitutability. Second of all, you have got to accept that people would then move. And I think those two things are complicated, because there are many arguments to suggest that it isn't pure substitution in the labor force — there is a mix from pure substitution to pure complementarity. And yes, you can find labor markets wherein pure substitution has taken place, but you can also find a whole series of examples where that isn't necessarily the case, through to pure complementarity."  Richard Barff

Some viewed the caveats regarding displacement of Americans from their jobs by immigrants as misleading:

"I just cannot buy this theory of no displacement, because I am convinced the studies must all be at such a macro level that the displacement or disturbances or adverse effect is so small on the macro scene, but in fact, there are people who are on the micro scene who are adversely affected."  Markley Roberts

(An exchange on displacement vs. wage depression follows.)

Burtless: To me, it is very striking that the wages of people who are in most intense competition with this kind of distribution of immigrant skills — it has been in this part of the wage distribution where wages have fallen most, and to me, if there is a mechanism that immigration is having on the labor market, I think it is through that. it is not through fewer people being employed.

F. Morris: For the African American population, with lower educational levels, while you may not get a displacement effect for the full economy, you certainly will with African Americans, because we disproportionately have less education that the others, and [are] disproportionately in some of the working class jobs that  have been over time and are still much more likely to get the pressures from being phased out. So I am simply saying that talking generally for the economy is not the same as talking for individual segments of the American population.

Burtless: Yes, but my argument even for black American workers would be that it is their wages that are likely to be affected in the long term, even if there are transitory effects on employment rates.

To some extent, however, this disagreement seemed to be a matter of definition, since what some understood to be job displacement (in the short term), others interpreted as merely wage depression (in the longer term) — but the existence of this phenomenon under certain circumstances was not disputed:

Martin: The feeling I got from the way people were speaking was that everybody would agree that there is some displacement effect, particularly at the low end of the job structure, of the economic scale.

Barff: I would be more comfortable if you talked about a wage effects as opposed to an employment effect.

(An exchange on definitions follows.)

Harrison: When I think of displacement, I think of this guy [who] was working in this job, an immigrant came and probably took a lower salary, and this guy left. But there is the additional question of, then what happened to this guy who left?

Burtless: And I say he found a job, maybe not in the same occupation, but unfortunately one where probably his wage is lower than it would have been.

Harrison: Yes, where his wage is lower.

F. Morris: Well, sometimes in these low-income areas, with all the other things that are also happening there, with low-income jobs being less available, it is not an easy assumption. Especially if you bring in the practice of discrimination or preferable substitution for more vulnerable workers, that is a clearly likely assumption.

Burtless: Right, and I would think the case for displacement is better for people who live —

F. Morris: — close to the margin.

Burtless: Okay.

Harrison: This is why there is a definitional problem, because for some of us, the guy gets knocked out of the job, he has been displaced, and then he goes and finds another job; but for others here at the table, that is much more accurately characterized — and the data that are available bear this out — as a reduction in real wage.

But one participant's examination of interstate migration of Americans suggests that unskilled workers may in fact be displaced my mass immigration, and are moving to states with less immigration:

"The net out-migration that we find in most of the high-immigration metropolitan areas as well as in high-immigration states is among people with less skills, that is, high school educations or below, people who are in poverty at the time of the 1990 Census, but also people who are elderly."  William Frey

"In the high immigration areas, where there is an out-migration of internal migrants, the people most likely to leave there are the high school [graduates] and below."  William Frey

In any case, most participants agreed that our nation's immigration policy is not sufficiently based on economic considerations:

"This issue is so politically charged that we end up with a kind of non-policy rather than a conscious, rational [policy, with] economic interest or economic welfare of the United States put first."  Markley Roberts

"The legal [immigration] system is so dominated by family unification that it pays no attention to human capital considerations whatsoever."  Vernon Briggs

"Europe is clearly going in a way far different from the United States, a way in which I think the United States should go, in terms of using immigration as an economic policy, or looking at its economic consequences. [Currently in the U.S.] most of the immigration takes place despite any consideration for the labor market or the impact on urban labor markets, in particular. [This] undermines so much other good faith efforts that people are trying to do in other areas of human resource policy."  Gary Burtless

Closing Thought:

"You can document this major arrival of immigrants in Los Angeles County, major arrival of illegal aliens, growing disparity and growing depression in wages, people moving out — all sorts of things that suggest that if immigration is good for the economy, it isn't working in Los Angeles."  David North

The Center for Immigration Studies is an independent non-profit organization founded in 1985 to conduct research and policy analysis and disseminate information on immigration's effects on the broad national interests of the United States — economic, social, environmental and demographic.