Stagnant Wages and the Connection to Immigration

By David Seminara, September 19, 2013

New data from the Census Bureau released this week confirm that while the economy is improving, incomes remain stagnant for all but the wealthiest Americans. According to a piece in Wednesday’s New York Times, the new data reveal that median household income adjusted for inflation was $51,017 in 2012, down slightly from $51,100 last year and significantly from a peak of $56,080 in 1999. According to the Washington Post’s Wonkblog, a typical American family now makes less than they would have back in 1989, when the (adjusted for inflation) figure was $51,681.

Aside from stagnant wages, we also have a stubbornly high unemployment rate, historically low labor force participation rate, and plenty of people who are underemployed. It’s a dismal picture, but the wage stagnation issue is just as troubling as the unemployment and underemployment crisis. According to the Times, the new data reveal that the top 5 percent of earners, those making $191,000 a year or more, made as much in 2012 as they did before the recession, but nearly everyone else is still making less, with less educated and lower-income men faring worst of all.

The release of this annual report on income and poverty will no doubt lead to more hand wringing in the media and in the halls of Congress about why wages aren’t going up. But the issue of immigration — legal and illegal — won’t be part of the mainstream discussion. Wage stagnation is a complex issue and only a fool would assert that continued large-scale immigration is the only reason why wages for working class Americans aren’t keeping pace with inflation, let alone rising.

But at the same time, to deny that immigration isn’t part of the wage stagnation picture, especially when it comes to less educated, lower-income workers, is to deny the obvious. Much has been made about how illegal immigration slowed during the recession, but the fact is that legal immigration has continued apace, generally averaging a million or more new arrivals each year during a time when job growth has been stagnant. As Steve Camarota pointed out in this 2011 backgrounder, nearly 14 million immigrants arrived during the previous decade (2000-2010). This was a decade where we experienced net negative job growth, but where at the same time, we took in more immigrants than in any previous decade. You have to be pretty creative to deny that immigration has played some role in depressing wages.

Employers don’t hand out raises and benefits like Santa Claus distributing presents. They respond to market forces, paying what they need to pay and offering the benefits needed to attract and retain workers. In recent years, it simply hasn’t been necessary to increase wages or benefits for most lower-paid, lower-skill workers in most parts of the country because there are simply too many people in this segment of the labor pool. Now if the estimated 11 million illegal immigrants are legalized and can join the mainstream labor pool, the wage stagnation crisis will only intensify.

An illegal immigrant who right now has to go down to a Home Depot parking lot to pick up day labor jobs or who can only apply for jobs with unscrupulous employers who turn a blind eye to their fake identity cards has limited options. But once he can apply on a level footing with legal immigrants and Americans for jobs with legitimate employers, we’ll be adding millions more into our already crowded mainstream labor pool.

Few want to go on record making a link between immigration and wage stagnation, however, because many fear that they’ll be accused of blaming or scapegoating immigrants. There are good reasons to be cautious because, sadly, there are extremists in this country (and in every other wealthy nation) who hate foreigners and anyone who looks different than them. There are also people like me, who are politically moderate or even liberal who believe that most immigrants, legal and illegal, are good people who deserve our respect. But that doesn’t mean we shouldn’t be concerned about the impact that immigration has on the working poor in America.

The reality is that extremists operate outside our political culture and aren’t part of any serious policy debate anyway. We cannot avoid a frank and open discussion of the wage stagnation crisis and how immigration and a potential amnesty impacts it simply because we are afraid of providing ammunition to hateful individuals who aren’t going to change no matter what we do. There is a fear that if we admit that large-scale immigration impacts wages that people will dislike immigrants on a personal level, but I think that sells the American people short. Most people are, by nature, welcoming, and are rational enough to have a public policy debate without making it personal. It’s high time we had an open and honest debate about why wages for the working poor aren’t going up.