Impact on Native-Born Workers

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The analysis of wages and prices indicates that Mexican immigration in the 1990s has probably reduced wages for high school dropouts by between 3 and 8 percent. So far we have concentrated on the benefits to consumers of lower wages for unskilled workers. While economics can provide an understanding of the size of the wage and price effects of Mexican immigration, it cannot tell us whether this situation is desirable. In order to make a normative judgment, one needs to first examine the characteristics of those workers harmed by Mexican immigration.

Workers Harmed Are the Poorest and Most Vulnerable. Although most natives are not in direct competition with Mexican immigrants, those who are include the poorest workers in the United States. Those adversely affected also comprise a large share of those lacking health insurance and of those on welfare. For example, one-fourth of adult native-born high school dropouts who work full-time live in poverty. Although they comprise only 8 percent of all adult natives who work full-time, high school dropouts account for 26.2 percent of full-time native-born workers living in poverty. Moreover, 31 percent (2.6 million) of the children of the native-born working poor are dependent on an adult who lacks a high school education.20 Natives who lack a high school education are also disproportionately those trying to move from welfare to work. More than one in four natives who worked in 1999, but who also used welfare during the year, had not completed high school.21 High school dropouts and their children are also often without health insurance. Of adult native dropouts who work full time, 30 percent are uninsured and 21.2 percent of their children do not have health insurance. Moreover, one-fifth of all natives and their children who are uninsured are either high school dropouts or a child dependent on a high school dropout for support.

The impacts of Mexican immigration also fall disproportionately on the nation’s minority population. Of native-born whites who work full-time, 6.5 percent lack a high school education. In contrast, 11.5 percent of native-born African Americans and 19.8 percent of native-born Hispanics who work full-time do not have a high school diploma. Thus, the negative impact of Mexican immigration is likely to be felt more by native-born minorities than by whites.

By reducing the wages and employment opportunities available for workers without a high school education, Mexican immigration can only make it more difficult for the unskilled to escape poverty, move off welfare, and afford health insurance. If policy makers wish to improve the situation for unskilled workers in the United States, then increasing Mexican immigration or leaving at its current high level would seem to be counter-productive, especially in light of the minimal effect on prices.

Wages for the Unskilled Declined in the 1990s. Although many in the business community continue to want access to unskilled labor from Mexico, the available evidence indicates that high school dropouts are not in short supply. Between 1989 and 1999, the real wages (adjusted for inflation) of workers who lack a high school education and work full-time year-round declined by 7.2 percent.22 Basic economic theory predicts that if the economy were desperately short of this type of labor, then wages should have risen significantly, rather than fallen. The decline in wages for this group certainly calls into question the idea that not enough of these workers are available. It should also be pointed out that annual wages (adjusted for inflation) of full-time, year-round workers who have completed high school rose 9 percent during the same period. This rise in wages for more skilled workers indicates that the labor market for such workers was much tighter in the 1990s than for dropouts. It also means that the gap between the two groups has widened. The average, full-time, year-round high school dropout has gone from earning 61.7 percent of what more educated full-time workers make to earning only 52.6 percent of what the average worker with at least a high education makes. Thus, both in absolute terms and relative to other workers, the wages of dropouts have declined, not risen as should be the case if there were a shortage of unskilled labor. In fact, demand for unskilled labor is clearly declining. The number of jobs available for dropouts declined by 400,000 during the 1990s. This points to a fundamental incompatibility between the nation’s immigration policy, which admits 150,000 to 200,000 unskilled workers from Mexico each year, and economic developments which cause labor market opportunities for such workers to decline. While some employers may wish to have access to unskilled labor in order to keep labor costs down, there seems to be no shortage of high school dropouts in the United States.

End Notes

20 Figures are for only the children of natives.

21 Figures are for persons who worked full- or part-time during the year. Major welfare programs included: Temporary Assistance to Needy Families, general assistance, food stamps, public housing, Medicaid, and SSI.

22 Figures are based on author’s comparison of average annual wages and salary for full-time, year-round workers using the March 1990 and March 2000 CPS.