The effect of immigrants on native wages


  • Innately difficult to quantify: almost impossible to separate cause and effect – if a country with high rates of immigration also sees strong wage growth, there can be no assumption immigrants are boosting wage. It may be instead immigrants choosing to move to strong economies already encountering wage increases, or forecast for wage increases.
  • To most suitably find the effect, a natural case must be found where the supply of or demand for labour changed exogenously, that is, changed due to external factors:
    • ‘Mariel Boatlift’: When Fidel Castro eased emigration restrictions, 125,000 Cubans moved to the USA, increasing the labour supply of Miami by 55,500.
    • The Mariel migrants were low skilled workers
    • Economist David Card of U.C Berkeley study 1990: found no difference in wage or employment trends in Miami and other cities
    • George Borjas of Harvard, 2015: found wages for low-skilled, native-born Miamians fell noticeably following the Mariel boatlift
    • Borjas claimed Card’s earlier analysis had obscured a large fall in the wages of native worker by using too general a definition of ‘low-skill worker’ – Card’s study had looked at the wages of U.S. workers whose education extended only to high school or elss
    • Widely disputed, prominently by Michael Clemens and Jennifer Hunt who co-authored a research paper against it, ‘The labour market effects of refugee waves: reconciling conflicting results”
    • Argued Borjas created data group’s that included far more low-wage black males – which could effectively account for the whole wage decline in those samples relative to other cities.
  • Theory: the short-run, partial-equilibrium effects of a large influx of migrants result in a sudden increase in supply and thus, given the downward-sloping labour demand curve, lower wages.
  • However, even if large-scale migration hurts native workers in the short run, it should have little bearing on public policy:
  • Far more relevant to lawmakers are the long-run effects of immigration on wages, which depend on how immigrants change the skill composition of the workforce
    • Theory: if lots of unskilled workers enter the country, unskilled worker’s wages should fall relative to everyone else’s.
  • In the long run, however, immigrants tend to reduce the wages only of past generations of immigrants (whose skills presumably overlap strongly with those of the newcomers)
  • ‘Rethinking the effect of immigration on wages’ (Journal of the European Economic Association, October 2011): found that while immigration between 1990 and 2006 had little effects on wages of native-born Americans, it lowered the wages of previous immigrants by 6.7%. American-born workers, possibly due to their language skills, were better prepared to move on to different jobs/

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