Wednesday, April 19, 2006

You can’t go wrong blaming illegal immigrants for falling wages, or can you?

Illegal immigration as a wedge issue has mostly divided Republicans against each other, but it’s also proving troublesome for liberal Democrats. Several weeks ago, Paul Krugman added his influential voice to the chorus of critics saying illegal immigration depresses wages. (Link to his Op-Ed here if you have Times Select access.)
Because Mexican immigrants have much less education than the average U.S. worker, they increase the supply of less-skilled labor, driving down the wages of the worst-paid Americans. The most authoritative recent study of this effect, by George Borjas and Lawrence Katz of Harvard, estimates that U.S. high school dropouts would earn as much as 8 percent more if it weren't for Mexican immigration.

That's why it's intellectually dishonest to say, as President Bush does, that immigrants do ''jobs that Americans will not do.'' The willingness of Americans to do a job depends on how much that job pays -- and the reason some jobs pay too little to attract native-born Americans is competition from poorly paid immigrants.
Liberals hate being called intellectually dishonest, especially if that puts them in the company of George Bush. But did Krugman overstate the economic case against immigration?

Apparently so, according to Eduardo Porter’s piece in the Sunday NYT (this one has free access.
As Congress debates an overhaul of the nation's immigration laws, several economists and news media pundits have sounded the alarm, contending that illegal immigrants are causing harm to Americans in the competition for jobs. Yet a more careful examination of the economic data suggests that the argument is, at the very least, overstated. There is scant evidence that illegal immigrants have caused any significant damage to the wages of American workers.
Porter gives a dramatic example, contrasting what has happened to low wage jobs in California (lots of illegals) and Ohio (very few):
California may seem the best place to study the impact of illegal immigration on the prospects of American workers. Hordes of immigrants rushed into the state in the last 25 years, competing for jobs with the least educated among the native population. The wages of high school dropouts in California fell 17 percent from 1980 to 2004.

But before concluding that immigrants are undercutting the wages of the least fortunate Americans, perhaps one should consider Ohio. Unlike California, Ohio remains mostly free of illegal immigrants. And what happened to the wages of Ohio's high school dropouts from 1980 to 2004? They fell 31 percent.
Most of the article is about shortcomings in the study by Borjas and Katz cited by Krugman, with the two economists conceding that the impact is much less than they calculated. Other experts say that when all relevant aspects are taken into account, there’s virtually no impact on wages.

Which is not to say that low-wage workers aren’t being left behind by our supposedly booming economy. They are. But the reason has more to do with the economic, fiscal and social policies favored by many of the same politicians who are scapegoating illegal immigrants.

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