Immigration Economics Q&A

Summary of Research Reports

Additional Research Resources

While some portion of the undocumented immigrant workforce receives jobs that would otherwise be filled by citizens and documented non-citizens, undocumented workers also create jobs by their presence as consumers in the U.S. It has been difficult for economists to weigh out the various factors, but one of the most obvious indicators, the unemployment rate, does not correlate with key changes in immigration. In fact, the unemployment rate over the last 25 years has moved in cycles that demonstrate a comparatively lower unemployment rate during the most recent (2000-2005) infux of undocumented workers. (Source: Misery Index)

For a recent summary of the economic complexities, please see:

"Immigration Debate Crux: Jobs Impact," by Ron Scherer (The Christian Science Monitor)

Are undocumented immigrants driving down the cost of labor?

Undocumented immigration has seen a sharp, steady increase over the last ten years only. For the fifteen years prior, the total number of undocumented immigrants fluxed up and down between 2.5 and 5 million people. The stagnation of wages and earnings of the working class has been steady since before the Regan administration. In other words, looking at the last 25 years, one does not find a correlation between the stagnation of the working class's wages/earnings and the number of undocumented workers entering the U.S. What has been consistent over the period of working class wage/earning stagnation has been the rise in the wealth of the top income earners in the U.S (those in the top 5% of wage/earning power). The U.S. has transformed into hourglass economy in which more workers are earning less and the top earners are gaining income and wealth at a striking rate. In accessing the wage/earning power of the working class, it is also important to note the decline in union participation over the 25 year period. There appears to be a correlation between the decline in union participation and the stagnation of the working class's wage/earning power. (Source: U. S. Census Data)

Why did the wages of California's high school drop outs fall 17% between 1980 and 2004?

While some observes have been quick to attribute this drop in wages to undocumented immigration, economists note that a variety of factors have led to the decline in wages for this specific group (including the impacts of technology). In the same period, for instance, wages for high school drop outs fell 31% in Ohio, a state that has a very low presence of undocumented immigrants. In a 2005 study, researchers also found that cities with many poorly educated immigrants, and cities that have very few, had no wage differences that could be attributed to the presence of immigrants. A group of scholars at M.I.T., Harvard and the Brookings Institution has also found that income inequality in the bottom half of the wage scale has not increased since approximately the mid-1980s. Two prominent economists have estimated that the decline in the wages of high school drop outs due to undocumented immigration is 3.6% over 25 years, but reacting to inquiries about this study, one of its authors has noted that the percentage would be reduced if alterations in trade flow were accommodated (for example, without undocumented immigrants, some items now made in the U.S. would probably be imported). Other economists note that the employment of undocumented workers has allowed some businesses to make capital investments that in turn create more jobs. This fact helps explain why, "across the entire labor force, the effect of illegal immigrants was zero, because the presence of uneducated immigrants actually increased the earnings of more educated workers, including high school graduates." The positive impacts of undocumented workers were also realized as "higher-skilled workers could hire foreigners at low wages to mow their lawns and care for their children, freeing time for these workers to earn more." (Source: "Cost of Illegal Immigration May Be Less Than Meets the Eye," by Eduardo Porter, The New York Times (April 16, 2006)

What are some of the economic factors that prompt Mexican migration to the U.S.?

NAFTA has created dramatic economic dislocations in Mexico. These economic impacts, among other factors, are leading Mexicans to migrate. For example, imports of U.S. corn have severely effected the local Mexican agricultural sector. NAFTA arrangements have helped increase the imports from 3 million metric tons in 1994 to more than 5 million metric tons in 2002. Also, the brief rise in outsourced U.S. manufacturing that helped the Mexican economy has ceased as these factories have now moved to Asia. (Sources: OXFAM; USDA, Nadal, 2002)

Summary of Reports: Immigration's Impact on the Economy and Labor Force

Research has illustrated that increased immigration has contributed to the growth of the economy, in part because immigrants (both undocumented and "legal") are a primary source of less-skilled labor and earn wages significantly less than U.S. born laborers. However, some concerns have been raised about the impact of immigrants on the job prospects and earnings for less-educated and low-skilled native-born laborers.

The first report is a monograph from researchers at the RAND Corporation's Center for Research on Immigration Policy. Though it is an older report (1997), it shows that California's economic growth was due in part to the productivity of immigrant labor, but also because of the decline in the earnings of immigrants in comparison to their native-born counterparts. At the same time, the researchers find that immigrants fill 60 percent of jobs for workers without a high school diploma in 1990, leading them to conclude that the job prospects for Californians without college are dwindling. They also argue that immigration has contributed most to lowering the employment rate for high school dropouts. However, immigration reduced the earnings of less educated native workers in the 1970s only, and continues to have a more significant impact on the earnings of immigrants themselves.

For more information, see Immigration in a Changing Economy: California's Experience, Questions and Answers Kevin McCarthy and Georges Vernez:
http://www.rand.org/pubs/monograph_reports/MR854.1/index.html

Other research confirms that undocumented immigration has contributed to the lowering of wages for native-born high school dropouts, but suggests that economists may have previously overestimated the unique impact of immigration. Below is a link to a New York Times article that highlights some key findings from a recent study.

Porter, Eduardo. "Cost of Illegal Immigration May Be Less Than Meets the Eye." New York Times, April 16, 2006, p. 3.3.
http://proquest.umi.com/pqdweb?index=1&did=1021540021&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1145908843&clientId=1563&cfc=1

Also provided is a link to the actual report authored by George J. Borjas and Lawrence F. Katz for readers interested in more in-depth analysis.

Borjas, George J. and Lawrence F. Katz. "The Evolution of the Mexican-Born Workforce in the United States." NBER Working Paper No. 11281. April 2005. Cambridge, MA: National Bureau of Economic Research. http://www.nber.org/papers/w11281

Finally, the link below is to congressional testimony given by Harry J. Holzer, Professor of Public Policy at Georgetown University and a Fellow at the Urban Institute. He highlights, in part, some of the other effects of immigration on the U.S. economy, including reducing the price of domestically produced goods such as food, clothing, and housing. Immigrants have also helped to reduce labor shortages in areas such as health care and elderly care, increasingly important as the "baby boomer" population reaches retirement. Newer immigration replenishes the labor force, and may help to reduce the nation's fiscal imbalances over several decades.

Holzer, Harry J. "Economic Impacts of Immigration." Testimony of Harry J. Holzer to the Committee on Education and the Workforce, U.S. House of Representatives. November 16, 2005. http://www.urban.org/publications/900908.html

Included below are links to some reports from the Pew Hispanic Center. They provide some information about public opinion on immigration and immigrants, demographic profiles of immigrants, as well as analysis of guest worker programs.

The first link is to a report on public opinion dealing with immigration, based on a nationwide survey of 2000 adults. This shows that a higher percentage of Americans than previously view immigrants as helpful to society, although a slim majority (52%) still views immigrants as a burden. However, another key finding is that 65% of those surveyed say that immigrants are taking jobs Americans do not want. It is lengthy, but some of the key statistics are provided in the introduction (pp. 1-10).

http://pewhispanic.org/files/reports/63.pdf

The second link is a "slide show" that provides some of the key statistics from the above report.

http://pewhispanic.org/files/reports/63.1.pdf

The third link is to a report that analyzes the size of the undocumented (or "unauthorized") population (est. between 11.5 and 12 million) and the various sectors of the economy in which undoc. immigrants are concentrated. A key finding is that 30% of the foreign born population is undocumented, which counters some perceptions that the majority of the foreign born population is undocumented. The
analyses are based on data from the March 2005 Current Population Survey, administered by the Census Bureau.

http://pewhispanic.org/files/reports/61.pdf

The fourth link is to a report that discusses the economic transition of Mexican migrants to the U.S. The key finding is that unemployment plays a limited role in motivating Mexican immigration to the U.S. Many are employed in the sectors in which they worked in Mexico.

http://pewhispanic.org/files/reports/58.pdf

Finally, the last link is to a report that examines the pros and cons of guest worker programs. This is an older report (from 2002).

http://pewhispanic.org/files/reports/7.pdf

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