Wages, Employment, and Immigration

In a recent post on this site, I commented that employers in the manufacturing industry have done just about everything they could to keep wages down. I gave the examples of automation, union busting, and shifting (or the threat of shifting) production abroad. 

But what about immigration? Has immigration been a factor in keeping wages down in manufacturing and other sectors of the economy? This is, of course, an argument put forth by some advocates of restrictions on immigration. Also, it is sometimes argued that low-wage, native-born workers—Black workers, in particular—have had their wages especially hurt by competition from immigrants. 

This argument has a certain appeal, and it may fit well with what gets shown, simplistically, on the blackboards of introductory economics courses: Increase the supply of workers and wages will fall.

Reality is Not So Simple

But reality is not so simple. “Labor” is not a homogeneous mass of undifferentiated people, with millions of workers who can be substituted for one another, and therefore compete with one another for a fixed number of available jobs. Furthermore, the number of jobs is not fixed and independent of the number and nature of the people available to work. 

In general, plumbers don’t compete with electricians for jobs; electricians don’t compete with auto repair specialists; auto repair specialists don’t compete with meatpackers; and meatpackers don’t compete with construction workers. And so on. 

It turns out that, to a considerable extent, native-born and immigrant workers often have different sets of skills. A prime example is language skills. Because many recent immigrants have limited ability in English, they tend not to compete with native-born workers in several occupations. Restaurant cooks, cashiers, and repairers of electrical equipment are all examples, cited in a 2009 paper by Alessandro Caiumi and Giovanni Peri, where language skills matter.

Instead of competing with native-born workers for jobs, immigrant workers tend to complement native-born workers. Indeed, immigrants often take jobs that native-born workers avoid. This is often the case with farm labor. As a result, more products get produced, and overall income rises. Immigrant workers, like all other workers, spend their wages on goods and services, generating more economic expansion, and the gains from this expansion are widespread. In other words, aside from any competition between immigrant laborers and native-born laborers, the latter share in the gains generated by the former.

Moreover, immigrant workers pay both direct taxes (like Social Security taxes) and indirect taxes (such as sales taxes). A 2024 study from the Institute on Taxation and Economic Policy estimated that in 2022, “Undocumented immigrants paid $96.7 billion in federal, state, and local taxes.” At the same time, studies from the Tax Policy Center and the Cato Institute find that immigrants receive less in government benefits than they pay in taxes; one factor bringing about this result is that undocumented immigrants are excluded from many government benefits.

What the Data Show

There are many studies of the relationship between immigration and employment and wages of native-born workers, and not all show the same results. Nonetheless, a 2024 National Bureau of Economic Research paper by Caiumi and Peri is especially useful because it is based on extensive data and an effective statistical methodology. Caiumi and Peri do not deny that some competition exists between immigrant and native-born workers, but they write: 

“Our estimates establish that immigrants have a substantial degree of productive complementarity with natives. This offsets the competition effect, resulting in a boost of native wages and in an increase of natives’ employment-population ratio in response to inflows for most native workers.” [Emphasis added. —A.M.]

And further:

“…our simulations of wage and employment effects of immigrants in the 20 years up to 2020 and in the last four years for which we have data (2019-2022) … show a clear positive/complementary effect of immigrants on wages of less educated natives without suggesting employment displacement (i.e., immigrants taking the jobs) of most native workers.”

This positive effect of immigrants on the wages of less-educated workers tends to belie the claim that immigration harms Black workers. Other evidence, moreover, leads toward the same conclusion. For example, Paul Krugman, in a 2024 New York Times column, pointed out that during recent years of high immigration, Black unemployment has been at historic lows. And, during the Biden administration, Black earnings (adjusted for inflation) were significantly higher than toward the end of the first Trump administration. 

Most of the data that lead to a rejection of the claim that immigration hurts the wages and employment of native-born workers is national. No doubt there are cases in particular locales and in particular activities where immigrants and native-born workers have been in competition. But particular cases and accompanying anecdotal evidence do not alter the conclusion regarding the national situation.

There is not much room for doubt. As has been the long, historical experience of the United States, immigrant labor has been a pillar of economic growth. And over this history, and in spite of the great inequality that exists today and at times in the past, the economic expansion generated in significant part by immigrants has benefited native-born workers.