Does Immigration Harm the Poor?
Camarota, Steven A., The Public Interest
Partly as a result of reforms undertaken in the 1960s, the United States is currently experiencing the largest sustained wave of immigration in its history. Each year, the United States admits between 700,000 and 900,000 legal immigrants; additionally, the Immigration and Naturalization Service estimates that 5 million illegal aliens now live in the country, with 400,000 new illegal aliens settling here annually. This influx of legal and illegal immigration has caused the foreign-born share of the population to double from roughly 5 percent of the population in 1970 to 10 percent today. While less than the 15 percent recorded in 1910, the 27 million immigrants now living in the country is more than twice the 1910 number.
A fierce national debate has erupted over the wisdom of allowing in such a large number of people. The most notable recent study of the issue comes from the National Academy of Sciences' National Research Council (NRC). Prepared by many of the top economists, demographers, and sociologists in the field, the study, The New Americans: Economic, Demographic, and Fiscal Effects of Immigration, contains an extensive analysis of the latest research on the subject as well as a good deal of original work. The media has devoted considerable attention to the study. However, misled by the study's rosy press release, they have claimed that The New Americans unequivocally confirms the benefits of immigration. In fact, the NRC study found that the total effect of immigration on workers, employers, consumers, and taxpayers is probably small. But it also finds - and this has gone unreported in the media - that the negative effect of immigration on unskilled workers and taxpayers in high-immigration states is substantial.
The disparity between the study's actual findings and its portrayal in the media caused George Borjas and Richard Freeman, two Harvard economists who helped write the study, to chastise the report's editor, James Smith of Rand, in the New York Times. They accused him and Senator Spencer Abraham, chairman of the Senate Immigration Subcommittee, of distorting the study by portraying immigration as a "free lunch." In this essay, I will explore what The New Americans actually says about who wins and who loses from immigration and what policy implications might be drawn from its findings.
Immigration's effect on wages
One of the most hotly debated aspects of immigration is its effect on the wages and job opportunities available to natives. After reviewing the literature in the field, the NRC study concluded that the negative effect of immigrants primarily takes the form of wage losses for workers who lack a high-school degree. This is the only educational group adversely affected by immigration because such a large percentage of recent immigrants lack a high-school education - about 40 percent. And it is only in this skill category that the proportion of immigrants is large enough, 25 percent by the mid 1990s, to exert a significant downward pressure on wages.
To arrive at its estimates, the NRC study used Census and other government survey data to compare increases in the supply of one type of worker relative to other workers brought about by immigration. The wage consequences of immigration are then calculated using an existing body of research that has measured the wage effects resulting from shifts in the relative supply of labor. An increase in the supply of unskilled workers is assumed to lower wages for those natives in competition with immigrants. In contrast, those who tend not to be in competition with immigrants should see their wages rise as demand for skilled labor increases. Additionally, consumers should benefit from price reductions for goods produced by unskilled labor, and owners of capital should also realize a better return on their investments from falling labor costs.
Using this method, the NRC study estimated that immigration was responsible for 44 percent of the decline in wages that high-school dropouts experienced from 1980 to 1994. …