Immigrant Labor and Supply and Demand

The Times had an article this morning that explained the immigration problem in very simple terms, "this many jobs; only this many visas." As the article reports, there are a huge number of less-skilled jobs waiting to be filled by immigrants, but almost no visas are available for immigrants to come across the border and work at these jobs legally.

To prove this case, the article quotes Stephen P. Gennett, president of the Carolinas chapter of the Associated General Contractors of America (a builders' trade group), "we have a problem here, a people shortage."

While Mr. Gennett is undoubtedly knowledgeable about the state of the labor market for construction workers, he also represents an organization that has a clear interest in this issue, they want cheap labor. Ordinarily, the claim that there is a people shortage would imply that wages are rising at an extraordinary rate. (This is the way economists ordinarily think about markets, shortages mean higher prices.) This means that there is a quick way to verify Mr. Gennett's claims about a people shortage: see if wages in construction have been rising at an extraordinary rate.

A quick trip to the Get Detailed Statistics section of the Bureau of Labor Statistics website tells us that inflation adjusted wages for construction workers have actually fallen about 5 percent since 1980, a period in which productivity has increased by more than 70 percent. So, we have wages falling in spite of a labor shortage, not where I learned my economics.

Labor is a cost to employers, and they would all like to get their labor as cheaply as possible. The Times would like to hire reporters for $25,000 a year. While there are plenty of smart people in places like India and China who would be happy to work for the Times at this wage (and could do a very good job), reporters and other higher paid professionals are powerful enough lobbies to largely foreclose this option. But, let's be clear. There is no more a shortage of workers for low-paid jobs than there is a shortage of workers for higher paid jobs. The difference is simply that the workers who perform less-skilled work have less political power to protect themselves against the efforts of employers to get low cost immigrant labor.

--Dean Baker

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