Immigrants and "Low Wage" Jobs

One of the great absurdities in the debate over immigration policy is the frequently repeated claim that the U.S. economy is generating more "low wage" jobs than can be filled by the domestic workforce. This line has been endlessly repeated in news stories on the issue.

Quick trip back to econ 101: recall the concepts "supply" and "demand." What makes a job a "low wage" job? In econ 101 world, a job will be a "low wage" job if the supply is high relative to the demand. When there is insufficient supply, then the wage rises. My students didn't pass the course if they couldn't get this one right. Econ 101 tells us that there is not a shortage of workers for low wage jobs; it tells us that there are employers who want to keep the wages for these jobs from rising.

Immigration has been one of the tools that have been used to depress wages for less-skilled workers over the last quarter century. Many of the "low-wage" jobs that cannot be filled today, such as jobs in construction and meat-packing, were not "low-wage" jobs thirty years ago. Thirty years ago, these were often high-paying union jobs that plenty of native born workers would have been happy to fill. These jobs have become hard to fill because the wages in these jobs have drifted down towards a minimum wage that is 30 percent lower than its 1970s level.

In response to this logic, the "low wage" job crew claims that if the wages in these jobs rose, then businesses couldn't afford to hire the workers. It's time for more econ 101. Businesses that can't make money paying the prevailing prices go out of business, that is how a market economy works. Labor goes from less productive to more productive uses. This is why we don't still have 20 percent of our workforce in agriculture.

So the economic side of the debate over immigration is a question about employers wanting access to cheap labor. That part is pretty simple. There are other questions in this debate about human rights and basic decency. It's outrageous to threaten people with deportation and imprisonment who have worked in this country as part of a conscious government policy. (No one enforced employer sanctions. That was a deliberate decision by the government.)

There is another side to this debate that gets less attention. The fact that immigrants are mostly less-skilled is not an accident. The current "die at the border" policy (so-called because you get the opportunity to work in the United States if you are willing to risk death in a dangerous border crossing) ensures that the flow of immigrants will be primarily less-skilled workers. Workers in developing countries with few employment opportunities might be willing to take this risk, in addition to the risk that they could be subsequently deported if they get picked up for a traffic ticket or some similar offence.

However, an established doctor, lawyer, or economist in the developing world will not try to slip over the border to work off the books in the United States. This fact ensures that the highly educated people who design immigration policy, and their professional colleagues, will not be subjected to the same sort of competition as less-skilled workers.

We could design an immigration policy that encourages highly educated people from the developing world to work in the United States. Such a policy would provide enormous economic gains, while also making income distribution in the United States more equal. While this could create a problem of "brain drain" from the developing countries, it is easy to design mechanisms to ensure that developing countries benefit from this immigration flow as well.

Since professionals are not working under the table (many actually have to be licensed by the government at regular intervals), it would be very easy to apply a modest tax to the earnings of immigrant professionals. This tax could be paid to the immigrants' home country, so that they can educate 2-3 doctors, lawyers, economists, etc. for every one that comes to work in the United States.

U.S. trade negotiators have not pursued such policies, because trade and immigration policy has been deliberately intended to redistribute income upward. We can debate whether this is a desirable goal for trade policy, but only if the media stops making silly claims about "low wage" jobs.

--Dean Baker

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