Immigrants Haven't Hurt Pay for Americans
(Bloomberg View) -- As President Donald Trump’s push for immigration restriction continues, his supporters among the pundit class continue to make economic arguments for closing the country’s gates. That’s only understandable -- it’s easy to blame immigrant competition for economic woes. But very often, it’s wrong.
On a recent appearance on Fox News, classicist and historian Victor Davis Hanson started off with some good and important points about the need for a shared culture to bind together the U.S.’s multiracial society. But he then continued to make some very dodgy economic arguments. Hanson asserted that “the Trump miracle [is] giving empowerment to the working … classes,” and that this empowerment was also being driven by “a radical curtailment [of] illegal immigration.” Hanson credits reduced illegal immigration with lower unemployment and increasing competition for workers.
Hanson is right about two big things. First, illegal immigration has indeed been radically curtailed:
The decline didn’t happen under Trump; it began under George W. Bush, when the Great Recession abruptly reduced demand for low-skilled labor. But illegal immigration didn’t pick up again after the recovery began, thanks to several factors -- increased deportations and stronger border enforcement by the Barack Obama administration, combined with much lower fertility and higher income levels in Mexico, the main source of illegal immigration.
Hanson is also correct that U.S. unemployment is very low:
Though a better measure of labor-market health, the prime-age employment-to-population ratio, shows more modest performance:
But was the halting of illegal immigration responsible for the recovery of employment? There are good reasons to think that it was a minor factor at best.
First of all, research shows that low-skilled immigration has at most a small effect on the wages of native-born workers. Though one high-profile researcher, Harvard University’s George Borjas, has claimed to find more deleterious effects, repeated studies of refugee influxes have found very small or nonexistent impacts on employment and wages. Since refugees tend to be very low-skilled immigrants, these findings imply that illegal immigration to the U.S. didn’t put many -- or any -- native-born Americans out of work.
Casual observation shows that unemployment was also quite low in the late 1990s and mid-2000s, with employment even higher as a percent of population. Those were times of high illegal immigration.
Second, if the U.S. working classes were really being “empowered” as Hanson alleges, we would expect to see robust wage growth. Instead, we’ve mostly seen the opposite. Since the end of large-scale net illegal immigration, in fact, wages have looked pretty anemic:
During late 2014 and 2015 there was an increase in compensation, but otherwise it hasn’t increased at anything close to the rate it did during the late 1980s, 1990s and early 2000s -- an age when illegal immigrants were coming in droves. And there has been no “Trump miracle” yet when it comes to wages.
This is not to imply that illegal immigration was driving up American wages, simply that the curtailment since 2007 hasn’t given wages any noticeable boost. If the working classes had been empowered as Hanson claims, one would think they would be able to bargain for better pay.
Countries with very low overall immigration rates haven’t done any better. Japan, for example, only started to take in significant numbers of immigrants in the last few years. But Japanese wages had been falling for many years, during the time when immigration was almost nonexistent. Closing the gates doesn’t save a country from the forces of globalization and technological change that have driven wages down.
So while Hanson is right to note that the age of illegal immigration has drawn to a close, he’s probably wrong to claim that this has helped the prospects of the U.S. working class. That class has, as yet, not really been helped at all. If Trump wants to raise wages for the people who elected him, he should try something other than immigration restriction.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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