One question that recently received heightened attention from lawmakers is whether or not immigrants should be admitted to the United States less on the basis of family ties and more on the basis of the skills they can contribute to the U.S. economy. Although some of the practices associated with a point-based immigration system might benefit the U.S. economy, policymakers should be careful not to assume that such a system would be a panacea for the widespread dysfunction of U.S. immigration policies.
A crucial question in the current debate over immigration is what impact immigrants have on the wages of native-born workers. At first glance, it might seem that the simple economics of supply and demand provides the answer: immigrants increase the supply of labor; hence they should decrease the wages of native workers. However, the issue is more complicated than this for two reasons that have been largely overlooked. First, immigrants and natives tend to differ in their educational attainment, skill sets, and occupations, and they perform jobs that often are interdependent. As a result, immigrants do not compete with the majority of natives for the same jobs. Rather, they “complement” the native-born workforce—which increases the productivity, and therefore the wages, of natives. Second, the addition of new workers to the labor force stimulates investment as entrepreneurs seize the opportunity to organize these new workers in productive ways that generate profits. When these two factors are included in the analysis of immigration and wages, it becomes clear that immigration has a positive effect on the wages of most native-born workers. Read more...
New data from the 2005 American Community Survey (ACS), released by the Census Bureau on August 15, 2006, underscore the extent to which immigration continues to fuel the expansion of the U.S. labor force.
Shortages of skilled labor constitute the foremost challenge confronting U.S. manufacturers who face growing competition from manufacturers in Asia, Eastern Europe, and elsewhere. Demand for professionals with university degrees is rising as manufacturing becomes increasingly high tech. But the U.S. educational system is not producing enough highly educated native-born manufacturing workers to meet this growing demand.
IPC Research Fellow Dan Siciliano told the U.S. Senate Judiciary Committee that immigration is directly responsible for billions of dollars annually in U.S. economic growth. Siciliano, who also is Executive Director of the Program in Law, Economics and Business at Stanford Law School, explained to the Committee that "if the United States were to reform the immigration system to better address the demand for foreign-born labor, the economic benefits of immigration could be even greater than what we have already experienced."
Foreign-born workers do not substitute perfectly for, and therefore do not compete with, most native-born workers. Rather, the complementary nature of the skills, occupations, and abilities of foreign-born workers increases the productivity of natives, stimulates investment, and enhances the choices available to consumers.
Current immigration policies are completely out of sync with the U.S. economy’s demand for workers who fill less-skilled jobs, especially in the case of Mexican workers. While U.S. immigration policies present a wide array of avenues for immigrants to enter the United States, very few of these avenues are tailored to workers in less-skilled occupations. It should come as no surprise, then, that immigrants come to or remain in the United States without proper documentation in response to the strong economic demand for less-skilled labor.