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The effects of immigration on wages

By Mike Konczal

One of the most counterintuitive ideas in the current debate is that the long-run impact of immigration on wages is zero. Counterintuitive and controversial. Simple supply and demand would lead us to believe, all things being equal, that a larger supply of labor would lead to less price of labor, which are wages.

But simple supply and demand isn't always (and perhaps never is) the full story. In places like finance, and in places like labor, things can get tricky very quickly.

Will Ambrosini has been writing, and has just summarized here, a sort of literature review on the economics of immigration and wages (there should be more blog literature reviews).

He looked at some of the key exogenous shocks studies, where lots of immigrants showed up out of nowhere into a community, notably a writeup of David Card's study of the 1980 Mariel Boatlift in Miami and a writeup of Rachel Friedberg's study of the mass immigration to Israel from Russia in 1990-94. These are micro studies of supply shocks, and the intuition that the labor shock would reduce employment or wages doesn't happen in the data.

Ambrosini also covers George Borjas's work, as well work by Gianmarco I.P. Ottaviano and Giovanni Peri which responds to this. Borjas says, to simplify, that of course there are no effects in the micro studies because things equalize. People and capital move around to take advantages of these effects, and if there's a labor shock there's probably also people leaving the sample space.

Card argued that though this is important in theory, it doesn't show up in the data in practice -- people don't move because of a labor shock. (And the way Friedberg's paper is set up to look at occupations also discounts this.)

But the Peri paper finds that when you look at the total effect, you have to look at different skill groups. Our immigrant populations are very different in skills. There's minor impact even in the worse case scenario of the short run, as shown in this chart:

What happens is that the skill sets across each of these groups function as a complement to each other, causing less decreases to wages. The simple story of supply and demand works if you view all labor as the same lump of substance, and the number of machines that they can work on as fixed.  When you realize that this story isn't that straightforward, that's when you get results like the ones above.

It is interesting that immigration affects the wages of other immigrants in a large manner. One thing I'm interested in learning more about is the non-wage portions of the job; the way that, say, worker safety, stability and non-wage perks factor into this job. If the work is becoming more dangerous, say, in meat-packing, but the wage stays the same, that's a pay cut. But as Ambrosini told me when I asked him about this, the new job is to explain why there is no correlation between immigrants and lower wages, instead of whether or not this effect is in the data. If this interests you, here's where to start.

Mike Konczal is a fellow at the Roosevelt Institute. He blogs about finance, economics and other topics at Rortybomb and New Deal 2.0, and you can follow him on Twitter.

By Washington Post editor  |  May 27, 2010; 6:00 PM ET
 
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Comments

No doubt immigration by robots who didn't require food, housing, schooling, etc. would depress wages. As it is, immigrants create demand, too, so it's hardly a surprise that the effects more or less cancel out.

Posted by: vagueofgodalming | May 27, 2010 6:49 PM | Report abuse

Actually, there was a very good study of the janitorial services in Los Angeles that clearly demonstrated the negative effect of immigration. The field was predominantly native born black and highly unionized until the companies started hiring large numbers of immigrants. Wages may not have decreased but they no longer kept pace with fields that had paid comparable wages in the past.

40 years after having undermined the wage structure, immigrants began a "Janitors for Justice" campaign which essentially tried to regain what had been lost in the field.

I find it interesting that people like Ambrosini (and Konczal) prefer the research of the past few years rather than that from people who have been working in the field for decades. The issue is not the impact of a sudden influx but the ongoing effect of having large numbers of unskilled (or semi-skilled) immigrant workers competing with similar native born workers. Small Businesses all across the country can tell you the result -- wage stagnation.

Posted by: Athena_news | May 27, 2010 9:50 PM | Report abuse

Athena_news,

"Justice for Janitors" is a national union (Service Employees ... SEIU) organizing campaign that was launched in the city of Denver. It was not launched by immigrants in Los Angeles.

I don't know of any studies that connect low wage growth for Los Angeles janitors to immigration. However, I am aware that in the early 1980's commercial real estate companies in LA began farming out hiring of janitors to building service contractors. These huge employers cut the average wages paid to janitors in LA by almost 40% in just a couple of years, and many janitors who previously enjoyed employee benefits lost them altogether.

SEIU brought "Janitors for Justice" from Denver to LA in 1988, and in 1990 the newly unionized janitors went on strike for 3 weeks and won a 22% pay increase.

Where is this study that you are talking about?

Posted by: Patrick_M | May 27, 2010 10:43 PM | Report abuse

I read Ezra Klein for a progressive view.

I get the conventional wisdom that asserts a deluge of illegal immigrants has no effect on wages or joblessness for the low wage American worker.

And I also get a stream of gooey how cool is China articles.

What I don't get is any interest or willingness to GO TO THE INDUSTRIAL WASTELAND OF THE USA AND TALK TO AMERICANS ABOUT WHAT IS GOING ON THERE.

I believe that is because China is important, outsourcing is still cool, and the cost to our communities of these crazy policies is invisible even to progressives.

If you cared YOU WOULD GO THERE.

Posted by: mminka | May 28, 2010 12:53 AM | Report abuse

"I read Ezra Klein for a progressive view."

Yet it doesn't seem that you have a learned a thing about the progressive view.

It is the progressives that have passed ARRA and other jobs bills, and have defeated the efforts of conservatives like Jim Bunning to cut off unemployment benefits to jobless Americans. Do you recall the number of Republicans that voted for ARRA? 3 in the Senate, 0 in the House.

If you can point us to the posts where Ezra Klein argues that "outsourcing is cool" or the "stream of gooey how cool is China articles" that will be helpful to refresh our memories. In his most recent post about China, EK discusses the real possibility that Chinese efforts at accelerated industrial development will end in disaster. Not very gooey.

Anyway, please point us to those articles that you mention. Otherwise, it might seem that you are just making stuff up, like Athena_news has done with the fairy tale about the LA janitors' wages.

And when the guest blogger surveys the data and concludes:

"What happens is that the skill sets across each of these groups function as a complement to each other, causing less decreases to wages. The simple story of supply and demand works if you view all labor as the same lump of substance, and the number of machines that they can work on as fixed. When you realize that this story isn't that straightforward, that's when you get results like the ones above."

...that is really a different finding than your characterization of the piece as "the conventional wisdom that asserts a deluge of illegal immigrants has no effect on wages or joblessness for the low wage American worker."

But you would have to actually read the post to know what it says, and perhaps you did not.

Posted by: Patrick_M | May 28, 2010 1:33 AM | Report abuse

So this is the effect of all immigrants not just illegal immigrants? If so it's a pointless study. Hardly anybody is complaining about all the PhDs we are importing.

Posted by: MrDo64 | May 28, 2010 7:50 AM | Report abuse

"Otherwise, it might seem that you are just making stuff up, like Athena_news has done with the fairy tale about the LA janitors' wages." -- Patrick_M

Excuse me Patrick, it's not a "fairy tale", it was a study conducted by two labor economists quite a while ago; I read the book in a Chicano Studies library over 10 years ago.

The problem that I have with the Democratic position on immigration is that it ignores any and all academic research that doesn't coincide their preconcieved ideas about immigration. It's a bit like the conservatives and climate warming -- if the study doesn't agree with them, they ignore it.

Calling something a "fairy tale" just because it doesn't coincide with what you want to hear is hardly constructive.

Posted by: Athena_news | May 28, 2010 8:35 AM | Report abuse

"Calling something a "fairy tale" just because it doesn't coincide with what you want to hear is hardly constructive."

The problem is not that your comment fails to coincide with anything I might like to hear, the problem is that you said things that are blatantly not true.

Your depiction of the origin of "Justice for Janitors," and the idea that the janitors in LA were trying to recover wage loss from immigration 40 years earlier due to immigration, (rather than a few years earlier due to the takeover of janitorial services by building service contractors), is non-factual.

Here's a link to a concise summary of the history of "Justice for Janitors" including a discussion of the situation in Los Angeles:

http://en.wikipedia.org/wiki/Justice_for_Janitors

If you can provide a link to the study you have mentioned, I'll be interested to review it.

Posted by: Patrick_M | May 28, 2010 9:50 AM | Report abuse

Suppose that an increase in the number of unskilled immigrants do depress the wages of unskilled workers. Presumably that effect would also occur in the immigrants' home countries - fewer unskilled workers in poor countries would raise the wages of unskilled workers in poor countries.

If this is true, then immigration leads to poor workers in the original country being better off, and the immigrants themselves being better off, with a small cost paid by relatively (emphasis on relatively) well paid workers in the U.S. From a utilitarian perspective, isn't this a good thing?

Posted by: justin84 | May 28, 2010 10:35 AM | Report abuse

I am trying to find a citation for the book. As I said, I read it about 10 years ago so I don't have the details here.

The facts though Patrick, do not coincide with your interpretation. It is misleading to state that the deterioration of janitorial wages in Los Angeles began in the 80s. Janitorial services in LA were in fact, highly unionized through the 60s. It was the use of low cost, immigrant labor by the contractors that lead to steady deterioration of wages and conditions throughout the 70s and 80s.

Those involved in Janitors for Justice may have only become concerned when the situation became unbearable for the immigrants who had undermined the old status quo but the situation was in fact over 30 years in the making -- and a direct result of increased employment of illegal immigrants in the 70s and 80s.

That's why I said that the whole campaign was in essence an attempt to regain what uncontrolled, low-skilled immigration had destroyed.

Posted by: Athena_news | May 28, 2010 10:57 AM | Report abuse

"If this is true, then immigration leads to poor workers in the original country being better off, and the immigrants themselves being better off, with a small cost paid by relatively (emphasis on relatively) well paid workers in the U.S. From a utilitarian perspective, isn't this a good thing?" - justin84

Umm, not necessarily. If the objective of a national immigration policy is supposed to be the betterment of the nation, then increasing the number of people living at the margin -- whether native born or immigrang -- is not a good thing.

More importantly, most of these studies tend to discount the actual impact that unrestricted low-wage immigration (legal as well as illegal) has on society itself. It's not just a direct economic problem. The reason so many polls indicate support for the Arizona initiative, as unreasonable as it is, is because people who live in these areas know that it's about more than wages.

They know that the schools their children attend have been directly affected by the resources going to non-English speaking children.

They know that they are frequently frustrated by non-customer service in stores and offices because communication has devolved to nothing but the basics.

They know that to complain about these and other phenomena opens the door to being branded "racist" rather than initiating a badly needed discussion about just what immigration policy is supposed do for the country.

Posted by: Athena_news | May 28, 2010 11:15 AM | Report abuse

"It is misleading to state that the deterioration of janitorial wages in Los Angeles began in the 80s. Janitorial services in LA were in fact, highly unionized through the 60s. It was the use of low cost, immigrant labor by the contractors that lead to steady deterioration of wages and conditions throughout the 70s and 80s."

i am not "interpretating" facts, I am stating them. From the Wiki piece:

"During the 1980’s, janitors working for large real estate owners had become victims of competition and lowered wages. The large real estate companies sent out cleaning services to the building service contractors. These contractors were in high competition with each other and therefore cut wages for their cleaning services. This placed janitors in a situation that they had no power to change: If they attempted to ask the service contractors for higher wages, the contractors would pass the responsibility to the real estate owners. If the janitors inquired the owners about increasing their wages, the owners would say that it was the responsibility of the contractors.

In 1983, an average janitor working in LA had a salary of over $7.00 and full health insurance for the janitor and his/her family. By 1986, the janitorial wages had been cut to a mere $4.50, and health care coverage was no longer an option. By the late 1980’s, janitors began to fight against these large owners and contractors. Janitors that were members of the SEIU joined together in the Justice for Janitors campaign using militant and direct action tactics. They wanted to hold both the owners and the contractors accountable."

And the actual history of "Justice for Janitors" (at large and in Los Angeles) is discussed in the same Wiki article and at SEIU's own web site:

"Formed in Denver in 1985, the Justice for Janitors campaign is now in its 24th year. The campaign is about hard-working janitors uniting for fair working conditions with support from their communities.

Justice for Janitors Day was established after janitors in Los Angeles were beaten by police during a peaceful demonstration against the cleaning contractor ISS on June 15, 1990. The public outrage that generated from this incident resulted in ISS agreeing to recognize L.A. janitors in a union. In remembrance of that day, SEIU janitors and supporters take action every June 15 in cities nationwide and in countries around the world."

(http://www.seiu.org/a/propertyservices/property-services-faq.php)

Posted by: Patrick_M | May 28, 2010 1:29 PM | Report abuse

I'm sorry Patrick but you are still missing the point: The rise of building services contractors in Los Angeles was fueled by their employment of large numbers of immigrant workers. That enabled them to displace what had been unionized janitors in Downtown LA and along the Wilshire Corridor.

Your focus on the 80s, by which time the contractors' low wage policy had enabled them to establish a stranglehold on the market, whhen immigrants suddenly discovered the benefits of unionization -- which they themsleves had helped undermine -- ignores the roots of the problem.

And quoting from self-serving articles composed by people who are clearly ignorant of the longer history in Los Angeles, doesn't prove anything.

Posted by: Athena_news | May 28, 2010 2:00 PM | Report abuse

Athena_news: your story describes the negative effect of weakening labor standards, not immigration per se. The company in question could easily have hired other Blacks as strikebreakers, and they would have depressed wages. You make yet another argument for increased avenues for legal immigration. At present, undocumented workers are not able to seek redress for labor violations. Skilled workers are also less able to seek redress because their status is tied to one employer. Immigration reform can easily solve these problems.

Posted by: weiwentg | May 28, 2010 2:06 PM | Report abuse

I have cited material which itself cites sholarly sources and describes in detail the historical reality.

You have completely inaccurately described the formation of Justice for Janitors and the nature of that organization. Do you continue to assert that the movement was begun by immigrant janitors in LA (not by the SEIU in Denver)?

You also present a theory of the impact on janitors wages in Los Angeles by immigration, which you say is based upon something you read ten years ago and which you can't produce or even name.

You also told the blogger that this mysterious thing you read ten years ago is a more authoritative source about the effect of immigration on wages than the data contained within the multiple studies that the blogger discusses.

Make any argument you wish about the impact of immigration on wages, but when you rely on a historical argument that you can't support, and when there is ample evidence that disputes statements that you present as fact, don't be surprised when others bring up the discrepancies.

Posted by: Patrick_M | May 28, 2010 2:15 PM | Report abuse

Weiwentg: Not so, it illustrates the degree to which the availability of a virtually limitless low-skilled labor pool weakened labor standards. In the case of Los Angeles, it was unionized black workers who were displaced by low-wage, non-unionized immigrants.

The experience there argues against increasing the levels of low-waged immigration -- legal or illegal.

Most of the discussion about immigration reform focuses on the immigrant: about legalizing workers who are here. Virtually no one talks about what the objective of immigration policy should be for the citizenry.

Posted by: Athena_news | May 28, 2010 2:19 PM | Report abuse

"You have completely inaccurately described the formation of Justice for Janitors and the nature of that organization. Do you continue to assert that the movement was begun by immigrant janitors in LA (not by the SEIU in Denver)?" - Patrick_M

No I do not...and I never meant to imply that. My point was that there was a certain degree of irony in the Justice for Janitors campaign in Los Angeles in that it was seeking to rectify a situation that immigrants themselves had created.

It wasn't a mysterious publication -- it was an actual academic study that examined the declining unionization of janitorial workers in Los Angeles. It was published long before Janitors for Justice appeared in Los Angeles, and perhaps well before its founding in Denver.

Ignorance of the history of a situation doesn't mean it didn't happen.

And for what it's worth, the study I referenced is not the only one that contradicts the poster. Many, many academics -- Vernon Briggs, Jorge Borjas, etc. -- have published studies that shown that wages of low skilled workers are negatively affected over the long term. I mentioned the study of janitorial workers in Los Angeles though, because it was so specific.

Posted by: Athena_news | May 28, 2010 2:34 PM | Report abuse

"40 years after having undermined the wage structure, immigrants began a "Janitors for Justice" campaign which essentially tried to regain what had been lost in the field. ... No I do not...and I never meant to imply that."


When you are in a hole, stop digging.


"I mentioned the study of janitorial workers in Los Angeles though, because it was so specific."

We'll take your word for it.

Posted by: Patrick_M | May 28, 2010 2:47 PM | Report abuse

"Sweeney’s rise to power at the AFL-CIO was due in large part to the success of his union in Los Angeles in *re-organizing* janitors in large office buildings through the so-called “Justice for Janitors” (JfJ) campaign. "

http://escholarship.org/uc/item/74z8c302?display=all

It's not the reference I was looking for, but it does support my contention that in Los Angeles, Justice for Janitors was in fact an effort to recover lost ground.

That paper also mentions that janitors in major buildings had been unionized with relatively high wages and benefits until contracting services shifted to low-wage immigrants.

Most of of what is available on the web deals with the late 80's and 90s. I'll have to search some hard copy bibliographies to find the actual source I mentioned.

Posted by: Athena_news | May 28, 2010 3:08 PM | Report abuse

"Umm, not necessarily. If the objective of a national immigration policy is supposed to be the betterment of the nation, then increasing the number of people living at the margin -- whether native born or immigrang -- is not a good thing."

Depends on your point of view of the betterment of the nation. A business owner would find cheap labor beneficial. A consumer not living at the margin - which would be most of us - would find the lower prices that cheap labor provides beneficial. The immigrants themselves find their low wages beneficial relative to their previous status. Their families who receive remittances are better off. Immigration and low prices are good for a lot of people.

Other than from a nationalist perspective, why should I care more about working class Americans than people who had the misfortune of being born in far poorer societies?

"More importantly, most of these studies tend to discount the actual impact that unrestricted low-wage immigration (legal as well as illegal) has on society itself. It's not just a direct economic problem. The reason so many polls indicate support for the Arizona initiative, as unreasonable as it is, is because people who live in these areas know that it's about more than wages.

They know that the schools their children attend have been directly affected by the resources going to non-English speaking children.

They know that they are frequently frustrated by non-customer service in stores and offices because communication has devolved to nothing but the basics."

What about the anti-immigrant laws & sentiments back during the 19th / early 20th centuries? I think this argument would have held then as well.

Posted by: justin84 | May 28, 2010 3:56 PM | Report abuse

Patrick_M's article points out that the janitors' decrease in wages was due in part to "competition." Wonder who that competition was.

Posted by: tomtildrum | May 28, 2010 6:05 PM | Report abuse

tomtildrum,

The very next sentence makes clear that the competition was among the small number of large contractors that had taken over the hiring of the janitors:

"These contractors were in high competition with each other and therefore cut wages for their cleaning services."

Athena_news,

Right, and the ground that was lost was lost during the 1980's. There is nothing in your one sentence quotation that is at all inconsistent with the documented history I have presented here about the way the labor market for janitors was re-structured to their great detriment during the course of that decade, or the resulting effort successful effort by SEIU to organize the janitors and to negotiate collective bargaining agreements with the service contractors that provided for decent wages. A lot has been written about SEIU's unique "market-wide" master contract approach with Justice for Janitors, designed to stop exactly the sort of rapid downward spiral that the janitors in LA experienced. It is anything but an obscure story in the field of labor relations.

I do sincerely hope that you have a restful and enjoyable holiday weekend.

Posted by: Patrick_M | May 28, 2010 6:43 PM | Report abuse

The issue in this discussion Patrick, is *why* the ground was lost in the 80s.

Mines, Richard and Jeffrey Avina. 1992. “Immigrants and Labor Standards: The Case of California Janitors,” in Jorge A. Bustamante, Clark Reynolds and Raul Hinojosa-Ojeda, eds., U.S.-Mexico Relations: Labor Market Interdependence, pp. 429-48. Stanford: Stanford University Press.

According to my notes, the authors observed that, while the SEIU had lost ground all over the US between 1977 and 1981, research indicated that the decline in California had been significantly greater. They went on to state: "The SEIU's main problem in California has been spiraling competition from nonunion contractors, whose reliance on low-wage immigrant labor, allows them to easily underbid unionized firms."

That Patrick, was the major reason the non-union contractors were able restructure the market in Los Angeles. It was their extensive use of immigrants, who were willing to work for much less, that enabled them to underbid unionized firms then dominate the industry and change the relationship between building owners and janitorial staff.

My original statement -- which I stand by -- was in no way a "fairy tale". As unfashionable as it may be among many in the pro-immigration camp, there is in fact a significant body of academic literature concluding that large scale, low-skilled immigration does indeed have a negative effect on native born workers in the same field and that the case of the janitors in Los Angeles was one such instance.

As indicated by its title, the piece I referenced discussed other areas in California as well. Los Angeles stuck in my mind because I read the piece it during the JfJ campaign there and found it ironic that they were essentially coming full circle.

Posted by: Athena_news | May 29, 2010 10:31 AM | Report abuse

Hello again, Athena_news,

First, let's kindly admit that the scenario you are presenting now is entirely different than the scenario you first presented (the one that I referred to as "a fairy tale," but which you say you continue to stand by) in which the arrival of immigrants undermines the wage structure circa 1950, and that "Wages may not have decreased but they no longer kept pace with fields that had paid comparable wages in the past. 40 years after having undermined the wage structure, immigrants began a "Janitors for Justice" campaign which essentially tried to regain what had been lost in the field."

Secondly, accepting your new and moderately more accurate scenario for a moment, we still have to wrestle with cause and effect. "It was their extensive use of immigrants, who were willing to work for much less, that enabled them to underbid unionized firms then dominate the industry and change the relationship between building owners and janitorial staff."

Yes, generally non-union contractors can underbid union contractors. People did not begin migrating from other countries into Southern California in the 1980's and immigants did not stop arriving after 1990. A sudden new availibility of immigrant workers accordingly does not explain the cause of the suddenly lower wages; what was new during the early 1980's (in your scenario #2) was a group of non-union contractors competing against the unionized employers, and (briefly) enjoying success until the union came in and organized the non-union workforce.

If, as you seem to argue, the only factor needed to make the wage depression happen was the availability of immigrant workers in Los Angeles, the depression of wages would have taken place much earlier, and it would still be continuing today. Your scenario #2 is more about non-union employers' effect on wages within a market than it is about immigration's effects.

But at least it is more accurate than scenario #1, in which immigrants arrive, wages flatten, and then 40 years later immigrants start Justice for Janitors.

Posted by: Patrick_M | May 29, 2010 4:32 PM | Report abuse

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