By Giovanni Peri, Ph.D.
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...
Published On: Sun, Oct 01, 2006 | Download File