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B. Private Consequences of Immigration | matthewsimmigration

B. Private Consequences of Immigration

In nearly every immigration debate, restrictionists have sought justification by arguing that labor market protectionism improves the economic well-being of natives, particularly low-skilled workers.  However, the empirical literature studying the effects of immigration on United States labor markets has shown little evidence of negative effects on native wages or employment.  As per George Borjas (Professor of Economics and Social Policy at Harvard University), although many researchers have tried, it has proven surprisingly difficult to document that immigration has an adverse effect on native workers. 52  Thorough surveys of the literature by Borjas, Richard Freeman (Chair in Economics at Harvard University), Lawrence Katz (Professor of Economics at Harvard University) and the National Research Council (hereinafter, "NRC," a division of the National Academies and considered by most scholars to have accomplished in 1997 the most thorough economic study of U.S. immigration to date 53) conclude that the evidence indicates a weak relationship between immigration and the employment and wages of all types of native workers, "white or black, skilled or unskilled, male or female." 54  In fact, in 1960, the average immigrant worker living in the United States actually earned about four percent more than the average native. 55  Moreover, an influential study by David Card on the effect of the Mariel Cubans on the Miami labor market found that the arrival of 125,000 Cubans in 1980, which unexpectedly increased the supply of labor in Miami by seven percent almost overnight, had "virtually no effect" on the wages and employment opportunities for workers in Miami. 56  In sum, as Borjas concluded in a 1990 review of the literature, "the methodological arsenal of modern econometrics cannot find a single shred of evidence that immigrants have a sizable adverse impact on the earnings and employment opportunities of natives in the United States." 57

 

In fact, as per Rob Paral (Research Fellow at the American Immigration Law Foundation), a steady supply of foreign national workers has been critical to an expansion of United States industry over the last decade, creating numerous additional employment opportunities for natives.  Even while absorbing 2.9 million Mexican workers in the 1990s, the American workforce saw its unemployment rate fall from 6.3 percent in 1990 to 3.9 percent in 2000. 58  The overall unemployment rate in the United States presently stands at 4.6 percent 59 and has been very low in this country for most of the last 25 years 60 (comparatively, unemployment in France, Germany and Spain has averaged around nine percent over the past 10 years 61).  Moreover, if one adds together the three million undocumented migrants granted amnesty in 1986 with 900,000 documented immigrants per year, who are here and hard and work, with another 11 million undocumented migrants here and working, the unemployment rate in the United States is still almost as low as it has ever been in the last 30 years. 62  For every 10 percent increase in the foreign-born share of the U.S. workforce, wages for natives are lowered less than one percent. 63  This data suggests that rather than leading to an oversupply of workers in low-skilled industries, the arrival of significant numbers of migrant workers has permitted American employers to enjoy continual access to needed personnel in a tight labor market.

 

Howard Chang (Professor of Law at the University of Pennsylvania Law School) asserts that the reason why migrants have so little adverse impact on the wages and employment of natives is because the demand for labor does not remain fixed when migrants enter the economy.  In other words, migrant workers not only supply labor but they also demand goods and services, and this demand translates into greater demand for domestically supplied labor.  In this way, the increase in demand offsets the effects of increased supply. 64  Borjas concurs, stating that "immigrants increase the demand for goods and services produced by native workers and firms…and native-owned firms and native-born workers are more than willing to provide these services to new consumers." 65  In 2004, consumer purchasing power totaled $686 billion among Latinos and $363 billion among Asians.  Given that roughly 44 percent of Latinos and 69 percent of Asians were foreign-born in that year, the buying power of migrants reached into the hundreds of billions of dollars. 66

 

In this same vein, Jean Grossman (Lecturer of Public and International Affairs at Princeton University) has shown that immigrants and natives are not perfect substitutes in the labor market and therefore do not compete for the same jobs.  Immigrant labor can therefore be a complement rather than a substitute for native labor, so that an increase in the supply of immigrant labor will increase the demand for native labor and thus have positive effects on native workers rather than negative effects. 67  Grossman’s labor substitution study is further confirmed by the NRC, which found that United States labor markets are in fact highly segregated, with immigrant labor concentrated in some occupations while natives are concentrated in others.  This indicates that immigrants compete with one another far more than they compete with natives and that these segmented labor markets can produce gains for natives in the labor market without necessarily producing adverse effects for native workers. 68

 

As per Daniel Griswold (Director of the Center for Trade Policy Studies at The Cato Institute), in his May 2005 testimony before the Senate Committee on the Judiciary, Subcommittee on Immigration, Border Security and Citizenship, immigrants gravitate to occupations where the supply of workers falls short of demand, typically among the higher-skilled and lower-skilled occupations.  That hourglass shape of the immigration labor pool complements the native-born workforce, where most U.S. workers fall in the middle range in terms of skills and education.  As a result, immigrants do not compete directly with the vast majority of American workers. 69  In sum, through higher levels of immigration, businesses gain opportunities for higher profits through lower labor costs while workers gain opportunities for additional jobs in alternative and potentially lucrative immigrant-demand industries.

 

In line with these studies, the number of Mexican workers in the low-skilled labor market doubled during the past decade as they became more integral to the nation’s economic growth.  While other migrant groups also perform these "essential worker" jobs, the size of the Mexican population makes its impact on the U.S. economy more quantifiable.  Furthermore, no longer are Mexican immigrants found only in isolated niches, they are now an integral part of the U.S. labor market, 70 becoming increasingly important in locations throughout the nation not previously known for large immigrant populations, including southern and southeastern states such as Mississippi, Tennessee and North Carolina.  This phenomenon reflects the fact that nearly 43 percent of all job openings in the United States by 2010 will require only a minimal education, at a time when native-born Americans are obtaining college degrees in record numbers and are unlikely to accept positions requiring minimal education.  Moreover, the fertility rate in the United States is projected to fall below replacement level by 2015-2020, declining to 1.91 children per woman.  And it is estimated that by 2012, the number of workers age 55 and over will likely increase 49.3 percent, compared to only 5.1 percent among those age 25 to 54 and nine percent among those age 16 to 24. 71

 

These trends - a segmented labor market, a more highly educated native labor force, and the general aging of the American population - have forced American employers in a wide variety of industries to recognize the high value of migrant workers.  United States industry has hired and continues to hire large numbers of foreign nationals due to significant shortages of native labor, fueling a dramatically increased role for immigrants and nonimmigrants in the national economy.  In the 1990s, the number of Mexican migrant workers in the country grew by 2.9 million persons, a 123 percent increase, while the overall number of American workers grew by only 13 percent over the same period. 72  In 2000, the 4.5 million undocumented migrants from Mexico alone contributed an estimated $220 billion to the national GDP. 73  These shifting demographics of the native-born workforce would present less of an economic challenge if the number of low-skilled jobs were not expanding.  However, the U.S. Department of Labor’s Bureau of Labor Statistics (hereinafter, "BLS") projects that a significant share of new jobs and job openings through 2012 will occur in industries that employ large numbers of workers with lower levels of formal education or training.  Many of the 58 mostly service industries projected to have faster than average employment growth through 2012 employ workers in low-skilled jobs, and these rapid employment growth industries collectively account for 84 percent of the total projected employment growth. 74

 

Christopher Rudolph (Professor of International Politics at American University) points out that services constitute 70 percent of the Gross Domestic Product (hereinafter, "GDP") in the United States, of which 64 percent are in the high-skilled, high-value category, 75 with world exports of commercial services reaching a level of $1.35 trillion in 1999. 76  And even with the slowdown in the high-tech sector, the BLS forecasts that the nation will need 1.7 million computer technicians during the decade ending in 2008, with demand increasing exponentially. 77  Therefore, as the more highly educated domestic labor force in the United States shifts toward these types of high-skilled professions, demand for low-skilled labor in industry, agriculture and domestic services will concomitantly be on the rise. 78

 

This, in fact, has been the trend in practice over the course of the last several years.  In 2001, undocumented migrants filled 1.4 million jobs in wholesale and retail trade, 1.3 million in service industries, 1.2 million each in manufacturing and agriculture, and 620,000 in construction. 79  Between 1996 and 2002, the immigrant share of employment growth amounted to 86 percent of the one million new positions in precision production, craft and repair (including mechanics and construction workers) and 62 percent of the two million new positions in service occupations such as janitors, kitchen workers and grounds workers.  In 2003, foreign-born workers comprised 41 percent of the labor force in farming, fishing and forestry, 33 percent in building and grounds cleaning and maintenance, 22 percent in food preparation and serving and 22 percent in construction and extraction.  Approximately 7.2 million undocumented migrants were employed in March 2005, accounting for approximately 4.9 percent of the civilian labor force.  These individuals made up a large share of all workers in several low-skilled occupational categories, including 24 percent of all workers employed in farming occupations, 17 percent in cleaning, 14 percent in construction and 12 percent in food preparation. 80

 

Even with this large undocumented migrant presence in low-skilled service sectors, the owners and managers of factories, restaurants, hotels, construction sites, hospitals and orchards throughout the country have been clear about their need for continued access to low-skilled workers.  Organizations such as the American Health Care Association, the American Hotel and Motel Association and the National Association of Home Builders have found themselves in recent years with no applicants of any kind for numerous job openings.  These groups cite the comments of former Federal Reserve Chairman Alan Greenspan that the inflationary pressures caused by a tight labor market can be alleviated "if we can open up our immigration rolls significantly." 81  Despite the slight increase in unemployment rates brought on by the 2001 recession, employers still cannot find sufficient workers in the housing, retail and services industries. 82

 

Of all major low-skilled sectors of the United States economy, agriculture is the most dependent on a migrant labor force.  United States agriculture hires approximately one million foreign workers each year for jobs that most Americans are unwilling to do.  Couple that with the fact that agricultural jobs are often seasonal and require migrating from farm to farm, and the reality is that even with competitive pay and benefits, most native-born Americans are not attracted to farm work.  United States agriculture would face dire consequences if it were to lose its migrant workforce.  According to a recent American Farm Bureau economic study, if an immigration reform bill that fails to address agriculture’s need for migrant labor becomes law, up to one-third of the country’s fruits and vegetables sector would disappear and an estimated $5 to $9 billion in annual U.S. production would be lost to foreign competitors.  Net farm income for other agricultural sectors also would decline by as much as $5 billion annually. 83

 

Over the long-term, America’s economic success also requires the nation to attract high-skilled professionals from across the globe to increase the international competitiveness of U.S. companies.  Despite the aforementioned recent problems in the high technology sector, the future of this industry appears more positive, with the BLS projecting 47 percent growth in science and engineering jobs overall and an 82 percent increase in computer-related jobs by 2010, compared to a 15 percent average growth for all occupations combined.  Computer software engineers alone are projected to increase by 90 to 100 percent.  The combination of a large drop in spending on computers and related hardware and a slower growth in spending on software would appear to be the primary reasons for job difficulties in certain high technology sectors, not the entry of migrant professionals into this sector of the labor market.

 

Foreign national scientists and engineers have long played a prominent role in U.S. technological and scientific advancement and are a critical part of the science and engineering labor force in corporations, universities and research centers nationwide.  They are key contributors to innovation, making up 28 percent of all individuals with Ph.D.s in the United States who are engaged in research and development in science and engineering. 84  In 2003, foreign-born workers comprised 19 percent in computer and mathematical occupations, and 17 percent in the life, physical and social sciences. 85  Immigrant entrepreneurs establish new firms and make substantial contributions to economic growth by contributing significantly to job creation in the science and engineering sectors.  For example, Indian and Chinese entrepreneurs alone head 29 percent of Silicon Valley’s technology businesses.  Collectively, these companies accounted for $19.5 billion in sales and 72,839 jobs in 2000.  Foreign-born naturalized citizens receive a disproportionately large number of the Nobel Prizes awarded to U.S. scientists, earning 26 percent of the awards in chemistry, 31 percent in economics, 32 percent in physics and 31 percent in medicine.  American universities, laboratories and manufacturers gain substantially from the discoveries and intellectual contributions made by these Nobel Laureates, 86 as well as by those awarded lesser national or international awards and other forms of international recognition as leaders in their respective fields.

 

The foreign-born comprised 11.1 percent of the national population as a whole in 2000, but accounted for 16.6 percent of all scientists and engineers in the United States.  Migrant scientists and engineers represented 38 percent of all scientists and engineers in the United States with a doctorate and 29 percent of those with a master’s degree in 2000.  The foreign-born share of all doctorate holders amounted to 51 percent among engineers and 45 percent among life scientists, physical scientists, and mathematical and computer scientists.  They accounted for 42.2 percent of all physical scientists and 38.6 percent of all life scientists in educational and health services in 2000, as well as 26.2 percent of all physical scientists in manufacturing.

 

Foreign-born professionals also play an important role in the delivery of health care in the United States as 1.1 million migrants account for 13 percent of health care providers in the United States.  The foreign-born account for 25.2 percent of all physicians; 17 percent of nursing, psychiatric and home health aides; 15.8 percent of clinical laboratory technicians; 14.8 percent of pharmacists; and 11.5 percent of registered nurses.  During the 1990s, immigrant employment grew by 114 percent in home health care, 72 percent in nursing care facilities, and 32 percent in hospitals.  Thirty-five million Americans live in areas with too few doctors to adequately serve their medical needs.  Overall, this lack of doctors affects more than 1,600 geographic areas in the United States and nearly 16,000 doctors are needed to alleviate this shortage.  Foreign-born professionals play a crucial role in filling severe shortages within the two largest health care occupations: physicians and nurses.

 

Health care reform is one of the most pressing social and political issues of our time.  Despite major advancements in medical technology, the number of Americans who have access to medical care continues to decline.  Together with factors such as widespread lack of health insurance, persistent poverty and low profit margins at medical institutions, the lack of access to health care is exacerbated by significant shortages of doctors and nurses.  These shortfalls in health care professionals are found in both rural and inner-city areas, where primary care physicians are often in short supply, and in hospitals and medical centers nationwide that are unable to locate and hire sufficient numbers of nurses.  Immigration policy reform is a tool available to the United States to address this shortage of health care workers, as immigration policy applicable to doctors and nurses has become more restrictive in recent years, even while shortfalls of these workers have become critical in many communities. 87

 

Contrary to concerns that foreign-born scientists, engineers, health-care and other professionals in the United States are "cheap labor" and undercut the wages of native professionals, data indicate that those working in the United States actually earn more than their native counterparts when controlled for age and the year in which a science or engineering degree is earned, according to the National Science Foundation. 88  Moreover, the fact that it is illegal to pay an H-1B (temporary visas for nonimmigrant professionals in specialty occupations 89) visa-holder less than a comparable native professional, combined with the difficulty of employers maintaining separate pay scales for H-1Bs and other employees working alongside them, as well as the ability of H-1B visa holders to change jobs and seek the market wage for their services, leads to a conclusion that critics of professional immigration are exaggerating any widespread use of employees on H-1B visas as "cheap labor."  An examination of the data reveals that H-1B totals do not show rampant hiring by United States employers without regard to market conditions.  In fact, H-1B hiring appears to rise and fall with economic conditions, as predicted by basest supply-demand theory.  In 2001, the number of new H-1B hires was 164,000.  However, in Fiscal Year 2002, following the onset of a recession exacerbated by 9/11, the number of H-1Bs dropped by half to 79,100, well below the 195,000 visa allocation ceiling in effect at that time, 90 and equaling approximately 0.058 percent of the total United States labor force.

 

Moreover, armed with new immigration powers as well as additional funding derived from employers’ H-1B fees, the U.S. Department of Labor (hereinafter, "USDOL") has increased its enforcement of H-1B rules.  Despite this increased enforcement, the number of serious violations remains low both in total and as a percentage of H-1B petitions approved, indicating that abuse is not widespread.  In 2001, only nine violations were deemed willful, while there were seven such violations in 2002.  USCIS fees paid by employers to hire foreign-born professionals on H-1B visas totaled more than $692 million as of 2003.  These fees helped provide training to more than 55,600 U.S. workers and funded scholarships for more than 12,500 U.S. students in science and engineering. 91

 

Between 1996 and 2003, the foreign-born accounted for 58 percent of the 11 million new workers in the United States.  In 2004, 14.9 percent of the labor force was foreign-born, amounting to 21.8 million workers. 92  America’s openness to immigration has created the opportunity for the country to remain vibrant and growing, while the country’s allies in Western Europe and parts of Asia - absent a change in their policies - may become stagnant due to their lack of openness and falling birth rates.  This dynamic is drawing greater attention around the world.  Population projections released by the United Nations show that a number of developed countries will fail to grow in the coming years, while many less-developed nations may receive a demographic dividend from their growing labor force.  "The U.S. is better off than Japan or Western Europe, thanks to a higher birth rate and a more open immigration policy that lets it maintain a larger pool of highly educated young people in its work force," notes the Wall Street Journal. 93  Barring changes in policies, such as welcoming more migrants, some countries expect to experience serious population declines that could bring significant negative consequences for everything from the economy to funding retirement and health care benefits for aging populations.  For example, Japan expects to see its population decline and Russia’s population is forecast to fall from 145 million today to less than 105 million by 2050. 94

 

With current levels of immigration, the United States labor force will grow 18.9 percent by 2030, while countries with more restrictive immigration policies such as Japan, Germany and Italy will see their adult working populations decline by 15 percent or more.  Immigration is therefore the crucial factor in determining whether the national labor force will experience growth or become stagnant. 95  This labor growth, led by immigration, will be a key to economic growth and the funding of health and retirement benefits for Baby Boomers. 96  The level of United States economic growth in BLS projections through 2012 is predicated on a growing supply of workers that likely will not be found in the native-born population alone.  BLS assumes that the GDP, which measures the total value of a country’s annual output of goods and services, will grow by three percent per year through 2012 and projects that this economic growth will increase the number of United States jobs by 14.6 percent from 144 million to 165 million.  It also projects that the number of workers in the country will increase 11.7 percent through 2012, from 145 million to 165 million, as a result of both natural population increase and immigration.

 

Moreover, BLS assumes that significant increases in productivity, which could sustain economic growth with fewer workers, are unlikely over the coming decade.  Productivity growth has in fact declined in recent years, from four percent in 2002 to 3.8 percent in 2003, 3.4 percent in 2004 and 2.5 percent in the first two quarters of 2005.  It is unlikely that many additional workers can be squeezed from the existing population given that the labor force participation rate among the native-born has actually declined from 66.4 percent in 1994 to 65.5 percent in 2004.  Moreover, native workers are unlikely to work additional hours.  Workers in the United States currently average 35 hours of work per week, which is high compared to most other developed countries, but represents a steady decline from the U.S. average in the 1950s.

 

Given that labor force participation rates in the United States are trending downward, population growth will be the primary source of labor force growth in the years to come.  Because natural population increase is unlikely to provide sufficient workers, immigration will play a critical role in sustaining the labor force growth needed to maintain overall economic growth.  BLS devotes special attention to immigration in projecting future labor force growth by noting that growth in particular age groups of the labor force must come from immigration, since United States workers in some age groups, such as those age 25 to 34 in 2012, are already born.  BLS projects that net immigration will add 4.25 million workers to the United States labor force through 2012, representing a quarter of total labor force growth. 97

52 George Borjas, Heaven’s Door (Princeton: Princeton University Press, 1999): 62 (citing Grossman 1982).

 

53 Chang, "The Economic Analysis of Immigration," 206.

 

54 Ibid., 209 (citing Borjas (1994), Friedberg and Hunt (1995) and Smith and Edmonson (1997)).

 

55 Borjas, Heaven’s Door, 8.

 

56 Chang, "The Economic Analysis of Immigration," 209 (citing Card (1990)).

 

57 George Borjas, Friends or Strangers: The Impact of Immigrants on the U.S. Economy (New York: Basic Books, 1990), 81.

 

58 Paral, "Mexican Immigrant Workers," 4.

 

59 Kathleen P. Utgoff, "Commissioner’s Statement on the Employment Situation."

 

60 Thomas W. Roach, "Thank God for the Mexicans."

 

61 Ibid.

 

62 Roach, "Thank God."

 

63 Walter A. Ewing, "The Economics of Necessity: Economic Report of the President Underscores the Importance of Immigration," Immigration Policy in Focus 4, no. 3 (2005).

 

64 Chang, "The Economic Analysis of Immigration," 210.

 

65 Borjas, Heaven’s Door, 88.

 

66 American Immigration Lawyers Association, "Immigrants Are Essential to the U.S. Economy."

 

67 Chang, "The Economic Analysis of Immigration," 210 (citing Grossman (1982)).

 

68 Ibid. (citing Smith and Edmonston (1997)).

 

69 Daniel T. Griswold, "The Need for Comprehensive Immigration Reform: Serving Our National Economy."

 

70 U.S.-Mexico Binational Council, Managing Mexican Migration, 6.

71 Ewing, "Economic Report of the President."

72 Paral, "Mexican Immigrant Workers," 4.

 

73 Walter A. Ewing, "The Cost of Doing Nothing: The Need for Comprehensive Immigration Reform" (citing Ojeda 2001).

 

74 Rob Paral, Dan Siciliano, Benjamin Johnson, Walter Ewing, and Michael Chittenden, "Economic Growth & Immigration: Bridging the Demographic Divide."

 

75 Christopher Rudolph, "Security and the Political Economy of International Migration" (citing Rosencrance, 1999).

 

76 Ibid. (citing WTO, 2000).

 

77 Ibid. (citing Los Angeles Times, 5 August 2000: C1).

 

78 Ibid. (citing Cornelius, 1998).

 

79 Ewing, "The Cost of Doing Nothing" (citing Lowell and Suro).

 

80 Passel, "Unauthorized Migrant Population."

 

81 Paral, "Mexican Immigrant Workers," 5 (citing Alan Greenspan).

 

82 Ibid.

 

83 Bob Stallman, "As American As Apple Pie (Produced Abroad)."

 

84 Ewing, "Economic Report of the President."

 

85 Jeffrey S. Passel, "The Size and Characteristics of the Unauthorized Migrant Population in the U.S."

 

86 Borjas, Heaven’s Door, 88 (citing Smith and Edmonston 1997).

 

87 Rob Paral, "Health Worker Shortages & the Potential of Immigration Policy."

 

88 Stuart Anderson, "The Global Battle for Talent and People" (citing National Science Foundation).

 

89 I.N.A. §101(a)(15)(H)(i)(b).

 

90 American Competitiveness in the Twenty-first Century Act of 2000 (Pub. L. 106-313).

 

91 Anderson, "The Global Battle" (citing Naik, Chang and Slater 2003).

 

92 Ewing, "Economic Report of the President."

 

93 Anderson, "The Global Battle."

 

94 Ibid.

 

95 Ibid.

 

96 Ibid.

97 Paral, et al., "Bridging the Demographic Divide."

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