Junk Economics: Mass Immigration Doesn’t Depress Wages

To any thinking person, it’s common sense: flood a market with a commodity, and the price goes down. This basic economic law also applies, of course, to labor, the price of which is wages. If plenty of cheap labor suddenly becomes available, employers will no longer be willing to pay current wages. Existing, more highly paid wage earners will either be replaced by the cheap newcomers, or will be forced to accept lower pay in order to “stay competitive.”

In a study published in 2003, Harvard University economist George Borjas confirmed that the least-skilled among American-born workers were indeed suffering wage erosion as a result of immigration.

But according to the August 11, 2008 issue of Business Week (see page 55), economists Gianmarco Ottaviano of the University of Bologna and Giovanni Peri of the University of California claim that Borjas got it wrong. According to Ottaviano and Peri,

[I]mmigrants compete for jobs with a broader swath of native workers than Borjas recognized, diluting their impact on the least skilled segment of the native workforce. Also, … employers can’t substitute an immigrant for a native worker as easily as Borjas assumed. [Thus,] immigration’s effect on native workers’ wages is almost too small to measure.

The absurdity of this argument is self-evident. Even if immigrants do compete with “a broader swath of native workers,” they’re still competing, and that still drives down wages. And you can’t easily substitute “an immigrant for a native worker”? Individual employers may occasionally have trouble doing this, but the overall net effect of tens of millions of Third-World immigrants—legal and illegal—has been one of mass substitution. Every job being done by an immigrant would otherwise have been done by an American. (Whatever you do, don’t believe the nonsensical assertion that immigrants do jobs “Americans won’t do.” There is not a single job that Americans won’t do for an appropriate wage. If you’re willing to pay enough, you can get a PhD to mow your lawn.)

The new “research” is obviously bogus. It’s yet another attempt to convince American workers that a flood of cheap labor into the country somehow won’t affect them.