Immigration Boosts Wages, Employment And Productivity, Fed Study Finds

Champions of strict immigration reform, be warned: there may be an economic consequence to tightening America's borders.

Immigration is actually good for employment, wages and productivity, according to a new study from the San Francisco Fed.

States that have had a large influx of immigrants tended to produce more, hire more and pay workers more than states that have few new foreign-born workers, the study shows. For every one percent increase in employment from immigration, the study finds, a state will see a .4 to .5 percent increase in income per worker.

In conducting the study, Giovanni Peri, an associate professor at University of California, Davis, compared output per worker and employment in states that have had large immigrant inflows with data from states that have few immigrant inflows. Peri found no evidence that immigrants "crowd-out" employment for American citizens.

Peri concludes that immigration boosted states' output, income and employment because the economies "[absorbed] immigrants by expanding job opportunities rather than by displacing workers born in the United States." Further, the results of the study support the theory that U.S.-born workers and immigrants tend to take different occupations, says Peri.

The study uses a hypothetical illustration to explain:

"As young immigrants with low schooling levels take manually intensive construction jobs, the construction companies that employ them have opportunities to expand. This increases the demand for construction supervisors, coordinators, designers, and so on. Those are occupations with greater communication intensity and are typically staffed by U.S.-born workers who have moved away from manual construction jobs. This complementary task specialization typically pushes U.S.-born workers toward better-paying jobs, enhances the efficiency of production, and creates jobs."

Check out a brief of the study at the NBER's website. (The full study is available for purchase.)

Comments

[melponeme k]

08:49 AM on 09/10/2010

In the old days educated workers used to riot when cheaper labor was used against them. The CEOs had a real fear of strike breaking and wage undercutting. No more. I think its time they did again.

[WhatChanged2]

08:08 AM on 09/10/2010

This study is pure canard. My entire IT team was replaced with H1-B visa workers from India. And now many of these fine American citizens are still out of work or making $10/hour

[drymartini3]

11:13 PM on 10/28/2010

H1B is legal immigration. What you should be against is illegals.

there is a difference

[doublehappi]

07:16 PM on 10/29/2010

I didnt understand your point - why was your entire IT team replaced by H1b's? EIther they outsource the whole thing or keep the jobs here and open the jobs for everyone as they have to pay the same for everyone

[mbbythesea]

11:33 PM on 09/06/2010

this is a lie. if this were true all the rampant illegal immigration would have produced a stronger economy. what do we have really? Decimated wage scales--high unemployment---and greedy CEOs exploiting workers more and more. But that's what THEY want--and so the SF Fed publishes this BS report. American workers are under assault from legal immigration HBN1 visas taking good jobs and illegal immigrants taking working class jobs. There were 2 million decently paid middle class workers in the Midwest Beefpacking industry--until illegal workers were utilized to make it a lousy paying job. Construction laborers used to make decent money and have means to rise through the ranks. Now they can't compete with illegal slave labor. Jobs not taken over in this way have been outsourced. The betrayal of the American worker by politicians is a disgusting disgrace. Workers in other countries--in Europe have good paying jobs. Oh but their CEOs don't make a bloated 650 times more than the average worker. See the problem America? We need to use the existing corporate tax rate to correct this problem. anyone interested, please ck out my prior comments on this topic.

[Norski]

04:59 PM on 09/06/2010

I have yet to see anyone prove the assumption that Illegal Immigration lowers the Cost of Living for ALL Americans. If Illegal Immigration lowers the cost of business by keeping wages low that is a net benefit to the business owners who hire them. But where are the lowered costs that supposedly benefit the average American? Especially when these analyses claim that wages are not falling for American Workers?

For example, if your neighbor's fireplace and foundation was built by a $30 per hour skilled craftsman hired by an honest Contractor and yours was built by a $13 per hour Illegal Immigrant hired by the dishonest Contractor, did you and your neighbor pay different prices for essentially the same house? Of course not. The dishonest Contractor priced his house to sell at the same price as the honest Contractor hiring the American Worker and pocketed the difference.

A Pew study by J.S. Passel "estimated that illegal immigrants fill a quarter of all agricultural jobs, 17 percent of office and house cleaning positions, 14 percent of construction jobs and 12 percent in food preparation."

So why are there no price differences between comparable products brought to market with Illegal Immigrant labor versus Citizen or Legal Resident labor? For comparable products should not a quarter of food products, 17 percent of hotel rooms, 14 percent of houses, and 12 percent of restaurant food be less expensive than that made by American Workers? Averaging incomes can incorrectly make everyone look better off.

[Lenny666]

03:34 AM on 09/05/2010

You might get people who don't work with their hands to believe this crap. Or people to young to know better. Ask a native born meat cutter or construction worker or farm worker or landscaper, etc. etc. They will tell you that immigration has driven down wages and opportunity for citizen workers. I have watched it happen over twenty years. I have worked along side immigrants in agriculture. I have worked in food processing and construction and manufacturing. Who am I going to believe? You or my lying eyes?

[WhatChanged2]

08:12 AM on 09/10/2010

Add IT workers to your list

[Pod-gers]

01:56 PM on 09/03/2010

Unemployment has gone up again, even while Wall St continues to rake in the profits.

Employing illegals is a way to undercut fair wages and benifits in the US. result, profits go
up as wages are forced down.

Today illegals are employed in those entry level jobs that used to go to American youth, who now "enjoy" 51% unemployment.

When such a large percentage of Americans are unemployed, there will be a lessoning of spending, lower taxes, ie income for the Gov, and an increase in the cost of government.

This cycle of winking at illegal employment is how the taxpayers are taxed to provide profits for private enterprise.

Both elected dems and repubs ignor this because they benifit from campaign contributions sent their way to look the other way.

meanwhile, our kids go jobless.

[confidance government]

10:03 PM on 09/02/2010

Immigrants provide transfusions of labor (skilled and unskilled) and capital into our economy, instead of just "taking their piece of the pie" they help keep our economy growing.

[Norski]

05:45 PM on 09/03/2010

Your statement is too simplistic. For Legal Immigrants roughly half are considered unskilled labor even though most enter the USA on family reunification visas. The flow of these Legal Immigrant unskilled workers is limited to our need for unskilled workers by our immigration system. That is why some family reunification visas take up to fourteen years to get. The other half of all Legal Immigrants are skilled workers, but only a small minority of them bring appreciable capital with them and they do so at rates that cannot even come close to providing the capital needed to employ all new Legal Immigrants.

For Illegal Immigrants the statistics are dismal. The vast majority are unskilled, bring no capital with them, and come to the USA in excess of our ability to create jobs. Illegal Immigration is nothing like your rosy portrait of Legal Immigration.

Maybe it is time for a new paradigm. Instead of importing millions of legal immigrants that in total do not have enough capital to create the jobs they fill, maybe we should do the process in reverse. Next time we reach full employment (everyone in the USA working) maybe we should invest the capital in creating businesses and jobs for the Immigrants in their home countries instead of here in the USA. Then they would not have to immigrate at all and their home countries get richer, helping more than just the immigrants. And the USA economy still grows through repatriated profits and without worker exploitation.

[Jackson Strong]

09:57 PM on 09/02/2010

Another laughable use of taxpayer dollars (yes, if money is not spent on this ridiculous study, it goes the treasury).

The FACT that immigrants are beneficial to the economy is shockingly obvious. This country would be nowhere if not for the stream of immigrants. I would be more worried about people leaving the country to seek better opportunity elsewhere.

Immigrants provide valuable resources to an economy, such as labor and entrepreneurship. Many companies have been started by immigrants.

It is true that adding supply of immigrants will lower wages IF new jobs aren't created. But this is only the result of foolish government regulations and federal borrowing, as it removes the capital required to create jobs and employ people. 100 years ago, when proportionately immigration was far higher than today, immigrants as well as American citizens had no problem getting jobs. Its only because our government manipulates the utilization of resources towards consumption, instead of a balance between consumption and production, we are not able to achieve our optimal economic output.

[Norski]

10:01 AM on 09/03/2010

Your statement "100 years ago, when proportionately immigration was far higher than today, immigrants as well as American citizens had no problem getting jobs" could not be more incorrect.

Five times between 1850 and 1914 large waves of immigrants came to the USA. And each wave resulted in high unemployment and economic recession. Unemployment of 30% in California resulted in the ridiculous Chinese Exclusion Act. Ellis Island was opened against a backdrop of unemployment exceeding 50% in the states of Maine, Kansas, and Michigan. Unemployment reached 32% for unskilled labor in 1910 thanks to uncontrolled immigration. By comparison unemployment peaked at only 25% in the Great Depression.

That is why we now control immigration. Since that control began we have not had a single immigration driven economic recession. Until now that is. Even at the lowest level of unemployment before the recession we had 12 million mostly low income Americans looking for jobs, 20% youth unemployment, and increasing numbers of workers at below poverty level wages, all courtesy of a labor oversupply of 7 million working Illegal Immigrants. And those Illegal Immigrant workers were employed where the vast majority of these destitute Americans were looking for work. And today, our unemployment rate is 50% higher than it should be thanks to the prescience of 7.5 million working Illegal Immigrants while 21 million Americans go unemployed.

[papapj]

12:49 PM on 09/03/2010

Few fallacies are more widespread these days than the idea that immigrants cross the border and steal jobs from hard-working Americans due to their willingness to work for what amounts to slave wages. Unfortunately, there’s not a single shred of evidence these immigrants have actually stolen a job from anybody nor driven up the unemployment rate (if you have evidence to the contrary, post it in the comments and I will publicly address it). There are several reasons why the idea that immigrants cause unemployment is fallacious:

Immigrants do increase the supply of labor, but they also increase the aggregate demand for the output of labor.
The average immigrant actually tends to pay more in taxes as a percentage of their income than the average U.S. citizen because they aren’t entitled to a tax refund if they overpay, and very few illegals work for cash under the table. Most provide a fake social security number and thus pay taxes (again, if you have evidence to the contrary post it in the comments).
The best refutation is historical: Why did the U.S. have extremely low unemployment throughout the 19th century when immigration numbers were much, much higher than they are today? Because the increased aggregate demand created by the immigrants created at least as many (if not more) jobs than they took.

[Norski]

06:03 PM on 09/03/2010

A Pew study "estimated that illegal immigrants fill a quarter of all agricultural jobs, 17 percent of office and house cleaning positions, 14 percent of construction jobs and 12 percent in food preparation." That means 75 percent of all agricultural jobs, 83 percent of office and house cleaning positions, 86 percent of construction jobs and 88 percent of the food preparation jobs are done by U.S. Citizens and Legal Residents. There is no job American's won't do.

http://pewhispanic.org/files/reports/61.pdf
http://archive.newsmax.com/archives/ic/2006/3/7/150022.shtml?s=ic

"And the preponderance of evidence indicates that the flood of illegal immigrants has hurt those on the bottom of the economic ladder most, blacks in particular and probably even American-born Hispanics." From 'Immigration and Race', Steve Bailey, The Boston Globe, February 8, 2008

http://www.boston.com/business/articles/2008/02/08/immigration_and_race/

June 23, 2008 'Immigration Crackdown May Boost US Job Prospects', by David R. Francis "a study by Northeastern University's Center for Labor Market Studies in Boston attributes the "unprecedented" levels of legal, illegal, and temporary immigration as a factor underlying the "devastation" in the job scene for America's teens and young adults over the past seven years. That's especially the case for males with no schooling beyond high school and youths from low-income families. Summer seasonal jobs as a proportion of all jobs are at the lowest level now in the past 30 years."

[ugly american]

08:20 PM on 09/02/2010

How was this study done?
Illegal immigrants take jobs away from low skilled Americans. When they are in agriculture they have jobs Americans won't take under the conditions. But in cities they take jobs in food service and construction and maintenance that low-skilled Americans not only want but did until they were undercut.
Legal immigrants come from countries that don't like us to do high-security jobs like nuclear engineering and chemical plant design and write our computer's programming. And they do take the jobs that our college graduates would like to make a bit more money for doing. Some of thier professionals work for as little as $8.00 an hour so it does not matter that they are from Pakistan or Iran or North Korea.
The last time we had an immigrant influx that really benifited the US was in the 1930's and that was the scientists from Europe.
These days immigrants provide a good way for employers to get off cheap on labor at the expence of the American worker.
Figure can lie and liars can figure. Here may be an example of both.

[confidance government]

10:04 PM on 09/02/2010

Get back on the boat your grandparents stepped off of.

[ugly american]

12:13 PM on 09/03/2010

My ancestors probably attacked yours as they stepped off of their boats. The rest of them had visas.
We give out over a million visas a year to people who want the American Dream. We have another million or so run across the southern border without permission. Is that not enough?
When the American Dream is available to Americans again then I will say "Come one, come all!" Until then lets slow down on employing the resat of the world and concentrate on employing the people already in the country.
Citizens are not the only ones suffering unemployment here.
By the by, is that the best you can do? Thow an insult instead of a rebuttal?

[Mover]

01:38 PM on 09/02/2010

"Further, the results of the study support the theory that U.S.-born workers and immigrants tend to take different occupations, says Peri."

From the example given, it seems to be suggesting that if we can get just a hundred million illegal aliens to take jobs, we could get everyone else employed.

How about this take on it: If we stop paying Americans for doing nothing except being a statistic for Democrats and progressives, why don't we allow them to work at those low paying manual labor jobs that the illegals are filling?

My assertion makes sense because illegal alien status lowers that wage pool. They cannot demand higher wages as they would just not get to work. They can't go to the police or union rep (funny, eh).

If teenagers and young adults were picking lettuce for pocket money we would not have jobs for illegals and our kids wouldn't be so overweight: Experiencing some actual hard work they would be motivated to get better education to get better jobs.

Every time an illegal alien takes a manual labor job in the USA, he/she helps create an America that is more devoid of the incentive to improve oneself and who become fat, lazy burdens on their families and society in general.

There are statistics and damned statistics. The stats used for the above article are spun to present a view that promotes anti-American attitudes among Americans. Just as it was intended.

[guveqzero]

01:23 PM on 09/02/2010

This article is about a flawed as going to the moon to mine diamonds. Higher productivity reduces jobs, what kind of drugs are these people on?

[IllTakeTheRedEye]

12:23 PM on 09/02/2010

This FRBSF analysis has flawed presumptions, known by most that do this type of analysis as the cēterīs paribus flaw.

1st) They wanted to isolate "'immigrants on output, income, and employment."

They refused to look at every state to be certain of their analysis but instead 'cherry picked' to suit their argument.

They 'cherry picked' states ranked at the top of USA records for where new legal immigrants reside in the greatest numbers.

List found here
Pg4
http://www.dhs.gov/xlibrary/assets/statistics/publications/lpr_fr_2009.pdf

9 of top 10 states where legal immigrants are supposed to reside are on USA coasts.

Claiming certain USA states have the strongest economies because of where the legal immigrants reside, is like claiming those economies are the strongest because that is where the largest percentage of the world's population resides.

Throughout the world, the overwhelming majority of the strongest economies at the city/state level are on the coasts, the WATERWAY ports of entry for world trade around the world. The overwhelming majority of goods move into and out of a continent through ports on our oceans, seas, & rivers. With few exceptions, this port rule of thumb for centuries has been the biggest reason for ports to have stronger economies than landlocked inner country cities.

2nd) Arguing that companies need to frequently replace workers with cheaper foreign nationals to raise capital to fund expansion is tantamount to trickle down economics. We lack creative thought, so cannibalize & exploit to expand.

[Nichole Boultas]

04:46 AM on 09/02/2010

If having immigrants here boosts wades among other things, why are we all ready to remove the illegals then? Is it just because they don't want to be tested on knowledge of the US or is it because of their country being poor and whatever else they tell you?

[Carolab]

03:18 AM on 09/02/2010

Look at Arizona. They claim that the state's economy will fail due to anti-immigration law because of the "black market" in labor there -- meaning the workers who are undocumented and for whom the employers pay no taxes. They claim that if they leave or no new immigrants are allowed in illegally that this will leave a void of jobs that Americans will not take. What do you want to bet that they WILL? Who did these jobs before the immigrants did them? The problem is that companies want to avoid their own personnel costs in the form of tax contributions and health care.

http://www.csmonitor.com/Business/The-Adam-Smith-Institute-Blog/2010/0730/Why-Arizona-s-anti-immigration-law-will-hurt-the-state-s-economy

[Mover]

03:20 PM on 09/07/2010

I believe there are several problems involved in getting Americans to do these traditionally low paying, sweat producing manual labor jobs, or even some entry level construction jobs.

Baby Boomers have been baby coddlers as parents and their kids don't know what it means to "earn" their way. They want to be friends with their kids instead of being role models and teachers, which is hard and calls for discipline. So Americans grow up with a sense of entitlement that rejects starting at the bottom then working and educating yourself for better jobs and pay.
2. The government, Fed, state and local, all make the poor comfortable with their lack of achievement. Government gives housing, food, clothing and health care to the poor to make them dependent on government. They don't give them enough to get ahead, just enough to keep them alive. Why go out ans sweat your rear off for $6.00 per hour, when you can sit on your recliner and collect about the same amount?
3. Unemployment insurance has become an extended vacation with pay. Lately, the few reasons to keep looking for more income would be to make your house payments. But, since congress caused this "Great Recession" a lot people have lost their ability to make those payments even with the job they had. So, the smart money walks away from the payment and then the incentive to take a job, especially one that pays less than your old job, isn't so important anymore.

[Carolab]

11:41 PM on 09/07/2010

Speaking AS a Boomer, I assure you my child was not "coddled". He was forced to find his own way, and he has turned out to be very self-reliant and driven at what he does. I was and am his friend, but that does not mean that I handed him everything nor that I did not discipline him. His father was in absentia most of his life and did little to nothing to either befriend him or parent him. In fact, I was the one who was "coddled" by my post-War generation parents and had to find my own sense of discipline and confidence at the advanced age of 35 when I finally left the nest. My child gets his hands dirty every day and works his back as well as his mind. It's a good honest day's living. And I work physically and mentally hard every day as well. I would not mind in the slightest having a day's labor in a field. I enjoy working my body hard. I would be grateful just to have the work, but at the age of 62 even though I can roller-blade circles around people half my age, "some people" think I am too old to hire for ANYthing, let alone as a field hand or as a maintenance worker or a maid. Yet I can handle this type of demand on my body and prove that true all the time, as does my equally active and fit husband.

[Carolab]

11:47 PM on 09/07/2010

As to your other two points:

The poor don't want to be comfortable, nor are they with the subsistence living and poor pay they receive. They would like a good job like anyone else, or at least a good opportunity to achieve. I worked for the welfare department and sadly there were multigenerational recipients, which testifies to a culture of poverty that was passed on. In the 90s, Gore and Clinton reformed welfare, and I cheered them on, because I felt that all many on welfare needed was a leg-up and not a constant hand-out and to me this was the beginning of the end of that. Unemployment insurance is PAID FOR with your payroll taxes and it is an EARNED right to collect it. That is why it exists in the first place and in fact when FDR created Social Security the bill embraced unemployment as well. And as to "smart money", the people who are walking away are people who SPECULATED and can afford to move along and buy a deal that resulted from their complete disregard for others in their desire to make a quick buck on some real estate deal(s) that didn't materialize, or borrowed heavily on "equity" that never really existed. THEY are the ones who are dragging down honest folks like ME who are still struggling to make payments on homes with solid downpayments and reasonable terms on their mortgages as we watch our equity go down the drain.

[TheGaysha]

12:45 AM on 09/02/2010

My favorite ridiculous argument is to make English official.
If there's one thing that I would like to see (or hear, rather) it is this:

"Thank you for calling.
Please listen to the following options, and press the number of the American language you speak.
Diné Bizaad. For Navajo, Press 1
Nehiyawemowin. For Cree, Press 2
Anishinaabemowin. For Ojibwe, Press 3
Tsalagi. For Cherokee, Press 4
Lakhóta. For Lakota Sioux, Press 5
Ndéé. For Apache, Press 6
Siksika. For Blackfoot, Press 7
Chahta Anumpa. For Choctaw, Press 8
If you speak a foreign language such as English, Press 9"