Could it be as simple as supply and demand? The question of whether immigration exerts downward pressure on wages is fiercely denied by Democrats and left-leaning think tanks. Because unfettered immigration is one of Democrats’ pet projects, the question has also enjoyed a cloud of media obscurity, with outlets explaining the matter away as complicated.
But the 2020s’ roaring inflationary period, during which media blamed inflation on everything from labor shortages to Americans themselves, accidentally helped clarify the question.
Amidst central banks’ and governments’ panic over unchecked inflation an unlikely source — the International Monetary Fund — gave away the game, acknowledging what workers have perceived in their paychecks for decades now.
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As central banks scrambled to get inflation under control, the IMF’s Kristalina Georgieva said this spring that the surge in migration to the U.S. had helped tame wages’ upward trend under inflationary pressures.
“Not everybody who crosses the border adds positively to the economy,” the IMF chief said. “But that labor supply also gave to the United States another comparative advantage [in fighting inflation]: Wages are not pushing up, because there is no strong pressure because of lack of labor.”
Economists had become concerned that rising prices would push wages up, which would in turn push prices up, but wages didn’t really budge because of an abundant supply of labor.
In other words, the obvious law of supply and demand — for which the sophistication of economists has been unable to make a sufficient apology — may in fact be at work as America tallies the millions of working aged foreign-born workers to arrive in the country in recent years.
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It just took a crisis of inflation to acknowledge textbook realities: all things being equal, the quantity of labor in the economy is subject to the same supply and demand considerations as other commodities.
While some economists have attempted to portray unfettered immigration as the triumph of free markets, it hasn’t always been that way. A Clinton-era House panel found no discernible benefit in “continuing to import lesser-skilled and unskilled workers to compete in the most vulnerable parts of our labor force.” As recently as the George W. Bush era, NYT economist Paul Krugman agreed.
Even the left-leaning Brookings Institution acknowledged the downforce of immigration on low-wage jobs’ pay in particular, as well as for college graduates, while portraying the effects on the overall employment sector as modest.
Current Vice Presidential candidate J.D. Vance told the New York Times that the importing of cheap labor was driving inequality. Low-wage Americans, in particular, have been hardest hit.
In other words, immigration, does in fact bring down wages, with college-educated workers, but particularly for the most vulnerable.
It is no question that immigration increases gross domestic product, but in the form, simply, of the wages paid to immigrant labor. If people are getting paid, the number still goes up.
However, both legal and illegal immigrant households use more social welfare services than native-born Americans — it is estimated nearly 60% of immigrant households use at least one form of welfare assistance, a Center for Immigration Studies report found.
The United States is also spending about $17,000 per student to educate the children of illegal immigrants. According to the CIS study, the tax revenues paid by illegal immigrants do not cover social services used by immigrant households — a net drain on the economy.
Another CIS study found that every 1% increase in the share of immigrants in low-skilled occupations drove wages down .5%. Accounting for the share of immigrants in the country “immigration may reduce the wages of the average native-born worker by perhaps 5 percent.”
Not only does immigration suppress wages, it drives inequality hitting the most vulnerable Americans, especially Blacks and Hispanics, hardest.
Remarkably, Kamala Harris’ father, economist Donald Harris, made the same argument in the 1980s.
It is unsurprising Americans have warmed to mass deportations across demographics. Hispanics, in particular, show strong support for the toughest immigration measures.
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If Harris had followed her father’s guidance, her support among African-Americans might not be struggling in the run-up to 2024.
In any event, the dynamic is clear: low-skilled and college-educated American workers alike are feeling the pinch of the Biden-Harris immigration agenda.