Real World Economics: Consider immigrants’ effects on wages and jobs

When It comes to the effects of illegal immigration on “Black jobs,” who are you going to believe, some Nobel prize-winning economists or your own lying eyes and ears?

Well, I’m with my own lying eyes and with Donald Trump — and against most individual economists and respected think tanks. In the real world, large numbers of immigrants in recent decades, here both legally and unauthorized, do suppress wages for low-skilled native-born workers. They also make it harder for native-born workers, Black or white, to find jobs.

This is a major reason for disaffection and anger among lower-education manual workers of any race in our country today, and it’s fueling Trump’s popularity. It is an issue to which higher-education white-collar workers shamefully have turned blind eyes and deaf ears, and to which ivory-tower think tanks have tried to defuse.

Caveat: I desperately hope that Trump loses the election. But at age 78 and with multiple health risk factors, he won’t be around forever. The issues he raises here, however, will live on.

Even if Trump loses, it would be tragic if well-off citizens who don’t support him continue to ignore why so many Americans feel cheated and ignored — the Americans who identify with Trump on immigration. The growing inequality of income distribution in the United States, and the well-founded hopelessness of tens of millions of households, is the central economic challenge of our age.

Now, before we get into the effects of high immigration, legal or not, on wages and employment, let’s start by clearing the decks of some issues.

First, Trump’s casual references to “Black jobs” have racist overtones. But if instead he had said, “high numbers of immigrants reduce wages and job openings for low-education, low-skilled native born U.S. workers,” his racial views would not have clouded the argument.

Secondly, Trump’s calling immigrants living and working in our country en-masse criminal, diseased, pet-eating drug dealers, and other tropes, is false and vile. Let’s have some empathy here. These folks are risking their lives coming here because they know (contrary to what MAGA implies) that America already is great. They seek work and better lives, not welfare. They commit fewer crimes than the general population. Few try to vote.

None of this is new. Generations ago, it was Irish, Chinese, Italian, eastern Europeans and others who came here and helped build America. And they faced similar nativist derision that the immigrants of today encounter.

Equally false, however, is the facile argument that immigrants only take “jobs that Americans are not willing to do.” That ignores the fact that the labor supply curve slopes up and to the right. Raise wages, and more people will want to do these jobs. Meatpackers, roofing contractors and dairy farmers who argue they hire immigrants “because I could not get anyone else to take the jobs” need to add the words “at the low wages I want to pay and under bad working conditions.”

Twenty-five years ago you could find plenty of native-born workers milking cows, mowing lawns, tarring roofs and troweling concrete. Forty years ago native-born workers still toiled on packing plant kill floors. The reason these now are rare is not that a wave of indolence swept our working classes. Rather it was that more and more employers found they could hire good workers at lower wages than they had been paying.

In economics terms, the entire supply curve for unskilled workers had “shifted to the right.” This means that at each of many possible wage rates, one could find more willing job applicants than before.

Also recognize that employers are not a vile class of exploiters. Most employers of unauthorized immigrants are not vast publicly traded corporations. Other than in meat packing and poultry processing, they often are small- or medium-sized businesses in brutally competitive markets.

In hiring, they are caught in a classic “prisoner’s dilemma:” If other small-business roofers, insulation installers or landscapers start hiring unauthorized workers, and they themselves can only get native-born crews by paying higher wages, and by extension, raising prices, they will soon be driven out of business. Or, as has been true for Minnesota dairy farms using only family labor, they face decades of brutally falling inflation-adjusted milk prices.

The cost advantage of hiring workers not here legally goes beyond wages to working conditions. These immigrants are the most powerless people in our economy. Most of their employers may be entirely honest and fair. Some are subject to federal inspection in terms of safety and compliance with Fair Labor Standards Act provisions. But millions of these immigrants also work in dangerous conditions, do not get overtime or rest breaks or whose wages are simply stolen. They are highly compliant workers who endure abuse because they are vulnerable with little choice.

Also recognize that for immigrants, merely being here is “fringe benefit,” because it is an investment for the future. Working for low wages in grueling conditions, enables bringing other family members. It promises their offspring far better futures than in their countries of origin. This trend is not new either. It has been true for all of American history and for most of us.

All four of my grandparents migrated here and worked punishing jobs so their offspring could have what we do now enjoy. Realize the importance of this intangible job benefit. It has little meaning to native-born workers, but does affect the wage rates immigrants accept.

So why do economists differ with Trump, and think high immigration levels have small adverse effects on native born workers? Their research is sophisticated in its use of statistical modeling and looks at effects on the economy as a whole. Search “economic research effect of immigrants on wages” to get studies from the liberal Brookings Institution and conservative Cato Institute alike, from Forbes Magazine, the Center for Immigration Studies, Congress.gov, the Penn-Wharton Budget Model and myriad scholarly journals.

These are based on econometric modeling. Many cite early work by David Card, a labor economist who shared a Nobel Prize in 2007 for work finding that minimum wages could increase employment and on the wage effects of immigration. But they broaden this across economies as a whole and in greater depth than in the “real world.”

I am not qualified to critique this work. However, Card’s initial work was on one unusual case, the effects of the 1980 arrival of Cubans in the Mariel boatlift that further doomed Jimmy Carter’s reelection chances. Card found that subsequent unemployment in the Miami area was no higher than in similar metro areas with fewer Mariel refugees. Extending this highly unusual one-time event to the entire national economy seems a “fallacy of composition” to the nth power.

Also, some academic results seem strained, to put it politely. For a few examples, consider that the availability of immigrant nannies allows more college educated mothers to return to work, thus increasing employment. Also, remittances back to El Salvador from immigrants here amount to 18% of their GDP and thus that country can import more from us.

I suggest that the current panicked reactions of employers of immigrants to the prospect of a Trump administration forcibly expelling millions of immigrants is the strongest refutation of academia’s “no effect on wages or employment” arguments. If immigration did not lower wages, as the economists say, why should out-migration, even forced, raise them?

The Department of Homeland Security says there are only some 82,000 unauthorized immigrants in Minnesota, but they are now a large fraction of dairy farm employees. A recent news article quotes a dairy farm owner warning in apocalyptic terms of soaring milk prices and milk shortages if illegal workers are rounded up and expelled.

Another from a national newspaper warns of a collapse of home construction and soaring housing prices if building contractors lose immigrant workers. And one can find similar plaints from poultry and hog processors of no ham on tables or even Chicken McNuggets if immigrants are arrested and expelled.

But, if one argues, as Trump does, that there actually is a downward wage response to the arrival of millions of immigrants, it make sense that their departure would trigger unprecedented wage and price spikes. And this is an add-on effect that Trump supporters who grouse about rising inflation should consider. If a Trump administration succeeds in deporting millions, it better be prepared for rising consumer prices.

Much more could be said, but let’s wait for election results to set the context.

St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.