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Low-wage US jobs continue to drift to Mexico
Subject Mexicans are employed in more and more low-wage jobs in the US, depressing wages for all.
Topic Resource Markets, Supply and Demand
Key Words low-wage labor, labor force, Latino workers
News Story

Last year, 2.5 million jobs were created in the US, and 40% went to the Latino population. Of that, 88% of the new Latino jobs were taken by recent immigrants to the US.

Latinos make up only 15% of the US labor force, but are increasingly becoming dominant in the low-wage sectors of the US economy. In San Ysidoro, California, about 50,000 Mexicans enter the US every day, some legally (as part of a work program) and some illegally. The result is typical: median Latino weekly earnings were $420 in 2002, $411 in 2003, and $400 in 2004. The one catch is that Latinos are no longer staying in California or Texas once they enter the US. Tennessee has seen a 116% increase in its Latino population since 2000, and Alaska has seen its Latino population increase 79% over that period.

Research isn't indicating, however, that immigrant labor is a substitute for US labor. It is, rather, a complement, as the percentage of US workers without a high school diploma has dropped to 9% from 52% 40 years ago. Consequently, US workers are looking for higher-skill, higher-wage jobs, leaving many opportunities for Mexican workers to thrive.

Not everyone is happy with this outcome, though. George Borjas, a Harvard economist, argues that continued reliance on cheap immigrant labor will contribute to lagging productivity increases. This is because it will continue to be cheaper to remain relatively labor intensive than to further mechanize the production process, making workers more productive.

Questions
1. Illustrate the impact on the market for low-wage labor with a graph of supply and demand.
2. What assumption about elasticity of immigrant labor supply can be made given the data in the article summary: more and more immigrants continue to come into the US, despite the reduction in wages? Why is this?
3. What do you expect to be happening in the market for physical capital equipment as a result of this increase in immigrant labor? Why? What assumption are you making about the relationship between low-skill labor and physical capital in the production process?
Source Joel Millman. "Low-wage Jobs Get 'Mexicanized,' But There's a Price." The Wall Street Journal, 2 May 2005. A2+.

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