South-Western College Publishing - Economics  
Mexican emigrants continue to take the majority of low-wage U.S. jobs
Subject Mexican Latinos and Latinas take more and more low-wage U.S. jobs, making workers overall less productive.
Topic Resource Markets, Supply and demand
Key Words

low-wage labor, labor force, Latino workers

News Story

The U.S. created 2.5 million jobs in 2004. Latinos or Latinas from Mexico filled 40%, or fully 1 million of these jobs. Recent U.S. immigrants from Mexico took 88%, or 880,000 of the new jobs. Latinos make up only 15% of the US labor force, but they increasingly dominate the low-wage sectors of the US economy. In San Ysidoro, California, about 50,000 Mexicans enter the U.S. every day, some legally (as part of a work program) and some illegally. The result: Median Latino weekly earnings were $420 in 2002, $411 in 2003, and $400 in 2004. The catch is that Latinos no longer stay in California or Texas once entering 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 same period.

Research shows, however, that immigrant labor does not perfectly substitute for US labor. Instead, this workforce complements U.S. citizen labor as the percentage of U.S. workers without a high school diploma has dropped to 9% from 52% in 1964. Consequently, U.S. workers seek jobs that require more skills and pay higher wages, leaving many opportunities for Latino workers to thrive on what the immigrants see as bounty in the form of low-paying jobs.

Not everyone is happy with this outcome. Harvard economist George Borjas argues that continued reliance on cheap immigrant labor contributes to lagging productivity increases: Service industries like restaurant and other hospitality will continue to remain relatively labor- intensive than to further mechanize the production process. If cheap labor were not available, such industries would have incentives to mechanize their production processes, 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?
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-skilled 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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