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Policy Debate: Does U.S. immigration policy harm domestic workers?


Issues and Background

...the net gains from current immigration are small, so it is unlikely that these gains can play a crucial role in the policy debate. Economic research teaches a very valuable lesson: the economic impact of immigration is essentially distributional. Current immigration redistributes wealth from unskilled workers, whose wages are lowered by immigrants, to skilled workers and owners of companies that buy immigrants' services, and from taxpayers who bear the burden of paying for the social services used by immigrants to consumers who use the goods and services produced by immigrants.
~George J. Borjas, November, 1996, The Atlantic Monthly

...highly skilled immigrants, who also create jobs for Americans, are not the only ones contributing to our economic boom. Even the less-skilled immigrants contribute to our economy and our lives by working in jobs most Americans do not want, such as cleaning offices, cooking in restaurants, and ringing up purchases in the grocery store. They, in turn, contribute by buying homes, clothes, and groceries. The wonderful cultural diversity brought to the United States by immigrants has become secondary to their willingness to work hard and become part of today's America.
~Bronwyn Lance


Most U.S. residents today are the descendants of immigrants who arrived in the U.S. during the past 150 years. Concern over the effect of immigration on domestic workers, however, have resulted in the passage of several laws designed to restrict immigration. Unions, in particular, have argued for more restrictive immigration policy on the grounds that immigration lowers the wage and employment levels for domestic residents.

There were no substantial restrictions on immigration into the U.S. until the passage of the Quota Law of 1921. This law set quotas on the number of immigrants based upon the country of origin. The Quota Law primarily restricted immigration from eastern and southern Europe. The Immigration and Nationality Act Amendments of 1965 (and subsequent amendments) eliminated the country-specific quota system and instead established a limit on the maximum number of immigrants allowed into the U.S. Under this Act, preferential treatment is given to those who immigrate for the purpose of family reunification. Those possessing exceptional skills are also given priority. No limit, however, is placed upon the number of political refugees allowed to immigrate to the U.S. (The definition of a political refugee, however, is narrowly defined and has sometimes been quite controversial.)

Not all immigrants, of course, enter the country through legal channels. Individuals often enter the country on student or tourist visas and begin working in violation of their visa status. Other individuals enter the country illegally without a valid U.S. visa. The Immigration Reform and Control Act of 1986 addresses the issue of illegal immigration by imposing substantial fines on employers that hire illegal immigrants.

The Illegal Immigration Reform and Immigrant Responsibility Act (IIRAIRA) of 1996 provided several new restrictions to immigration. Host families could only accept immigrants if the host family receives an income that is at least 125% of the poverty level. This Act also required that the Immigration and Naturalization Service maintain stricter records of entry and exit by nonresident aliens.

The Secure Fence Act of 2006, signed on October 26, 2006, authorizes the construction of an additional 700 miles of fencing along the border in an attempt to reduce illegal immigration. Supporters of this legislation argue that this will both improve homeland security and help protect low-wage native-born workers from competition from low-wage illegal immigrants.

Those who support stricter limitations on immigration argue that immigrants increase the supply of labor in many labor markets, resulting in lower wages in the affected markets. This argument is somewhat flawed, though, in that it does not take into account the increase in labor demand that also occurs as a result of immigration. The demand for labor is a "derived demand." This means that the demand for labor is derived from the demand for final output. Immigrants provide labor to various labor markets. In return, however, immigrants receive labor income that is used to buy goods and services produced in the domestic economy. As the demand for output rises, so does the demand for the labor that produces this output. Increased immigration, therefore, results in higher levels of both labor demand and labor supply.

Thus, the effect of immigration on wages will vary across labor markets. In those labor markets in which labor supply rises by more than labor demand, wages will fall. In other labor markets, however, labor demand will rise by more than labor supply and wages will rise. Thus, increased immigration will be expected to cause lower wage rates in some occupations while higher wages will be received in other labor markets. The overall effect on domestic wages is, to a large extent, an issue that can only be resolved empirically. Recent studies by David Card, Cordelia Reimers, Kristin Butcher, and George Borjas have found that immigration has little overall impact on wage rates for domestic workers. Increased immigration, however, appears to generate small adverse wage and employment effects for domestic workers who have not completed high school.

While immigration may lower wage rates for some domestic workers, it should be also noted that these lower wage rates benefit producers. Lower wage rates also result in lower equilibrium product prices, thereby benefiting consumers. From society's perspective, the gains from immigration to producers and consumers should be weighed against the losses to low-wage workers.

Advocates of increased immigration note that children do not begin working the minute they are born. It requires substantial expenditures in the form of food, clothing, shelter, education, and other childrearing costs to produce an adult worker. These investments in human capital formation are quite substantial. Immigrant workers, unlike newborn children, are able to begin engaging in productive activities upon their arrival in the country. The cost of much of their human capital formation was borne by the country from which they emigrated. Since most immigrants arrive at a stage in their life in which they are relatively productive, higher immigration rates generally result in an increase in the proportion of the population that is working. As the proportion of the population that is working rises, per capita income also rises.

Concern over the future of social security is also used to support relaxed immigration restrictions. Declining birthrates in the U.S., combined with rising lifespans, result in a steady increase in the ratio of retired to working individuals over the next few decades. An increase in the number of younger immigrants could help to alleviate this problem.

Until the last few decades, most immigrants to the U.S. possessed higher levels of education, skills, and training than were the norm in their country of origin. Much of the immigration to the U.S. during this period was from countries in which the return to human capital was lower than in the U.S. The higher rate of return on human capital investments in the U.S. provides skilled workers with more incentive to emigrate to the U.S. In recent decades, however, most immigration to the U.S. has been from countries in which there is a higher level of income inequality. In this case, less skilled workers receive a higher return to emigration to the U.S. This has resulted in a larger proportion of immigrants possessing a relatively low level of human capital accumulation in recent years.

Opponents of immigration often express concern that immigrants use high levels of government services. This has been a more significant issue in recent decades since recent immigrants have generally possessed lower levels of education and training than had been possessed by earlier waves of immigrants. It is interesting to note, though, that illegal immigrants may provide a lower cost to society since they do not generally receive transfer payments from the government.

As an examination of the readings below will suggest, immigration is a topic on which there are some very strong feelings. There is, however, a growing body of empirical evidence that should help resolve some of these disputes.

Primary Resources and Data

  • U.S. Citizenship and Immigration Services
    The U.S. Citizenship and Immigration Services web site contains information on current U.S. immigration law and policy.

  • Harvard University Library Open Collections Program, "Immigration to the United States"
    This website provides a timeline describing the history of U.S. immigration and immigration law between 1789 and 1940. Links are provided to pdf files of relevant scanned documents in the Harvard Library collections.

  • The History Channel, "Ellis Island - Timeline"
    This website provides a timeline describing the history of Ellis Island from the 17th century to the present.

  • Congressional Budget Office, "Immigration Policy in the United States"
    This February 2006 Congressional Budget Office document provides an overview of the evolution of U.S. immigration policy from 1790 to the present. It provides detailed analysis of current immigration law and policy. (The Adobe Acrobat viewer is required to view this document. You may download this viewer by clicking here.)

  • Quota Law of May 19, 1921
    The Quota Law of May 19, 1921 established country-specific quotas on immigration.

  • Historical Documents, "Immigration and Nationality Act Amendments of October 3, 1965"
    This website provides a description of the key provisions of the Immigration and Nationality Act Amendments of 1965. These Amendments ended the country-specific quotas for immigrants.

  • Immigration Reform and Control Act of November 6, 1986
    The Immigration Reform and Control Act of 1986 provides amnesty to illegal immigrants who have been in the U.S. for a specified period while imposing penalties on employers of illegal immigrants.

  • Secure Fence Act of 2006
    The Secure Fence Act of 2006 authorizes the construction of an additional 700 miles of fencing along the U.S.-Mexico border.

  • Homeland Security, "Yearbook of Immigration Statistics"
    The Yearbook of Immigration Statistics contains an extensive collection of current and historical U.S. immigration statistics. It also provides information on immigration law enforcement actions.

  • Marian L. Smith, "Race, Nationality, and Reality: INS Administration of Racial Provisions in U.S. Immigration and Nationality Law Since 1898"
    Marion L. Smith, the senior historian for the U.S. Immigration and Naturalization Service, describes the evolution of U.S. immigration law in this Summer 2002 article, appearing in Prologue Magazine. The primary focus of this article is the role of race and nationality in immigration law.

  • WashLaw Web, "Immigration Law"
    Washburn University School of Law Library provides this extensive collection of links to online resources that deal with immigration law.

  • The 'Lectric Law Library Lawcopedia, "Immigration Laws, Policies, and Issues"
    This web site provides a useful summary of U.S. immigration laws and policies as well as a discussion of current policy issues related to immigration.

  • Immigration and Naturalization Service, "Illegal Immigration Reform and Immigrant Responsibility Act of September 30, 1996"
    This 1996 law attempted to make illegal entry into the U.S. more difficult. It also substantially slowed down border crossings by road and rail. (The text of this law appears about 3/4 of the way through this document. You can get to it quickly by searching for the first few words of the title of this law using your browser's search function.)

  • George Borjas, "Immigration"
    George Borjas provides a historical discussion and economic analysis of immigration and U.S. immigration policy in this online article appearing in The Concise Encyclopedia of Economics. This article provides a very useful overview of this topic.

  • Phillip L. Martin, "The Economics of Immigration"
    Philip L. Martin discusses some of the economic issues associated with immigration policy in this May 1995 online article. This article, designed to provide background material for journalists, provides a useful overview of the major economic issues associated with immigration and introduces many of the basic concerns that are often raised about U.S. immigration policy.

Different Perspectives in the Debate

  • George J. Borjas. "The Economics of Immigration"
    George J. Borjas examines the economic effects of immigration in this article appearing in the December 1994 issue of the Journal of Economic Literature. He notes that, as a result of the low levels of education and training possessed by most recent immigrants, high levels of immigration have contributed to rising levels of income inequality in the U.S. during the past two decades. Borjas also observes that recent waves of legal immigrants tend to receive a relatively high level of transfer payments. He indicates that immigrants in earlier decades tended to receive relatively high wages after a few years of residence and were unlikely to receive welfare benefits. Borjas argues that U.S. immigration law should be modified to provide preferential treatment for skilled workers. He also suggests that a larger number of immigrants should be allowed when the economy is strong and fewer immigrants allowed when unemployment rates are relatively high.

  • Randy Capps, Michael Fix, Jeffrey S. Passel, Jason Ost, and Dan Perez-Lopez, "A Profile of the Low-Wage Immigrant Workforce"
    Randy Capps, Michael Fix, Jeffrey S. Passel, Jason Ost, and Dan Perez-Lopez examine the characteristics of the low-wage immigrant labor force in this November 2003 Urban Institute online article. They observe that immigrants constitute a growing share of the labor force. Immigrants comprise 11% of the population, but represent 14% of all workers and 20% of all low-wage workers. Recent immigrants, on average, have substantially lower levels of education and job training than domestic workers. (The Adobe Acrobat viewer is required to view this document. You may download this viewer by clicking here.)

  • Daniel Griswold, "Testimony before the Senate Committee on the Judiciary, Subcommittee on Immigration, Border Security and Citizenship"
    Daniel Griswold addresses the issue of immigration law reform in this May 26, 2005 testimony. He argues that immigration helps keep inflation low and growth high in the U.S. economy by providing a source of labor that rises during expansions and declines during recessions. Griswold suggests that immigrant workers tend to fill jobs in which there is a shortage of domestic workers. He argues that laws should be revised to allow for temporary visas to allow immigrant workers to fill jobs in which there is a temporary shortage.

  • Vernon M. Briggs Jr., "Immigration Policy: A Tool of Labor Economics? Immigration and the U.S. Labor Market: Public Policy Gone Awry"
    In this 1993 Levy Public Policy Brief, Vernon M. Briggs Jr. argues that U.S. immigration law should be revised to provide priority for immigrants who possess the human capital characteristics that are needed in U.S. labor markets. He also suggests that the current policy of providing priority based upon family reunification results in the entry of a large number of immigrant workers who possess low levels of education and training. Since there is no evidence of a shortage of unskilled workers, Briggs argues that this policy depresses wages for workers in these low-wage markets. (The Adobe Acrobat viewer is required to view this document. You may download this viewer by clicking here.)

  • Alan B. Krueger, "Two Labor Economic Issues for the Immigration Debate"
    Alan Krueger, in this April 4, 2006 letter, notes that recent Congressional debate on the issue of immigration reform involves the assumption that immigration reduces the employment of native-born workers. He observes that there is little credible evidence that supports this argument. Krueger also argues that it would be inefficient to not allow guest workers some degree of labor market mobility. Krueger summarizes several important recent studies that indicate that even large-scale immigration to specific geographical regions do not have an adverse effect on wages or employment for native-born workers in the affected region. Krueger observes that most studies that argue that immigration harms native-born workers are based on theoretical models, not empirical evidence. He argues that these theoretical models do not take into account the increase in labor demand that occurs when immigration occurs; nor do they take into account the possibility that immigrants may possess higher levels of entrepreneurial ability. (The Adobe Acrobat viewer is required to view this document. You may download this viewer by clicking here.)

  • Kevin F. McCarthy and Georges Vernez, "Immigration in a Changing Economy: California's Experience--Questions and Answers"
    In this 1998 Rand report, Kevin F. McCarthy and Georges Vernez examine the changing conditions of immigration in California during a 30-year period. They find that, while employers in California have consistently benefited from immigration, there have been growing costs to the public sector (primarily through higher educational costs) and to native-born low-wage workers (in the form of lower wage rates). McCarthy and Vernez observe that immigration has been rising at a rapid rate. Education and job skill levels, though, have been declining for immigrant workers relative to native workers. They argue that educational and skill levels should be considered in immigration decisions. (The Adobe Acrobat viewer is required to view this document. You may download this viewer by clicking here.)

  • Rand, "Publications of the RAND Center for Research on Immigration Policy, 1989-1999"
    This page contains links to a collection of studies on immigration conducted by the RAND Center for Research on Immigration Policy.

  • Donald R. Davis and David E. Weinstein, "Technological Superiority and the Losses from Migration"
    In this May 2002 NBER working paper, Donald R. Davis and David E. Weinstein examine the effects of immigration resulting from technological differences. They show that this causes the more technologically advanced country to lose from immigration. Davis and Weinstein estimate that the loss for the U.S. may be approximately equal to 0.8 percent of GDP. (Caution: this paper requires a fairly high level of mathematical and theoretical sophistication.) The Adobe Acrobat viewer is required to view this document. You may download this viewer by clicking here.

  • Californians for Population Stabilization, "Immigration"
    Californians for Population Stabilization is a group that is lobbying for a lower rate of population growth in California. They note that the population of the state has doubled since 1960. Since 96% of the growth in the California population is due to immigration, they argue for more stringent immigration restrictions.

  • The CNMI Guide, "Characteristics of the CNMI Labor Force and the Need to Control Immigration"
    The Commonwealth of the Northern Mariana Islands (Saipan, Tinian, and Rota) has been a U.S. Commonwealth since 1978 (and had been a U.S. Trust Territory since 1947). This online article describes concerns over a proposal to impose U.S. immigration laws on islands that rely extensively on immigrant labor.

  • Walter A. Ewing, "Not Getting What They Paid For: Limiting Immigrantsí Access to Benefits Hurts Families Without Reducing Healthcare Costs"
    Walter A. Ewing argues, in this 2003 online document, that the 1996 welfare reform law prohibited most immigrants with permanent resident status from receiving benefits from transfer payment programs. While this lowers the cost of TANF and food stamp programs, it does so at the expense of the nutritional and health care needs of low-income immigrant households. While children born in the U.S. to these immigrant households are eligible for benefit programs, the evidence suggests that these benefits are not being received in households in which the parents are not eligible for benefits.

  • Congressman Tom Tancredo, "Congressional Immigration Reform Caucus"
    This website describes the efforts of the Congressional Immigration Reform Caucus to have troops placed along U.S. borders to prevent illegal immigration. The concern appears to be primarily related to national security.

  • California Coalition for Immigration Reform
    This is the website of a group arguing for stricter enforcement of immigration law and a reduction in the number of immigrants allowed into the U.S.

  • Glenn Spencer's American Patrol Report
    This site provides anecdotal evidence of problems associated with a high level of immigration of low-wage workers. It also provides links to news articles that support a need for tighter immigration requirements.

  • Center for Immigration Studies
    This organization provides a variety of arguments and studies suggesting that there should be greater restrictions on immigration into the U.S.

  • Julian Simon, "Immigration: The Demographic and Economic Facts"
    Julian Simon argues that immigration tends to provide net benefits to the U.S. in this December 11, 1995 Cato Institute study. He notes that immigration rates are only about one-third of their level in the early part of the twentieth century. Simon provides a summary of research findings that indicate that immigration generates little or no adverse wage or employment effects for domestic residents.

  • Alexis De Tocqueville Institute, "Immigration"
    The Alexis De Tocqueville Institute provides annotated links to resources that discuss the beneficial impacts of immigration on the U.S. economy.

  • Bronwyn Lance, "The Economic Impact of Immigrants"
    In this May 2000 online document, Bronwyn Lance cites anecdotal evidence and research studies that indicate that immigration benefits the U.S. economy. She notes that immigrants have higher labor force participation rates than domestic residents. Lance cites a study that she co-authored that suggests that higher levels of immigration leads to rising property values in cities.

  • Bronwyn Lance, "The Traffic Jam and Job Destruction Act: Why Congress Must Do Away With Border-Clogging Provision Slipped Into 1996 Law"
    In this June 1999 online article, Bronwyn Lance discusses the problems with the entry and exit reporting requirements of the Illegal Immigration Reform and Immigrant Responsibility Act. She observes that these requirements cannot be easily met with current technology and have resulted in substantial delays in border crossings.

  • Rakesh Kochhar, "Does Immigration Hurt U.S. Workers?"
    Rakesh Kochhar summarizes the empirical evidence of immigration on U.S. labor markets in this August 24, 2006 Pew Research Foundation online article. He reports on a Pew Research Foundation study that finds no clear relationship between immigration and wages using immigration and wage data for U.S. states.

  • American Immigration Law Foundation
    The American Immigration Law Foundation provides an extensive collection of online studies and other resources that suggest that immigration provides net benefits to the U.S. economy.

  • American Immigration Lawyers' Association
    The American Immigration Lawyers' Association provides online studies and other resources that describe the benefits that the U.S. receives from immigration.

  • U.S. Committee for Refugees and Immigrants
    The U.S. Committee for Refugees and Immigrants is an organization that attempts to help immigrants and refugees in the U.S. In addition to describing their support programs, this website also provides information on the international problems that have resulted in refugee situations.


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