Are Illegal Immigrants Really Taking Jobs Away From American Workers?

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When the Supreme Court voted to uphold the "Legal Arizona Workers Act" (LAWA) on May 25, the ability for states to revoke business licenses for firms hiring illegal immigrants was protected. (LAWA is distinct from Arizona SB 1070, which empowered law enforcement officers in Arizona to engage in racial profiling.)

Reaction to the decision among likely voters was strongly in favor: A Rasmussen poll conducted on May 27 and 28 found that 61 percent of Americans support a law in their state that would shut down companies that knowingly and repeatedly hire illegal immigrants.

And activists who advocate for restrictive immigration policies welcomed the ruling. "There's a downward effect on wages," says Jessica Vaughn, the director of policy studies for the D.C.-based Center for Immigration Studies, referring to the introduction of undocumented workers in the market. "There's so many occupations where wages have just been stagnant for many years, or even declined, like in construction, building trades industry and custodial work. Of course, it's not just one thing. You can't control competition from China. But immigration policy is something that we can control as a nation."

Support for the penalization of companies hiring illegal workers can be chalked up to a variety of motivations. But the view that it protects American jobs has been embraced by many, including politicians like Rep. Lamar Smith (R-Texas), the chair of the House Judiciary Committee and a member of the Reclaim American Jobs Caucus. "Not only is this law constitutional, it is common sense. American jobs should be preserved for Americans and legal workers," he said of the high court's 5-3 ruling. "Today, there are 7 million individuals working in the United States illegally. E-Verify will help turn off the jobs magnet that encourages illegal immigration."

The debate over whether there is any correlation between immigration policy and the fortunes of American workers is in fact an open one. And according to Pia Orrenius, the senior economist for the Federal Reserve Bank of Dallas, the major question among most economists is actually why the impact of the nation's estimated 12 million illegal immigrants on the labor market is so small.

Given that the topic of the economic impact of immigration is so politically charged, scores of studies have been ordered on the subject. The widely-shared consensus holds that for every 10 percent increase in the share of foreign-born workers in a specific area there's less than 1 percent change in the average wages of legal residents, including for low-skilled workers, says Orrenius. (Wages are used as the economic metric for employment in the U.S.)

Two leading papers that present the view of a minimal negative economic impact are: "Immigration and National Wages: Clarifying the Theory and Empirics," published in 2008 by academics Gianmarco Ottoviano and Giovanni Peri; and the landmark, "The New Americans: Economic, Demographic, and Fiscal Effects of Immigration," published in 1997 by James P. Smith and Barry Edmontson, working under the aegis of the 1990 Immigration Act.

These economists caution against extrapolating from anecdotes of immigrants coming to a specific town and taking jobs. Smith and Edmontson do concede, though, that "the losers may be the less-skilled domestic workers who compete with immigrants and whose wages will fall." But they go on to say: "To the extent that immigrants specialize in activities that otherwise would not have existed domestically, immigration can be beneficial for all domestic residents. In this case, there is little substitution of new immigrant workers for domestic workers."

The argument that an infusion of foreign workers represents a new and non-competing workforce, and therefore poses little threat to the American worker, is buttressed by other economic analysis. Among them is the related concept that as immigrants carry out jobs that natives wouldn't want, or even wouldn't exist if it weren't done by a foreigner, the native-born American is freed up to specialize. And that complementary model improves overall efficiency. Finally, the so-called "immigration surplus" holds that the US economy must benefit from a net gain in goods and services because wages earned by immigrants tend to be lower than the cost equivalent of what they produce.

Should companies be shut down for hiring illegal immigrants? Yes4082 (80.2%) No791 (15.5%) Undecided219 (4.3%)

But activists who do see a negative impact from the country's illegal immigrant population point out that the creation of a whole new jobs market is the very point.

"There are jobs that provide no benefits, no retirement," says Jim Gilchrist, the president of the anti-illegal-immigration group, the Minuteman Project. "As long as the laws are not enforced, cheap wages with no benefits will continue.... You take that out, the low wage element out, and you'll see American citizens applying for jobs like landscaping, shoveling concrete, because wage rates will go up, and they'll come with retirement benefits and unions."

Such a hypothesis assumes that those jobs could sustain such costs, and people wouldn't simply choose to carry out those tasks on their own. These activists, however, also point to a rival set of economic data that suggest an even greater wage impact from immigration. This school, led by Harvard economist George Borjas, takes issue with comparing immigration statistics between cities, as the other reports do. The gripe centers on a failure to account for the ongoing movement of people between cities. Instead, Borjas studies the topic from a national perspective, and uses economic models for comparative analysis. (Borjas was approached for this article, and didn't return a request for an interview.) And whereas the first school sees a wage impact of around 1 percent, Borjas' reports see the figure closer to 3 percent for every 10 percent increase in population. The rate gets as high as 8 percent for low-skilled workers.

In addition to Arizona, E-Verify is only fully required for all statewide employers in Mississippi. But the program is on the books in a variety of partial iterations in 18 states, and is poised to gain momentum in the wake of the decision. Just two weeks after the Arizona decision, the Roberts court ordered the 3rd U.S. Circuit Court of Appeals to review its overturning of a Hazelton, PA, act that mandated the denial of business permits for firms hiring illegal immigrants. But as proponents of the program continue to link E-Verify to the fortunes of the American labor force, Orrenius says that there's one matter about which the economists have no argument.

"Everyone kind of agrees in the long run you should have a growing economy and capital should flow in and these wage effects eventually wash out," she says.