Irrational choices | Free exchange | Economist.com

The debate over the impact of immigration on American wages is a hot one. As seen in the video below of immigration opponent Lou Dobbs, many in America view the free-market, open boarders ideas of certain economists with outright disdain and hatred. Among these “anti-immigration hawks” is economist George Borjas:

“(Anti-) immigration hawks like George Borjas have estimated that wage competition from immigrant labour may reduce native, unskilled worker earnings by something like 7 percent.”

Among economists, however, such views are rare:

“Other researchers dispute such figures, arguing that immigrant impact on native, unskilled workers wages is minimal and is strongly positive for skilled labour. In either case, it’s clear that the gains enjoyed by the migrants themselves significantly exceed domestic worker losses.”

One argument often made by open-border advocates is that granting migrants legal status benefits not only the immigrants themselves, but the nation as a whole. Legal workers can be taxed and thus become contributing members of society, whereas illegal workers run the risk of being exploited, payed below legal wages, and in addition are unable to be regulated and taxed by the government. As explained in the article above:

This suggests that by regularising the status of incoming labourers and taxing off a portion of the surplus they earn from migrating we could compensate domestic workers for any harm they experience. To that tax revenue, we could also add the massive amounts of money currently spent fighting immigration–billions of dollars per year, and growing. It’s almost certain that under such a regularisation and redistribution approach all parties involved would be better off than they currently are.

The argument above is compelling, to say the least. It acknowledges that immigration may indeed have a negative effect on American workers, as hawks like Lou Dobbs so virulently argue. Unlike Dobbs’ xenophobic, racist views, however, the concept above actually attempts to mitigate the negative impact on American workers of immigrants entering the work force. By granting immigrants legal status and collecting taxes on their wages, the government earns valueable tax revenue that can be used to give a helping hand to those workers whose jobs were lost or whose wages were reduced due to immigration. In addition to taxes on immigrants’ wages, the government can put the billions it’s currently spending on “border security”, trying to keep immigrants out, towards such programs for affected workers as well.

What could the government do for workers harmed by immigration? It can help displaced workers by subsidizing professional training or continued education, in order to give them the skills they need to find employment in a job where they will earn higher wages. Even a simple check in the mail may be enough to satisfy a worker who lost his job to an immigrant, giving him much needed help to get him back on his feet. From the American worker’s perspective, such a payout may or may not be viewed as an adequate trade-off for losing a job; but surely it would soften the harmful impacts of more open borders.

Clearly there is a demand for more low-skilled workers in America than in Mexico and other Latin American countries. The relative wage rates between the US and these countries send a clear market signal from firms (the demanders of labor) to households (the suppliers of labor). In a truly free labor market, immigration simply represents the efficient allocation of resources, as labor shifts from a market where it’s in low demand to one where it’s in high demand. Maybe it’s time for America to stop talking about ways to keep foreign workers out of the country, rather, start figuring out ways to make their transition into the American workforce easier and faster, so that they can become contributing, legal members of America’s economy, who pay taxes and pitch in just like the rest of the country’s workers.

Maybe “anti-immigration hawks” like Lou Dobbs just forget sometimes that almost everyone in America today is an immigrant in a sense. No one kept us out then. When the hope and promise of a better life beckoned, our forefathers arrived in America by the millions. The arrival of immigrant workers today is not that different, and the economics of immigration seem pretty much indisputable: it benefits everyone (firms get cheaper labor, households enjoy lower prices and more jobs for high-skilled workers, the government gets more tax revenue) and harms very few.

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About the author: Jason Welker is a teacher at Zurich International School in Switzerland, where he teaches Advanced Placement and International Baccalaureate Economics. Jason was an international school student in Malaysia before studying economics at Seattle University then earning his Masters in Education. He calls Seattle and Northern Idaho home. In addition to maintaining an economics wiki and this blog for economics student and educators, Jason also gives presentations on using Web 2.0 tools in education at workshops and conferences around the world. His economics wiki won the 2007 "Best Educational Wiki" award from the "EduBlog Awards".

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