More evidence on immigration and wages

by on March 15, 2007 at 3:55 pm in Data Source | Permalink

As of 2004 California employed almost 30% of all foreign born workers
in the U.S. and was the state with the largest percentage of immigrants
in the labor force.  It received a very large number of uneducated
immigrants so that two thirds of workers with no schooling degree in
California were foreign-born in 2004.  If immigration harms the labor
opportunities of natives, especially the least skilled ones, California
was the place where these effects should have been particularly strong.
But is it possible that immigrants raised the demand for California’s
native workers, rather than harming it?  After all immigrants have
different skills and tend to work in different occupations then natives
and hence they may raise productivity and the demand for complementary
production tasks and skills.  We consider workers of different education
and age as imperfectly substitutable in production and we exploit
differences in immigration across these groups to infer their impact on
US natives.  In order to isolate the "supply-driven" variation of
immigrants across skills and to identify the labor market responses of
natives we use a novel instrumental variable strategy.  Our estimates
use migration by skill group to other U.S. states as instrument for
migration to California.  Migratory flows to other states, in fact,
share the same "push" factors as those to California but clearly are
not affected by the California-specific "pull" factors.  We find that
between 1960 and 2004 immigration did not produce a negative migratory
response from natives.  To the contrary, as immigrants were imperfect
substitutes for natives with similar education and age we find that
they stimulated, rather than harmed, the demand and wages of most U.S.
native workers.

In other words, if lots of Mexican carpenters move to California, we don’t see the non-Mexican carpenters leaving in droves, due to lower wages. 

Here is the paper.  Here is a non-gated version.  The article makes the interesting observation that if California were counted as a nation (and the U.S. not), it would receive the second largest number of immigrants per year of any country, with only Russia beating it out.

save_the_rustbelt March 15, 2007 at 4:20 pm

If the carpenters really didn’t leave it is probably due to the housing
bubble.

Wait a couple of years and check again.

Or check Vegas and Arizona now, I think you will find some of those CA
carpenters. Where will they work now that the bubble has popped?

gassie March 15, 2007 at 5:02 pm

Non-Mexican carpenters in CA are all out on workers comp. Back injuries I hear.

Steve Sailer March 15, 2007 at 7:41 pm

Two words: opportunity costs.

Without immigration, California, which was fated to have vast amounts of new construction after 1960 due to its superb climate, would have attracted lots more American-born carpenters from other states.

I may have asked this before, but why do economists forget all their Econ 101 concepts like opportunity cost, supply and demand, and risk and reward when it’s time to propagandize for immigration?

Karl Smith March 15, 2007 at 8:04 pm

I may have asked this before, but why do economists forget all their Econ 101 concepts like opportunity cost, supply and demand, and risk and reward when it’s time to propagandize for immigration?

Unless you think that non english speaking and largely immigrants are a perfect substitute for educated Americans then it is not a forgone conclusion that immigrants will lower wages.

Now one point that I think, from reading your other work, you may be picking up on is that there is an increasing return to human capital.

So while skilled and unskilled labor may technically be compliments, concentrating skilled labor boosts productivity even more.

We would be thinking about a production function like (S^1.4)(U^.3) where S is skilled labor and U is unskilled.

Here unskilled labor raises the marginal productivity of skilled labor but more skilled labor actually raises it more.

The exponents have to be pretty wacky to make a model like that work but given that the US, paradoxically, has the highest education level in the world and at the same time the largest shortage of skilled labor something of the sort may be going on.

Keith March 15, 2007 at 9:03 pm

“Without immigration, California, which was fated to have vast amounts of new construction after 1960 due to its superb climate”

California didn’t have a good climate before 1960?

Sailer’s really grasping at straws now that the evidence is showing his “I hates brown people” routine for the joke that it is.

Hey, but let’s hear Schaeffer tells us how immigration’s going to turn all of America into Cudahy! It’s so funny when Schaeffer generalizes wildly from one slected square mile.

Steve Sailer March 15, 2007 at 9:17 pm

Keith writes:

“California didn’t have a good climate before 1960?”

I cited 1960 because that’s when the period studied started: “We find that between 1960 and 2004 …” Please try reading the paragraph Tyler posted before posting with your killer refutations of my comments.

John S. March 15, 2007 at 9:51 pm

I am not going to comment on the content, but on the syntax. The paper has a single author. Why then is it written in the first person plural? Who is the “we” to whom the author(s) refer(s)?

Incidentally I too feel funny writing “In a previous paper (Yours Truly, 2004) I found that …”. But I have never gone so far as to invent an invisible twin for a co-author.

Peter Schaeffer March 15, 2007 at 10:04 pm

Keith,

You may not like the evidence of how immigration is creating a new and ever larger underclass in the U.S.

However, before you make fun of the sad realities at hand, you should at least study the evidence.

Read Peri's Response March 16, 2007 at 12:19 am

Cowen: I’ll ask the same question I asked Peri (answer at the link).

What’s the price tag on the massive PoliticalCorruption associated with IllegalImmigration?

What’s the price tag on giving the MexicanGovernment even more political power inside the U.S.?

Please, factor that into the bottom line and then get back to us.

Mike March 16, 2007 at 8:54 am

Can anyone tell me why Russia receives so many immigrants, and where they might be coming from? I apologize for my naivete.

-Mike

Peter Schaeffer March 16, 2007 at 11:32 am

spencer,

I agree your test would be superior. However, Peri didn’t even consider price impacts. Once you do, immigration into California starts looking very bad.

bob montgomery March 16, 2007 at 3:46 pm

TWIC requires all transportation workers in the US to have a green card (in addition to undergoing a background check). Because the population of short-haul truckers in California is dominated by immigrants, it is now now widely recognized TWIC will decrease, perhaps precipitously, the supply of short-haul truckers available to move import and export cargo through the ports.

Please correct me if I am mistaken, don’t you mean “dominated by illegal immigrants”? Shouldn’t legal immigrants be mostly unaffected by this requirement?

Classic supply and demand suggests that trucking rates will jump significantly in the near future. But there is still the overarching question: Where are the Americans who actually WANT to drive trucks for a living?

You answered your own question. The Americans who want to drive trucks for a living don’t do so because the pay isn’t high enough.

Or am I missing something?

triticale March 16, 2007 at 8:08 pm

But there is still the overarching question: Where are the Americans who actually WANT to drive trucks for a living?

I know one. He’s waiting for his probation to end so a drug possesion charge is expunged from his record. He’s thinking long haul tho.

Steve Sailer March 17, 2007 at 5:59 pm

A commenter writes:

“Ironically, while we move to limit the pool of available labor, there is a critical shortage of truck drivers nationwide.”

You know, I was just thinking about the critical shortage of Gulfstream private jets. Heck, I don’t own one and I’d like to, so there is obviously a critical shortage, just like there is a cricial shortage of truck drivers.

When are economists going to start applying the concept of supply and demand to immigration-related questions?

Jasper March 18, 2007 at 7:41 pm

You know, I was just thinking about the critical shortage of Gulfstream private jets. Heck, I don’t own one and I’d like to, so there is obviously a critical shortage, just like there is a cricial shortage of truck drivers.

Sailer: you’re really grasping at straws here. Last time I checked, factories were producing as many private jets as the market can absorb with no interference from the government. There is no shortage of Gulfstreams. This is in contrast to the supply of manual/semi-skilled labor, which is prohibited by the government from reaching buyers through legitimate, legal means.

bertie June 3, 2007 at 5:34 am

no one seems to believe that our laws trump economic advantage. betray the constitution at your own peril…i live right in the center of this mess and am observing and experiencing the disintigration of a really nice texas city…color it any way you wish…your country is in peril….ex aclu member.

joinoiwe November 30, 2007 at 3:45 am

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