A report released yesterday by the Migration Policy Institute (MPI), entitled The Impact of Immigrants in Recession and Economic Expansion, argues persuasively that immigration is a valuable economic resource. The report, by economist Giovanni Peri of the University of California, Davis, finds that “immigration unambiguously improves employment, productivity, and income,” increasing the earnings of native-born workers in the long run (over ten years). However, the report notes that, during times of economic downturn, some native-born workers may be disadvantaged by the presence of immigrants in the short run (over one to two years). The report argues that these negative effects would be mitigated were the United States to create legal limits on immigration that rise and fall with actual labor demand.
According to the report, “total immigration to the United States over the period 1990-2006… caused a 2.86 percent real wage increase for the average U.S. worker.” These wage gains came about primarily “due to an increase in the economic efficiency of production.” As Peri explains in a 2006 report for the IPC:
Immigrants and natives tend to differ in their educational attainment, skill sets, and occupations, and they perform jobs that often are interdependent. As a result, immigrants do not compete with the majority of natives for the same jobs. Rather, they “complement” the native-born workforce—which increases the productivity, and therefore the wages, of natives. Second, the addition of new workers to the labor force stimulates investment as entrepreneurs seize the opportunity to organize these new workers in productive ways that generate profits.
The end result is a bigger economy, a more productive labor force, and generally higher wages.
The MPI report concludes that neither immigrant nor native-born workers benefit from the current U.S. immigration system, in which immigration limits fail to rise and fall with labor demand. As a result, during periods of economic expansion, the rising demand for less-skilled labor is met in large part through unauthorized immigration. The report recommends higher legal limits on both high-skilled and less-skilled immigration when economic times are good, and lower limits when times are bad. This is a critical and common-sense recommendation that many U.S. lawmakers seem unable to grasp.
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