How immigration affects workers: two wrong models and a right one.

• Author: Lewis, Ethan
• Position: Essay

Immigration has been in the news a lot recently, along with many strong claims about how it harms workers. This article reviews what research by economists says about how immigration affects workers. This requires first getting past common misconceptions that pervade press accounts and public policy debates about immigration, some of which even claim to come from economics. Unfortunately, these misconceptions usually lead to exactly the wrong policy conclusions about immigration--policies that tend to make the United States worse off. This is why it is important have the right economic model of immigration. This article first covers two common "wrong" models of immigration, before explaining the "right" model. The right model is confirmed by a large body of empirical evidence, which will be described here as well.

A frequent starting point for concern about immigration in public discussion is the large number of immigrants in the United States. There are currently 42 million immigrants in the country, and they make up almost 17 percent of workers, a historic high. This is often compared to another large number--the number of unemployed. It is not hard to find policy briefs and news articles with titles like "All Employment Growth Since 2000 Went to Immigrants" (Zeigler and Camerota 2014) and "Illegal Immigrants Outnumber Unemployed Americans" (Meyer 2015).

What is the point of such comparisons? Such articles usually do not lay out an explicit reason, but the desired implication is nevertheless clear: If we got rid of immigrants, jobs would open up for native-born workers. But why would that be? Implicitly, the authors of such articles assume--or want the reader to presume--that there are a fixed number of jobs available. That brings me to Wrong Model 1.

Wrong Model 1: Fixed Number of Jobs

The reasoning behind comparing the number of immigrants to the number of unemployed is that there is a supposedly fixed pool of jobs, so that every immigrant who has a job is taking a job away from a native-born worker. This is patently false. This faulty reasoning may originate from a kind of small-scale thinking: people might imagine an immigrant beating out a native-born worker for a specific job opening. However, this reasoning does not scale up to the level of a whole economy. Indeed, economists have argued against this idea for a very long time--though apparently not very successfully. Economist David Schloss termed it the "lump of labor fallacy" and thoroughly refuted it in 1892. It is a wrongheaded idea that just refuses to die.

At a basic level, the number of jobs in the United States is far from fixed. In fact, the number of jobs in the United States has more than doubled in the past 50 years, as Figure 1 shows. That is not to say it is going up at every moment. There are ups and downs, as Figure 1 also shows. During recessions job growth may stagnate for a while. Periods of slow growth, like the past decade, are when the economy starts to feel zero sum, and when fallacious lump of labor thinking tends to emerge in public policy discussions.

There is a large body of empirical research that directly examines the extent to which immigrants "take jobs" from natives. These studies ask: "Per immigrant who comes in, how many natives lose their job?" This research finds basically the opposite of the popular conception: not only do immigrants not take jobs from the native-born; if anything, they slightly create jobs for natives. (1) To put it differently, it seems that slightly more than one job is created for each immigrant arrival.

Why would this be? A key reason is that immigrants do not just come to the United States and extract money out of the economy. Rather, by virtue of being here, they generate consumer demand. Immigrants demand and buy all the things they need to live--housing, food, clothing, and so on--and as a result they generate demand for new workers. (2) On top of this, immigrants tend to specialize in jobs that enhance demand for native-born workers by making the latter more productive. They also raise product diversity through both supply and demand channels. For example, you will probably not be too surprised to learn that immigration increases local restaurant diversity (Mazzolari and Neumark 2012). The net effect of the combination of these forces is that immigrants end up creating more jobs than they take.

In sum, the net...