The impact of immigration on wages of unskilled workers.

• Author: Peri, Giovanni
• Position: Essay

Immigrants did not contribute to the national decline in wages at the national level for native-born workers without a college education. This article reviews how the timing of their immigration and skill sets of immigrants between 1970 and 2014 could not have been responsible for wage declines. This article then reviews other evidence at the local level that implies immigration is not associated with wage declines for noncollege workers, even if they are high school dropouts. Higher immigration is associated with higher average wages. Causality is difficult to tease out but numerous factors could explain the positive association between the quantity of immigrants and native wages.

Wage Stagnation in the American Workforce

Wages for noncollege graduates, which this article refers to as "unskilled," have been stagnant since 1980 (Autor, Katz, and Kearney 2008). The Census data confirm that the average national real weekly wage of college-educated workers who are natives, employed for at least one week of the previous year, and aged between 18 and 65 grew by about 20 percent from 1980 to 2014. In contrast, the average real weekly wage of noncollege graduates decreased by 8 percent during the same period, while dropouts lost about 18 percent of their real weekly wages. Trends in wage inequality between college and noncollege workers highlight this trend but with significant variation over the period. For instance, the 1990s were the only decade in which college and noncollege workers both saw positive wage gains of 10 and 14 percent, respectively.

Immigration's Contribution to Wage Stagnation on the National Level

Immigration could affect wages by changing the relative supply of different types of workers. For instance, if immigration increased the supply of noncollege graduates substantially relative to workers in other education levels then it could contribute to a pure "relative supply" explanation whereby an increase in one type of worker reduces their wages relative to other types of workers. This section uses the estimates of the elasticity of complementarity between college and noncollege workers and between high school graduates and dropouts to see how relative changes in die quantity of immigrants by education affects wages.

Wage Gap for College and Noncollege Workers

This article calculates the effect of the relative worker-supply shift produced by immigrants witii a constant elasticity of substitution (CES) in a production function (Katz and Murphy 1992). The size of this effect depends inversely on the elasticity of relative wages to relative supply. Table 1 uses die elasticity of 1.75, the proper elasticity according to the current state of die peer-reviewed literature, to show that immigration cannot account for the observed increase in wage inequality in the considered period by decade; thus it cannot account for relative wage stagnation. The relative supply effect of immigration actually attenuates wage inequality in the periods of largest increase in the gap between college and noncollege workers from 1980 to 1990 and 2000 to 2010. Immigrants were disproportionately college educated in those two decades, but diese periods also experienced the largest increase in the college and noncollege wage differentials. Immigration can explain 14 percent of the increase in the wage gap in the 1990s. Too many immigrants are college educated to explain any of die relative wage decline of non-college graduates especially in the decades when this relative wage decline was the greatest. Only in the 1990s was immigration moderately noncollege intensive. The 1980 to 2010 relative supply change due to immigrants could account only for 0.1 percent of the increase in wage inequality when there was a 24 percent decrease in the relative college to noncollege wage ratio.

The Wage Gap for High School Dropouts and High School Graduates

There is some disagreement among economists, but there is substantial evidence that workers who are high school dropouts and those with only a high school degree are substitutable, which means that changes in their relative supplies do not significantly affect their relative wages (Goldin and Katz 2008, Ottaviano and Peri 2012, Card 2009). If that characteristic holds for the period that this...