The labor market effects of immigrants.

• Author: Peri, Giovanni
• Position: Research Summaries

Introduction

International migration is firmly restricted by national policies and national laws. While capital, technology, and goods move globally with few restrictions, governments heavily regulate the movement of labor, restricting the number of foreign nationals who reside and work in their countries. In spite of this, immigration into the rich countries of Europe, North America, and Oceania increased dramatically during the last decade. As of 2009, around 10 percent of the working age population in the OECD countries and about 14 percent of that population in the United States was born abroad. That was up from around 6 percent in the OECD and 11 percent in the United States, in 2000.

From a world perspective, international migration is a formidable way to increase individual productivity: immigrants moving from poor to rich countries nearly quintuple their income (on average) after the move. (1) Therefore, less restrictive immigration policies could generate huge gains, accruing in large part to migrants. What would be the effects on the economies of the receiving countries, though? Would immigrants take the jobs of natives or stimulate firms' growth? Who would suffer losses? Who would benefit? Would native workers be better or worse off with more immigrants?

My research agenda, developed with a number of co-authors during the last several years, has analyzed the economic impact of immigrants, helping to identify some crucial aspects that need to be considered in describing the labor market effect of immigration on natives. First, for example, we have emphasized that differences in the skill distribution (schooling and age) between natives and immigrants, and in the interactions of these skills in production, are crucial to assessing the skill-specific effect of immigrants on wages and employment. Second, we have identified an important mechanism of specialization, which allows local economies to absorb less educated immigrants with little or no adverse effects on native wages and potentially positive effects on productivity. Third, we have looked across countries to see how economies outside the United States have absorbed recent immigrant flows and what the role of labor market institutions has been in determining the wage and employment effects of immigrants. I describe these contributions below.

Immigrants and Natives: Competition and Complementarity

From a labor market perspective, immigration is an inflow of workers distributed across education and experience cells (skills). This was emphasized first in an influential paper by George Borjas. (2) Because workers with different skills tend to perform different jobs, immigrants in a skill group tend to compete more intensely with natives in the same group than with natives in other groups. They may even "complement" workers in other skill groups. This means, for instance, that a young, less educated construction laborer competes with (hence reduces the demand for) native construction workers but he/she also complements (and increases the demand for) native construction-supervisors and engineers. Similarly, an immigrant engineer competes with native engineers but he/she complements native construction supervisors and construction workers. One needs to...