The employment data released today indicates that although employment increased, the rate of growth slowed. Following gains of 154,000 jobs last month and average growth of 252,000 each month in the three months prior, employer payrolls climbed by just 115,000 jobs. At the rate of job growth from the previous month, employment growth is about matching the rate at which new workers are entering the labor market, and the unemployment rate remained relatively stable at 8.1 percent.
Both federal and state policymakers continue to argue the importance of U.S. immigration policy. One point of contention in that discussion has been how immigration affects American wages and the labor force, especially in these challenging economic times. Actually, since the beginning of the Great Recession, immigration flows have changed significantly due to the weak labor market. The number of undocumented individuals has decreased (Passel and Cohn 2010; DHS 2012), and the number of high-skilled H-1B visas issued has decreased by more than 25% since its peak in 2001 (US State Department). However, it is expected that both the desire of immigrants to work in the United States and the need for labor from American firms will continue to rise as the economy continues to improve. For our nation’s long-term growth strategy as well as short-term economic policy considerations, the capacity of our immigration system to meet these objectives is still crucial.
In advance of The Hamilton Project’s immigration forum in Washington, DC on May 15, we address the economic facts about immigration’s impact on U.S. jobs and the economy in this month’s employment study. In addition, we’re always updating our analysis of the “jobs gap,” or the quantity of jobs the US economy must generate to get back to pre-recession employment levels. Recently, we unveiled a fun new interactive tool that lets users predict when the US will close the jobs gap at various rates of job creation.
Immigrants’ Effects on Employment and Income
While many fear that immigrants would compete with Americans for jobs, the most recent data on the economy indicates that, generally speaking, foreigners enhance American chances and wages. According to a review of scholarly research, economists are less likely to conclude that immigrants significantly reduce the employment and earnings of native-born Americans (Card 2005). Rather, they may result in an overall increase in wages and decrease in prices (Ottaviano and Peri 2008; Ottaviano and Peri 2010; Cortes 2008). This effect can be attributed, in part, to the fact that immigrants and workers who were born in the United States typically do not compete for the same positions; rather, many immigrants enhance and boost the productivity of American workers.Low-skilled immigrant laborers, for instance, enable American-born farmers, contractors, and artisans to increase agricultural output or construct more dwellings, hence increasing job opportunities and wages for American workers. Businesses adapt to incoming immigrants by opening shops, eateries, or production facilities to take advantage of the increased labor supply; more workers equals more business. This is another way that immigrants benefit American workers.
Economists have discovered that immigrants marginally increase the average salaries of all workers born in the United States. Estimates from opposing ends of the academic literature come to the same result, as seen by the chart below’s rightmost set of bars, and indicate that American workers may see modest but positive wage rises of between 0.1 and 0.6 percent.
Although immigration raises living standards generally, there is disagreement in the economic research over whether immigration lowers wages for particular worker groups. Specifically, several approximations indicate that immigration has lowered the pay of college graduates and low-skilled workers. According to this research, the blue bars in the above chart indicate that between 1990 and 2006, the number of immigrants decreased the salaries of college graduates by 1.7% and low-skilled workers by 4.7%. All American workers’ salaries rise as a result of immigration, independent of the immigrants’ educational attainment, according to alternative estimates (shown by the red bars in the chart) that look at immigration within a different economic framework.
A Forward Direction for Immigration Reform Using an Economic Approach
Numerous overlapping visa categories, each with varied costs, durations, and quotas, comprise our existing legal immigration system. These are augmented by caps that are specific to each countries and even a randomly selected visa lottery. Because of this, the system has numerous issues, which range from its expensive and time-consuming application methods to its ineffectiveness un meeting the demands of American families and a dynamic economy. The hundreds of dollars that many visa applicants must pay in legal expenses is one indicator of the inefficiencies.
One strategy for immigration reform that focuses on addressing economic concerns about the U.S. immigration system is presented by University of California, Davis Professor Giovanni Peri in a future discussion paper for The Hamilton Project, “Immigration Policies for Jobs, Productivity, and Growth.” Peri’s plan is divided into multiple phases, from minor adjustments to a complete overhaul. His plan calls for the introduction of an auction system based on the market to distribute the current supply of temporary work permits. Employers would bid on a permit to sponsor that person in an auction rather than having to wait in line to bring them into the nation as they would under the existing system. The system’s operating costs and the state and local governments bearing the heaviest financial pressures from immigration might be covered by the auction proceeds. The other actions and improvements are outlined in the discussion document that will be released on May 15.
The Jobs Gap in April
The Hamilton Project keeps up its monthly examination of the changes in the “jobs gap” since the Great Recession began in December 2007. The Hamilton Project has added a new interactive tool to its employment blog analysis this month that lets users determine how long it will take for the jobs gap to close at various rates of job creation. You may access this interactive feature by visiting this link.
In April, there was an 11.2 million job deficit in our country. The net number of jobs lost since the start of the Great Recession is displayed by the solid line. The broken lines indicate the time required to close the employment gap under various future employment generation rates.
It will take until March 2020, or eight years, to close the jobs deficit if the economy adds 208,000 jobs per month, which was the average monthly rate for the strongest year of job creation in the 2000s. Based on a more optimistic estimate of 321,000 jobs per month—the average monthly rate during the strongest year of job growth in the 1990s—the economy will not need another four years to achieve pre-recession employment levels by June 2016.
In summary
The Great Recession has left many American workers jobless and the economic recovery has been sluggish. Immigration is still a contentious topic among policymakers due to worries about how newcomers impact the job market and the economy, but it is important to keep the discussion grounded in reality. Ten Economic Facts About Immigration, a publication published in 2010 by The Hamilton Project, was inspired by this.
The Hamilton Project will resume its investigation into the obstacles to and prospects for immigration reform in the current political and economic environment on May 15. A roundtable discussion featuring prominent figures such as former U.S. Senator Chuck Hagel (R-NE), Silver Lake Co-Founder Glenn Hutchins, National Council of La Raza President and CEO Janet Murguía, and UNITE HERE President John Wilhelm will take place alongside a panel discussion centered around Giovanni Peri’s latest proposal.
