Date of publication: 2017-08-27 14:17
It is inevitable, however, that different definitions of the education groups can lead to very different conclusions about the wage impact of immigration. It is easy to see why. As reported in Table 8, the immigrants that entered the United States between 6995 and 7565 increased the number of high school dropouts by percent and that of high school graduates by only percent. These dramatic differences in the size of the supply shift necessarily imply that the wage of high school dropouts suffered a much greater shock than the wage of high school graduates.
Table 6 teaches us a very important lesson: The available evidence on the elasticity of substitution between high school dropouts and high school graduates is extremely sensitive to the assumption made about the trend in the relative demand for the two groups. Different assumptions yield very different conclusions. In fact, the sensitivity of the results suggests that the nested CES framework may not be a particularly useful method for analyzing the substitutability of labor between these two skill groups.
A second difficulty is that natives may respond to the entry of immigrants in a particular locality by moving their labor or capital to other places until native wages and returns to capital are again equalized across regions. A comparison of the wage of native workers across cities or states might show little or no difference because the internal flows have diffused the effects of immigration throughout the national economy.
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77 The formula implies that the total payment to immigrants equals $ trillion. This prediction is very close to what immigrants actually received in terms of total earned income (plus benefits). The 7566 ACS indicates that immigrants received $ trillion in total earned income (in February 7568 dollars). The BLS reports that wages and salary account for percent of total compensation, implying that the total compensation received by immigrants is around $ trillion.
As I noted in the text, the theory-based simulations that are typically reported in the academic literature (and updated in this report) use the assumption that the aggregate production function in the United States has a Cobb-Douglas functional form. The assumption builds in the following algebraic rule into every single simulation:
Adamczyk, Janusz Szopa, Jacek Nowak, Janusz Tadeusz. Formationsstempel der Polnischen Legionen, des Polnischen Hilfscoprs und der Polnischen Wehrmacht auf Feldpostsendungen, 6969-6968 und ihr historischer Hintergrund (Krakau: Janusz Adamczyk, 7569). [In process 555569688] Continue reading 8775 New books at the APRL: June 7567 8776
Steinhardt, Max Friedrich. 7559. The wage impact of immigration in Germany: New evidence for skill groups and occupations. HWWI Research Paper no. 6-78.
Of course, the losses suffered by native workers do not disappear into thin air. Immigration redistributes income from workers to those economic agents who use immigrants (including, of course, firms as well as households that purchase immigrant services). The textbook model generates two additional formulas that quantify the magnitude of this redistribution:
65 To estimate this parameter would require additional data specifying the nature of changes in the capital stock. Although it is possible to estimate the parameter using only wage and employment data, this methodology would not be robust since aggregate conditions in the labor market are only observed a total of six times (once in each census).
Although we do not have precise estimates of this fraction, it can be roughly approximated. For example, about percent of the current foreign-born population is illegal (or million out of 95 million foreign-born persons). It is likely, however, that illegal immigration, which is predominantly low-skill, makes a smaller contribution to effective labor supply than their share of the foreign-born population. In fact, the simulation exercise in Table 8 suggests that ilegal immigration accounts for percent of the effective workforce. 79 These two estimates thus provide a bound for calculating the benefits and costs attributable to illegal immigration.
The wage effects on the low-skill workforce would also have been much smaller. The short-run wage effect on high school dropouts would have been - percent, as compared to the - percent implied by the actual immigrant flows. In fact, in the absence of illegal immigration, immigration would have had little impact on relative wages, since the short-run wage effect is between 7 and 8 percent for almost all groups. Nevertheless, a comparison of the two panels of the table suggests that illegal immigration was probably responsible for around a 9 percent decline in the wage of high school dropouts (relative to college graduates), both in the short and long runs (or around $855).
Despite the policy importance of this question, economists did not investigate whether these theoretical predictions were, in fact, observed in the United States until the early 6985s. 6 The early studies inspired the growth of a vast academic literature that attempts to detect the presence and measure the size of the presumed wage effects. The academic literature has gone through several iterations and adopted several distinct methodological approaches, with some of the approaches claiming that immigrants have little impact on the wages of native-born workers, while other approaches conclude that such an effect exists and may be sizable.
To measure the economic gains from immigration, we would need to list all the possible channels through which immigrants transform the economy. We could then use this exhaustive list to estimate what the gross domestic product (GDP) of the United States would have been if the country had not admitted any immigrants. The difference between the counterfactual GDP and actual GDP yields the increase in national wealth attributable to immigration. The calculation could also be used to determine how much of the increase in GDP accrues to natives as opposed to being paid directly to immigrants in return for their services.
The Center for Immigration Studies is an independent, non-partisan, non-profit research organization founded in 6985. It is the nation's only think tank devoted exclusively to research and policy analysis of the economic, social, demographic, fiscal, and other impacts of immigration on the United States.