Immigration Redistributes Income from Poor U.S. Workers

Immigration Redistributes Income from Poor U.S. WorkersCenter for Immigration Studies – A new report by Harvard economist George Borjas and published by the Center for Immigration Studies finds that the flow of one million immigrants into the United States each year does not substantially raise the overall income of native-born Americans.

Borjas, recognized by Business Week and the Wall Street Journal as “America’s leading immigration economist”, calculates that the wages of native-born workers in competition with immigrants (legal and illegal) are reduced by $402 billion per year.

This reduction in wages is offset by an increase in profits or wages of those who use immigrant labor of $437 billion. The resulting negligible “immigration surplus” represents two tenths of one percent of GDP. It is most often the least-educated and poorest American workers competing with immigrants who suffer the most from immigration.

Illegal immigration, specifically, creates an even smaller benefit to the overall economy – six one-hundredths of one percent – which comes from the same source: lowering the wages of less-educated American workers.

The report, “Immigration and the American Worker: A Review of the Academic Literature“, does not address the fiscal impact of immigration (taxes paid minus costs created for government), which is a separate question from the labor market effect.

Dr. Steven Camarota , Director of Research of the Center for Immigration Studies, comments, “Professor Borjas’s findings on the magnitude of the immigration-driven reduction in wages for less-skilled American workers is disturbing. I hope those formulating immigration policy in Washington will consider the effects on our poorest countrymen of amnesty for illegal immigrants and further increases in legal immigration.”

More detail on the report’s findings:

  • The presence of immigrants (legal and illegal) in the labor market makes the U.S. economy (GDP) an estimated 11 percent larger ($1.6 trillion) each year. This “contribution” to the aggregate economy, however, does not measure the net benefit to the native-born population.
  • Of the $1.6 trillion increase in GDP, 97.8 percent goes to the immigrants themselves in the form of wages and benefits; the remainder constitutes the “immigration surplus” – the benefit accruing to the native-born population.
  • The estimate benefit to the native-born from immigration (legal and illegal) is equal to $35 billion a year – or about 0.2 percent of the total GDP in the United States.
  • The immigration surplus is generated by reducing the wages of native-born in competition with immigrants by an estimated $402 billion a year. However, the profits of business owners and other workers are estimated to increase an estimated $437 billion.
  • For this benefit to exist, some American workers must suffer lower wages. The best research indicates that workers with less than a high school education lose the most.
  • Those without a high school diploma make up a modest share of the workforce. However, they are among the poorest Americans. Moreover, the children of these workers account for one-fourth of the children of the native-born working poor.
  • Illegal immigration has increased GDP by an estimated $395 to $472 billion a year. As before, this “contribution” to the economy does not measure the net benefit to natives.
  • The immigration surplus or benefit to natives created by illegal immigrants is estimated at around $9 billion a year or 0.06 percent of GDP – six one-hundredths of 1 percent.
  • Although the net benefits to natives from illegal immigrants are small, there is a sizable redistribution effect. Illegal immigration reduces the wage of native workers by an estimated $99 to $118 billion a year, and generates a gain for businesses and other users of illegal immigrant labor of $107 to $128 billion.
  • The above estimates for illegal immigrants are generated by the presence of additional workers in the labor market, not their legal status.
  • Looking at immigration from 1990 to 2010 indicates that the average annual earnings of American workers were reduced by $1,396 in the short run.
  • The same type of education/age comparison used to measure the wage impact shows that a 10 percent increase in the size of a skill group reduced the fraction of native-born blacks in that group holding a job by 5.1 percentage points.

The Center for Immigration Studies is an independent, non-partisan, non-profit research organization.