Unskilled doesn’t mean unnecessary

TYLER COWEN is a professor of economics at George Mason University and director of its Mercatus Center. DANIEL M. ROTHSCHILD is a researcher at the Mercatus Center.

GOOGLE, YAHOO and Sun Microsystems were all founded by immigrants -- from Russia, Taiwan and India, respectively. There is near-universal agreement that skilled immigrants are an enormous boon to the American economy.

But what about the millions of unskilled laborers who arrive in this country every year?

Recent public discourse would have us believe that they poach American jobs, lower wages and sponge off welfare. Yet economic research suggests a different picture: Unskilled immigrants are good for the U.S., and the U.S. is good for them.

Until the late 1990s, when a boom in native-born self-employment occurred, immigrants were more likely than natives to work for themselves. Immigrant small businesses, from the Korean corner market to the Mexican landscaping service, are, well, as American as apple pie. The labor market is not a zero-sum game with a finite number of jobs; immigrants create their own work.


A key question for economists has been whether the influx raises or lowers “native” American wages. UC Berkeley’s David Card, who studied patterns in different U.S. cities, concludes that immigration has not lowered wages for American workers. George Borjas of Harvard counters that immigration reduced the wages of high school dropouts by 7.4% between 1980 and 2000.

Most economists have sided with Card. For one thing, his studies better capture the notion that immigrant labor makes work easier for all of us and brings new skills to the table. Additionally, as Card points out, the percentage of native-born high school dropouts has fallen sharply over the previous decades, creating a shortage of unskilled laborers that immigrants fill. In 1980, one in three American adults had less than a high school education; by 2000, this figure had fallen to less than one in five.

Gianmarco Ottaviano of the University of Bologna and Giovanni Peri of the National Bureau of Economic Research have shown that immigrants and low-skilled American workers fulfill very different roles in the economy. For instance, 54% of tailors in the U.S. are foreign-born, compared with less than 1% of crane operators. A similar discrepancy exists between plaster-stucco masons (44% immigrant) and sewer-pipe cleaners (less than 1% foreign-born). Immigrants come to the United States with different skills, inclinations and ideas; they are not looking to simply copy the behavior of American workers.

New arrivals, by producing more goods and services, also keep prices down across the economy. Even Borjas -- the favorite economist of immigration restrictionists -- admits that the net gain to the U.S. from immigration is about $7 billion annually.

And over the coming decades, the need for immigrant labor will increase, according to demographers. The baby boom generation will need more healthcare and more nursing homes. The forthcoming Medicare fiscal crunch will require more and younger laborers to finance the program.

Some argue that we should employ a more restrictive policy that allows in only immigrants with “needed” skills. But this assumes that the government can read the economic tea leaves. Most bureaucrats in 1980 did not foresee the building or biomedical booms of the 1990s, or the decline of auto manufacturing.


We should not trust government to know what kind of laborers we will need 20 years from now. The ready presence of immigrant workers -- including the unskilled -- makes all businesses easier to start, and thus spurs American creativity.

We should not forget that immigration is good for the immigrants themselves. It often means the difference between extreme poverty and the good life.

Card finds that post-1965 immigrants, as recorded in U.S. census data, have a good record of assimilation. Second-generation children have, on average, higher education and wages than the children of natives. Of the 39 largest country-of-origin groups, the sons of 33 and the daughters of 32 of those groups have surpassed the educational levels of the children of natives.

Finally, it is fitting that both Card and Borjas are themselves immigrants. Borjas emigrated from Cuba when he was 12, and Card came from Canada to earn his doctorate at Princeton. Their very debate shows how immigrants have become central to the American enterprise.

Yes, immigration brings some real costs. But most of these problems are concentrated in a few border and urban areas; federal policy can help correct the imbalances.

Americans have heard from politicians for more than 200 years that immigration will cause the sky to fall. Yet each time it has only made us stronger.