Donald Trump’s economic message is loud and clear: Misguided Washington policymakers have allowed foreign countries to steal American jobs, and uncontrolled immigration is driving wages down.
Trump is partly right in saying that trade has cost the U.S. economy jobs and held down wages.
He may also be correct — to a degree — in saying that low-skilled immigrants have depressed salaries for certain jobs or industries, the latest economic research shows.
Where Trump gets things wrong, economists say, is in exaggerating the downside and ignoring the benefits that trade and immigration provide to the economy.
And his proposed solutions, such as imposing a 45% tariff on Chinese imports and deporting immigrants living in the U.S. illegally, would make the economy worse, not better, many experts warn.
“Slapping high tariffs would be catastrophic for a wide range of American businesses,” said John McLaren, an economics professor at the University of Virginia. “It would throw the World Trade Organization into chaos. We would be open to all sorts of retaliation, and that would likely trigger a trade war that would be devastating.”
Mitt Romney, the 2012 GOP presidential nominee, warned last week that Trump’s policies would be disastrous for the U.S. economy. “If Donald Trump’s plans were ever implemented, the country would sink into a prolonged recession,” Romney said in an unprecedented attack by the party’s onetime standard-bearer against the current front-runner.
Yet Trump’s diagnosis of the nation’s economic problems has tapped into deep-seated concerns about globalization shared by millions of Americans.
Recent research backs him up partly. Studies increasingly have confirmed that imports and trade deficits, notably involving China, have led to significant losses for workers in the U.S. as well as in other countries, with the biggest impact on those without college degrees.
Researchers from MIT and other institutions have estimated that soaring Chinese imports resulted in a net loss of 2 million to 2.4 million domestic jobs from 1999 to 2011. Chinese imports to the U.S. reached a record $482 billion last year.
At the same time, Trump exaggerates the extent of these impacts, economists say.
“Yes, Trump is hitting on something that’s real, yet he’s exploiting it in a way that’s distorted the issue.” said Harry Holzer, a public policy professor at Georgetown University.
For example, economists note that the wave of globalization and imports has also reduced prices of goods, benefiting poorer American families. Thanks to cheaper imports, the dollars of all Americans go further — not just at Wal-Mart but at the Apple Store and other upscale establishments.
“It may be that it’s enough to offset the effect on wages,” McLaren said.
Holzer and other experts also say that technology, skills-training and other policy choices have played more significant roles than trade in the worsening condition of many workers — and these are factors that are largely ignored by Trump.
In blaming immigrants for America’s economic troubles, Trump is on even more slippery ground.
Although some studies have suggested that low-skilled immigrant labor reduces wages in certain industries, whether meatpacking or gardening, the bulk of economic research analyzing data over the last 40 years shows that immigration has had no significant detrimental impact on wages or employment for American workers overall, said Giovanni Peri, a leading authority on the subject at UC Davis.
On the contrary, Peri said it may have more of the opposite effect. Large-scale immigrant labor adds to demand for services. Immigrants hold down costs of farm products, child-care and other goods and services. Moreover, in doing manual work, Peri said, immigrants create opportunities for those companies to create other jobs in sales, clerical or management that are more attractive and likely to be taken by native-born workers.
One in six U.S. workers is foreign-born. Immigrant workers are much more likely to work in service industries, and in construction, warehousing and maintenance jobs. The median pay for foreign-born workers was $664 a week in 2014, or 81% of the pay for U.S.-born, according to the Labor Department.
College-educated immigrants, on the other hand, earn slightly more than their U.S.-born counterparts, reflecting the larger share of foreign-born workers with graduate or professional degrees.
And immigrants are disproportionately starting new businesses and injecting capital and fresh ideas into the economy.
In a recent study of about 900 individuals who have contributed to notable technological innovations, a little more than one-third were found to be immigrants, although they account for just 13.5% of the nation’s overall population.
“Even if there’s some evidence of constraining wages at the lower end, it’s hard to make the case that high-skilled immigration is not a win-win,” said Robert Atkinson, president of the Information Technology and Innovation Foundation, a nonpartisan research group in Washington that produced the study on Demographics of Innovation.
Atkinson credits Trump for talking about trade and immigration in the context of America’s economic competitiveness, but worries that the candidate’s fiery comments will hamper efforts to increase work visas for people with expertise in science, technology, engineering and math — known as STEM.
“I understand why Trump’s message — ‘make America great again’ — is getting resonance,” Atkinson said. But “the purple rhetoric around immigrants taking our jobs — that’s going to flow into STEM immigration and make it harder to deal with.”
Maybe not. Previously Trump had advocated eliminating work visas for high-skilled immigrants, but during the debate Thursday he changed his tune.
“We need highly skilled people in this country, and if we can’t do it, we’ll get them in,” Trump said. “I’m softening the position because we have to have talented people in this country.”
Hours later his campaign issued another statement, reversing again and saying Trump still opposes such visas.
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