July 17, 2007

Drumming Up Evidence On Immigration’s Income Impact

By “An Economist”

[Previously by “An Economist”: Ten Reasons The Amnesty/Immigration Surge Bill Is Appalling]

Cleaning up after the Great Amnesty/Immigration Surge Battle: one unedifying sight was Kevin Drum, the liberal Washington Monthly blogger, [send him mail] joining forces with the worst corporate employers in the America.

Drum denounced Slate blogger Mickey Kaus for "trying on his new role as champion of the common man” by trying to “convince gullible liberals that the plight of the working poor (i.e., chicken pluckers) is due to immigration from Mexico.” [See Kaus’s Plucking The Pluckers] He accused Kaus of using outdated, inaccurate material to support the claim.

Here’s a reality check.

Models that show minimal wage losses from unskilled immigration are theoretical. The empirical data is vastly different and shows huge losses from immigration. Take the work of Giovanni Peri ("Immigrants’ Complementarieties and Native Wages”, [PDF]). He claims, based on theory, that immigration has raised wages for even unskilled workers. However, his actual data (Figure 3) shows a 17.6% reduction in wages for unskilled workers in California and a 15.1% reduction nationwide.

Of course, the California data seriously understates the real reduction, because Peri uses a national cost of living index rather than a Californian one. Allowing for California's much higher cost of living, the real wage reduction is much greater.

Can Peri explain any of this? No. Does he try? No.

Other evidence:

1. The Chain Never Stops, by Eric Schlosser (Mother Jones, July/August 2001 issue)

"Thirty years ago, meatpacking was one of the highest-paid industrial jobs in the United States, with one of the lowest turnover rates. In the decades that followed the 1906 publication of The Jungle, labor unions had slowly gained power in the industry, winning their members good benefits, decent working conditions, and a voice in the workplace. Meatpacking jobs were dangerous and unpleasant, but provided enough income for a solid, middle-class life. There were sometimes waiting lists for these jobs. And then, starting in the early 1960s, a company called Iowa Beef Packers (IBP) began to revolutionize the industry, opening plants in rural areas far from union strongholds, recruiting immigrant workers from Mexico, introducing a new division of labor that eliminated the need for skilled butchers, and ruthlessly battling unions. By the late 1970s, meatpacking companies that wanted to compete with IBP had to adopt its business methods—or go out of business. Wages in the meatpacking industry soon fell by as much as 50 percent. Today meatpacking is one of the nation's lowest-paid industrial jobs, with one of the highest turnover rates. The typical plant now hires an entirely new workforce every year or so. There are no waiting lists at these slaughterhouses today. Staff shortages have become an industry-wide problem, making the work even more dangerous."

2. Lower Wages For American Workers, (Federation of American Immigration Reform website, updated 1/05)

"The effect of immigration on those low-skilled Americans is profound, and the government knows it: ‘Undoubtedly access to lower-wage foreign workers has a depressing effect [on wages],’ says former Labor Secretary Robert Reich. Research suggests that between 40 and 50 percent of wage-loss among low-skilled Americans is due to the immigration of low-skilled workers. Some native workers lose not just wages but their jobs through immigrant competition. An estimated 1,880,000 American workers are displaced from their jobs every year by immigration; the cost for providing welfare and assistance to these Americans is over $15 billion a year."

3. Radical groups taking control of immigrant movement, by Lou Dobbs (CNN, 5-1-2006)

"In fact, a meat-packing job paid $19 an hour in 1980, but today that same job pays closer to $9 an hour, according to the Labor Department. That's entirely consistent with what we've been reporting—that illegal aliens depress wages for U.S. workers by as much as $200 billion a year in addition to placing a tremendous burden on hospitals, schools and other social services."

4. Latinos Surge In Midwest, (Rural Migration News, Vol. 3 No. 3, July 1996)

"Meatpacking wages fell sharply after peaking in 1980. In Iowa, the average hourly earnings of meatpackers in 1981 was $11.33, 50 cents less than the US average $11.83. Wallace Huffman of Iowa State University noted that real meatpacking earnings fluctuated between 1963 and 1988, but were lower in 1988 than in 1963."

5. Choosing Sides on Immigration, by Froma Harrop (RealClearPolitics.com, 6-5-07)

"And it's true that recent "victories" in unionizing low-skilled workers have produced paltry gains. For example, the Service Employees International Union managed to organize janitors in Los Angeles, but Briggs notes, "at wages way below what they were back in the 1970s." The strange part is that Los Angeles' janitors were highly unionized (and mostly African-American) until the '70s, when a surge in illegal immigration destroyed their bargaining power.

The union last year organized janitors in Houston. For all these efforts, this largely Hispanic workforce saw its pay rise from a pitiful $5.25 an hour to a pathetic $6.25 -- which is lower than the minimum wage in 21 states and the District of Columbia. Wages in the contract's later years will barely exceed the new federal minimum."

6. Immigration Policy and Low Wage Workers: The Influence of American Unionism (pdf), by Vernon M. Briggs, Jr. (Cornell University; Briggs Public Testimony)

"Following the enactment of the first ceilings on immigration in U.S. history, the economic gains to workers were found to be immediate. Indeed, labor historian Joseph Rayback called the Immigration Acts of 1921 and 1924 "the most significant pieces of "labor" legislation enacted during the post-World War I era.” Mills and Montgomery likewise observed "from the international viewpoint the morality of the postwar immigration policy of the United States may be questioned, but of its economic effect in raising real earnings there can be little question.” Lebergott, who attributed this tripling of real wages for urban workers that occurred in the 1920s to the substantial immigration reductions that occurred in this period, observed that "political changes in the supply of labor can be more effective in determining wages than even explicit attempts to fix wages.” What more powerful statement can be made about the significance of the adoption of reasonable immigration polices to the enhancement of worker welfare in the united States?"

7. Dropping Out Immigrant Entry and Native Exit From the Labor Market, 2000-2005, By Andrew Sum, Paul Harrington, and Ishwar Khatiwada (Center for Immigration Studies, September 2006). This is a paper on how immigration is driving American workers from the labor force.

8. The Impact of New Immigrants on Young Native-Born Workers, 2000-2005. This is another paper on the same subject as #7.

Finally, let's try the common sense approach. Why exactly does corporate America relentlessly demand open borders? Because they want  more Democratic voters in the US? More welfare costs? More crime?

Not very likely. 

How about wages that go down and down down? Doesn't that make a lot more sense?

If corporate America knows in its heart that mass immigration slashes wages, why can't Kevin Drum figure it out?