National Data | “Skills Shortage”—Or Immigration Overreach?


From Gates to Greenspan, business leaders say a mismatch between the skills of American workers and the needs of employers puts our ability to compete internationally at risk. And the growing U.S. income inequality is often blamed on this shortage of skilled workers and a glut of incompetents.

But University of Wisconsin sociologist Michael J. Handel begs to disagree. In his new book Worker Skills and Job Requirements: Is There a Mismatch?, he offers proof that American workers are as competent as those in other advanced nations.

Native-born Americans are, that is.

The apparent relative weakness in U.S. average cognitive skills vanishes when the effects of immigration are netted out. Handel points to the International Adult Literacy Survey (IALS), a test administered to working-age adults in 14 advanced industrialized countries between 1994 and 1998. The U.S. ranked 10th place overall, but our poorest performers (5th percentile) were dead last and our best performers (95th percentile) were 3rd highest. [Table 1.] The U.S. gap between top and bottom was the widest of all the countries surveyed.

Hendel cites studies showing this result is primarily the result of mass immigration. For example:

  • “Blau and Kahn…find that immigration accounts for a considerable portion of the greater test score inequality in the United States relative to eight other countries…When immigrants are excluded from the samples, the difference between test score inequality in the United States and other countries disappears completely for women and shrinks by 55 percent for men.  [Francine D. Blau and Lawrence M. Kahn, Do Cognitive Test Scores Explain Higher U.S. Wage Inequality?” National Bureau of Economic Research, Working Paper 8210, 2001.]

 

  • “….when Devroye and Freeman….exclude immigration from samples for the United States, Germany, the Netherlands and Sweden, they find differences in test score inequality between the United States and the other countries declines by approximately 40 percent…” [Daniel Devroye and Richard B. Freeman, “Does Inequality in Skills Explain Inequality in Earnings Across Advanced Countries?”, National Bureau of Economic Research, Working Paper 8140, 2001.]

Three points spring out from Hendel`s research.

  • The skills of U.S. immigrants are decidedly inferior to those of immigrants and native-born in other countries. This is quantified in another analysis of the IALS test scores: [Table 2]. U.S. immigrants scored 210, or 16 points less than the average of immigrants in other high-income countries. U.S. native born scored 284, or 8 points above the average of native-born in other high income countries.

 

 

  • Third, the presence of unskilled immigrants does enable U.S. employers to pay native-born workers less than their skill levels would otherwise warrant. We can infer this, for example, from the Devroye-Freeman paper, because the dispersion of skills among the native-born is less than the dispersion of skills among immigrants, but the inequality of income is the same.

Curiously, Handel`s publisher, the Economic Policy Institute, is a liberal operation that specializes in blanket defenses of (unionized) labor while doing its politically-correct best to ignore immigration`s impact.

Does EPI realize the implications of Hendel`s work? (Ask them.) Does he? (Ask him.)

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.