June 2, 2016

Wage Gap and Illegal Immigration

[From article]
There is a close long-term correlation between low-skill wages and illegal immigration. An influx of low-skilled labor drives down wages at the bottom of the income scale, aggravating the wage gap and social divisions, providing fodder for left wing demonization of the prosperous and successful.
The normal equilibrating capacity of a market economy is short circuited when the influx of low-skill illegal immigrants is nationwide. If American workers could easily escape to another country offering higher wages, then wages in the USA would quickly recover from a surge of immigrant workers, and employers would gain only a short-lived benefit. So, it might not be worth paying off politicians to import cheap labor from poor countries.
The Mariel Boatlift event provides a demonstration of this. Wages were hammered down in a local economy (Miami) by a flood of refugees and then recovered as workers scattered to surrounding areas with higher wages. The whole process took 10 years.
Miami Wages after the Mariel Boatlift
Harvard professor George J. Borjas has been called "America’s leading immigration economist" by BusinessWeek and The Wall Street Journal. The good professor recently surprised himself and outraged many of his pro-immigration colleagues with a study measuring the dive in wages for low-skill natives in Miami after the Mariel boatlift of 1980.
[. . .]

The Gap predictor works fairly well for the US as a whole because there is no foreign country where a low-skill worker can get enough of a pay raise to make it worth the move. So, the wages stay depressed for about 40 years, until the immigrant workers retire.
It is easy to say that immigrants can upgrade their schooling and training and thus reduce the surplus of low-skill labor. In practice, it is usually very difficult, especially while raising kids. For example, Senator Marco Rubio’s father spent his career mostly as a hotel bartender. He was also a street vendor, security guard, apartment building manager and crossing guard. Rubio’s mother worked as a maid and Kmart store clerk.
They stayed in low-skill jobs over their entire working careers. Their children did very well, however. If the children of immigrants do as well as the children of natives, then the depression of low-skill wages goes away unless more low-skill workers are brought into the country.
If the children and grandchildren of a large class of immigrants remain low-skill workers like their parents, then my simple Gap predictor no longer works and we are left with a persistent underclass of people who continue to cause a surplus of low-skill workers and thus continue to depress low-skill wages.
Unfortunately, this is the case for most of the illegal immigrants that are continuing to pour into the country.

Another Permanent Underclass?
If the illegals are allowed to stay, the effects will be dire, according to the findings of Gregory Clark, Professor of Economics at the University of California, Davis. “Immigration to the United States … rarely changes one’s social status,” he concludes after extensive study and many published works. His recent book is about the tendency of descendants within a family to stay in the same social class as their ancestors.
[. . .]
But if current immigration policy is continued, the “United States is likely to soon have the unprecedented situation of fostering a semi-permanent underclass.” This lack of social mobility from one generation to the next is a result that no government uplift program has been able to erase, according to Clark’s study of government efforts in Sweden, the US, and elsewhere.
[. . .]
A society over-loaded with low-skill workers will have lower wages in that category until the surplus disappears, which in this case might be generations away.
I estimate that enforcing the law and deporting all illegals would raise real low-skill wages by about 20% to 40% within 6 years, providing immediate relief to the oppressed low-skill citizens of our country.
[. . .]

A more skilled population would increase the historical trend of economic growth in this country. We might even become the richest per capita country in the world.


June 2, 2016
Illegal Immigration and the Wage Gap
By David Lee

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