When economists minimize the impact of immigration on wages, they aren’t denying that immigration pushes wages down in the jobs that immigrants take. They concede that immigration does do that. They celebrate that immigration does that. Instead, they join their celebration of immigration’s wage-cutting effects with a prediction about the way that the natives will respond.
But what if the prediction is wrong? What if natives respond to immigrant competition by shifting out of the labor market entirely, by qualifying for disability pensions? The proportion of the population receiving disability pensions doubled between 1985 and 2005 and jumped by another 20 percent during the Great Recession. 14 million Americans now receive disability pensions. The evidence is compelling that disability applications rise when the job market weakens.
Why? Economists talk too blithely about natives shifting to more skilled and remunerative work. Up-skilling costs time, effort, and money. It can oblige a worker to move away from family and friends. It forces older workers to begin again at a time in their lives when they felt settled, to risk failure at a time in life when risk is not appreciated. It’s not highly surprising that many displaced workers would opt to give up on work altogether instead.
The exit of native-born men from the workforce—at least arguably because of immigration—has the curious side effect of tilting the immigration models in a pro-immigration direction. Remember, the models are based on ratios of hours worked and wages paid. If a native-born janitor earning $18 an hour is displaced by an immigrant and then shifts to a $12 an hour retail job, the models capture that change as a harm to native-born workers. But if the displaced native-born janitor exits the labor force, he disappears from the model altogether, and with him, the evidence of the harm. It may seem crazy, but it’s the way the model is built.
Third: Economists habitually regard the free movement of investment, goods, and people as the natural order of things. They don’t feel much need to explain such movements, any more than lawyers ask why people violate contracts or doctors ask why people fall off ladders.
Yet immigration is inescapably a political act. Nations can regulate immigration, can make choices about which immigrants they allow and how many, about how strictly labor laws will be policed and what will be done with lawbreakers.
Theoretically, a nation could determine that high-skill labor is complementary to low-skilled labor and make decisions such as the following:
“If we admit a lot of foreign-born surgeons, we could hugely drive down the cost of major medical operations. American-born doctors would shift their labor to fields where their language facility gave them a competitive advantage: away from surgery to general practice. This policy would hugely enhance the relative purchasing power of plumbers and mechanics, enabling them to eat out more often and buy more American-made entertainment, increasing GDP and creating jobs.”