When critics of immigration make their case, they often point to the labor market. The argument goes something like this: An increase in the supply of workers creates additional competition for jobs, and if immigrants are willing to accept lower wages than American-born workers, then it's the American workers who will suffer.
It’s true that an inflow of new, able-bodied workers generally means an increase in the labor supply, though immigration patterns affect industries differently. And that can certainly have an impact on the wages of some workers. But there’s another piece to this puzzle that is often overlooked—and that’s the increased demand for services that comes along with a burgeoning population.
A new working paper investigates this other side of the immigration equation. Researchers from Indiana University and the University of Virginia modeled demand within a local economy, using decennial census data and looking at the populations of metro areas. They specifically focused on demand for the goods produced by "non-tradable industry," meaning those goods and services that must be sold or tendered domestically by local workers, such as hospitality, teaching, retail, and construction. (Tradable industry, by contrast, includes things such as manufacturing, engineering, and other jobs that can be outsourced.) Part of the rationale behind this separation for the purpose of the study is that demand for tradable goods can be the result of forces outside of a local economy, while demand for non-tradable goods are beholden to population shifts within a specific location.