Are immigrants to blame for America’s economic rut? In his recent cover story for The Atlantic, David Frum points to that belief as a major reason for the dynamics of the Republican primary, particularly Trump’s rise. In his final State of the Union address, President Obama pushed back against those who would answer that question in the affirmative, saying, “Immigrants aren’t the reason wages haven’t gone up enough; those decisions are made in the boardrooms that too often put quarterly earnings over long-term returns.”
Is Obama right?
The extent to which immigration impacts wages is a contentious and layered question. Critics of current immigration policy often cite the work of the economist George Borjas, a professor at Harvard, who finds that in both the long and short run, the impact of immigrants on wages can be deleterious, particularly for low-skilled workers. But Borjas also finds that the opposite can be true, and that the outcome on wages depends largely on the size of demand and the consumer base in a particular area of for a particular product. A recent paper from researchers at Indiana University and University of Virginia advances the finding that immigration can boost the economy overall since an influx of immigrants can actually create jobs in a local economy, as new residents generate demand for everything from housing, to haircuts, to restaurants. The wage effect is a bit less clear, the paper concedes. The research found that an influx of immigrants can cause a decline in wages for tradeable professions (things that can be outsourced like manufacturing or engineering) but can cause an increase in the wages for local workers in non tradable professions (jobs that must be done locally, like waitresses, retail, or hospitality professionals).
But on the bigger picture, Obama is right: The discussion of just how much wage suppression immigrants might be responsible for is a bit beside the point. The president’s argument during the State of the Union address was probably not that wage redistribution and suppression doesn’t exist, but instead that the level of wage dampening that immigration is actually responsible for in the broader scope of the problem pales in comparison to the wage suppression that has occurred since multi-billion dollar companies decided to prioritize rewarding shareholders first and workers last.