Repost: Why immigration doesn’t reduce wages

From Noah Smith:

With the return of the border crisis and Biden’s plans for a big new immigration reform, it looks like the immigration issue is heating up again. In the coming year we’re probably going to hear lots of very heated arguments from a lot of different angles, and I’m inevitably going to be blogging about some of these. But one aspect of the immigration debate that I feel like I’ve already dealt with pretty well is the question of wages.

A lot of people think immigration lowers wages for native-born Americans. This is true of both immigration opponents, but also of some supporters, who think an influx of workers will help restrain inflation. This is a natural thing to think, since everyone knows that immigration increases labor supply. But what fewer people realize is that immigration also raises labor demand, which tends to cancel out the downward pressure on wages. In late 2020 I wrote a post called “Why immigration doesn’t reduce wages”, in which I explained how this works and listed a bunch of the relevant evidence. I wanted it to be a useful and comprehensive guide that people could come back to again and again.

In this post, I’m going to explain why immigration doesn’t lower wages for native-born people (except possibly a little bit, in a few special circumstances). But before I do that, there’s one thing you really have to understand: No one is going to be persuaded by this post. There are two reasons for this.

First, people don’t really believe social science evidence. It took years and years of empirical research — solid results, almost all pointing in the same direction — just to shift academic economists’ opinions on the effects of minimum wage. The average person, not being an academic economist, has even less of an idea of how reliable social science research is.

Second, in my experience, anti-immigration people are completely set in their belief that immigration should be restricted. It’s their fixed north star. The justifications change — Lower wages! Environmental destruction! Brain drain! Rule of law! Cultural change! — but the policy conclusion never wavers. They know what they want to do.

So this post isn’t going to persuade anti-immigration people to change their stance, and it’s probably not going to persuade many normies to be up in arms about the need to let in more immigrants, either. But it’s still important to write, and not just because I’m a stubborn S.O.B. who will die face-down in the muck fighting for The Empirical Evidence. It’s because in another 20 years or so, when America’s current freakout over identity and nationhood has passed, we’re hopefully going to be ready to let in a bunch of immigrants again. And when that time finally comes, these arguments will matter.”

Continue reading here.

Posted by at 5:15 PM

Labels: Macro Demystified


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