Medcalfe: Immigrant workforce can bring benefits

Medcalfe

This election cycle has generated much coverage of the immigration debate.

 

While there are many nuances to the larger topic, as an immigrant myself, I have taken an academic interest in the debate over the effects of immigrants on native workers.

Specifically, do less educated immigrants displace similarly skilled native workers because they are competing for the same jobs? Or do they increase employment opportunities because they provide complementary skills?

What are complementary skills? I was walking around a new housing development in town and saw some construction workers digging a trench while another welded. These skills are complementary because they can be used together. (Not to be confused with complimentary skills: “You did a great job with the presentation this morning.”)

Economic research on this topic is immense but plagued with methodological issues. We cannot run controlled experiments where one city is exposed to immigrants and an identical city is not because immigrants are not assigned to cities, but rather gravitate toward certain areas.

A new study has shown that low-skilled Mexican-born workers are more mobile than native workers, moving away from the Great Recession’s hardest-hit metro areas toward more favorable markets.

To overcome this selection problem, the University of Copenhagen’s Mette Foged and Giovanni Peri analyzed the Spatial Dispersal Policy of Den­mark, which distributed refugee immigrants independent of local labor market demand. The aim of the program was to disperse refugees across communities to even out the housing burden and also to create ethnic clusters.

Refugee immigrants were less educated, rarely spoke Danish and were often employed in unskilled occupations. Using data on all workers employed in Denmark from 1991 through 2008, Foged and Peri found that unskilled native workers moved to more com­plex jobs and saw a 1 percent to 1.8 percent increase in wages for each 1 percent increase in immigration.

They also found no negative effect on jobs – immigrants not displacing natives – because the two are imperfect substitutes for each other. Skilled native workers see an increase in wages of greater magnitude because their skills are complementary. The wage effects are permanent and long lasting (15 years).

One could argue that immigrants take future jobs from those who are currently unemployed, but Foged and Peri’s study, published in American Economic Journal: Applied Economics, found no evidence of this.

The impact of immigration is different across different demographics: Young, low-tenured, low-skilled native workers are more likely to retrain and transition to more complex jobs; older, high-tenured workers were less likely to acquire new skills and suffered displacement by immigrants.

Does any of this Danish study apply to the United States?

The authors argue that it does because both America and Denmark have high levels of labor market mobility. Other evidence comes from a study looking specifically at Georgia that finds documented workers see a wage boost of about 0.5 percent as the share of undocumented workers in a county increases by 1 percent.

The wage effect within the firm (of an increasing share of undocumented workers) is smaller, reflecting the spillover effect into the local economic area. The authors of this study, also published in American Economic Journal: Applied Economics, suggest this is most likely when documented workers are assigned to more complex tasks that require more communication skills. The increased specialization of labor and productivity makes a more efficient production process.

So all studies tend to show a small but positive impact of immigrants on native wages in the aggregate, but some groups benefit more than others.

 

SIMON MEDCALFE IS AN ASSOCIATE PROFESSOR OF FINANCE AND CREE WALKER CHAIR IN THE HULL COLLEGE OF BUSINESS AT AUGUSTA UNIVERSITY.

 

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Sun, 12/17/2017 - 20:02

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