Open Borders Economists Have Gone Awfully Quiet About Wages

I don’t remember where I was the first time I heard the claim from otherwise serious economists that immigration doesn’t suppress wages. Immigrants are consumers as well as producers, the argument went, meaning they increase demand as quickly as supply in the labor market. I do know that I was not sipping a beverage at the time because, had I been, it would have come straight out my nose.

As an abstract description of the long-run equilibrium in a macroeconomic model, perhaps the claim contains a kernel of truth. Tight labor markets and strong wage growth can occur with a population of any size. As an analysis of immigration’s real-world effects, especially the surge of unskilled workers into a labor market’s low-wage segments, it is downright bizarre and plainly pretextual. Countless immigrants taking jobs in slaughterhouses won’t lead to lower quality, lower-paid jobs in the meat-packing industry, because immigrants also buy meat? Really, that’s the argument?

Before the issue became so thoroughly politicized, the effect of immigration on wages was well understood. A 1961 study funded by the National Bureau of Economic Research and published by Princeton University Press, Real Wages in Manufacturing: 1890–1914, opened:

The economic history of the United States has been marked by a strong and persistent rise in real wages. Only one period has seemed to stand out as an exception to this trend—the twenty-five years just before World War I. Previous students of this period have concluded that real wages from 1890 to 1914 were essentially stationary. … Many more immigrants came to the United States in this period than in any other of equal length, and more of them came from places where levels of skill and education were low. These forces could have worked to lower the incomes of wage earners relative to other incomes.

President Bill Clinton’s Commission on Immigration Reform, chaired by Democratic Congresswoman Barbara Jordan, concluded: “The commission finds no national interest in continuing to import lesser-skilled and unskilled workers to compete in the most vulnerable parts of our labor force.”

In 2006, Paul Krugman wrote in the New York Times, “a review of serious, nonpartisan research reveals some uncomfortable facts about the economics of modern immigration, and immigration from Mexico in particular.” He continued:

It’s intellectually dishonest to say, as President Bush does, that immigrants do “jobs that Americans will not do.” The willingness of Americans to do a job depends on how much that job pays—and the reason some jobs pay too little to attract native-born Americans is competition from poorly paid immigrants.

It must have been sometime during the Obama administration that the memo went out: Economists know high levels of low-skill immigration do not affect wages. But even then, that only applied to the U.S. market. When Donald Trump took office at the beginning of 2017, the Washington Post reported on the anticipated impact of migrant workers returning to Mexico: “More returnees means lower wages for everybody in blue-collar industries such as construction and automobile manufacturing, where competition for jobs is likely to increase, economists say.”

As I observed in The Once and Future Worker in 2018:

No prominent American newspaper would ever include such a nonchalant observation in a report about the U.S. labor market. But stripped of the fraught emotional context surrounding domestic immigration debates, … describing the dynamic proved unproblematic. Neither reporter nor editor bothered to include caveats or highlight countervailing benefits. There was no need even to put any particular economist on the record. Of course a sharp increase in the supply of unskilled labor would force blue-collar wages lower.

And then came the inflation of the Biden administration, and the script flipped back again, so quickly that editors had difficulty keeping up.

On December 4, 2023, the New York Times was still policing any criticism of immigration. In response to my claim in an interview that “strong immigration enforcement, reduction of immigration into low-wage segments of the labor market and the elimination of guest worker programs are pro-labor policies,” the Times appended an editor’s note: “The economic impact of low-wage immigrants on low-skill wages is debated; some economists argue there is an effect, while others contend there is close to zero effect.”

Four days later, on December 8, the Times reported on the latest labor-market developments: “That influx of workers, which includes a recovery in immigration flows, has also taken the air out of wage increases, and made it more difficult for people on the margins of the labor market to find stable jobs with decent pay.”

With so much concern about inflation, immigration had magically become a tool for fighting inflation. Perhaps the most nakedly opportunistic effort came from FWD.us, a group lobbying for higher immigration levels, which published an entire report titled, To lower inflation, America needs more immigration to alleviate national labor shortages. “When labor is in short supply relative to demand, employers offer higher wages, which are in turn passed on to consumers, leading to rising prices,” the authors argued. “A significant driver is the lower number of immigrants who have entered the U.S. in the past several years.”

“Immigration has been a key part of Biden’s economic success,” argued Paul Krugman earlier this year. “Inflation has come down so easily in part because of strong labor force growth. How much of that growth can be attributed to foreign-born workers? All of it.” He went on to note: “So employment is being constrained by supply, not demand. Foreign-born workers expand the supply.” What happened to the comparable demand that immigrants create as well, which would presumably exacerbate labor shortages and drive inflation higher? Never mind.

But now it is 2024 and we’re not supposed to talk about inflation anymore, so selling immigration as a way to suppress wages is once again rather unattractive. Having just spent a few years selling it on exactly those terms, the time is not yet ripe for another 180-degree pivot back to arguing that the effect on wages is negligible—give it a year or two. In the meantime, wages simply will not be mentioned at all.

Heidi Shierholz, president of the labor-aligned Economic Policy Institute, recently unleashed a 12-part thread on X about how mass migration has not hurt American workers, failing to cite any data related to wages. Krugman went 1,200 words on immigration’s economic effects without mentioning wages once. Wages are the sort of thing progressive economists would typically focus on intensively, but not anymore.

Instead, the talking point is growth. “The U.S. economy has defied pessimistic forecasts, with 200,000 jobs added a month, real growth in gross domestic product at 3% in the past year, and an inflation rate that has fallen dramatically in the past few years,” celebrated Jason Furman in the Wall Street Journal. “The biggest factor behind this strong economic performance is immigration.” Yet within two paragraphs, Furman was back to asserting that immigrants are:

also consumers who generate demand and the need for more jobs. Historically, when the U.S. economy faces structural changes as a result of variations in the labor supply—whether through a surge in immigrants, women entering the workforce or other demographic changes—supply and demand increase roughly in tandem, raising or lowering the economy’s potential growth rate without triggering changes to the unemployment rate or inflation.

Were immigrants “the biggest factor” behind “an inflation rate that has fallen dramatically” or are immigrants “also consumers who generate demand” who thus avoid “triggering … inflation”? The economics is beside the point. The point is more immigration.

“Illegal aliens are coming into the country, and taking away our jobs,” said Joe Biden in his debate last month with Donald Trump. “There’s a reason why we have the fastest growing economy in the world.” This may be narrowly correct. A growing workforce will typically translate into higher GDP. And if overall GDP growth is the goal unto itself, then all forms of immigration might make sense. If reducing consumer prices is the goal, then welcoming as many workers willing to work for as little as possible might indeed be the right choice. But if improving labor-market outcomes for the nation’s less-skilled, lower-wage workers is the central objective, the economic case for unskilled immigration collapses.