How Unskilled Immigrants Hurt Our Economy

Steven Malanga For City Journal (Part III of VI)

A handful of industries get low-cost labor, and the taxpayers foot the bill.

The flood of immigrants, both legal and illegal, from countries with poor, ill-educated populations, has yielded a mismatch between today’s immigrants and the American economy and has left many workers poorly positioned to succeed for the long term. Unlike the immigrants of 100 years ago, whose skills reflected or surpassed those of the native workforce at the time, many of today’s arrivals, particularly the more than half who now come from Central and South America, are farmworkers in their home countries who come here with little education or even basic training in blue-collar occupations like carpentry or machinery. (A century ago, farmworkers made up 35 percent of the U.S. labor force, compared with the under 2 percent who produce a surplus of food today.)

Nearly two-thirds of Mexican immigrants, for instance, are high school dropouts, and most wind up doing either unskilled factory work or small-scale construction projects, or they work in service industries, where they compete for entry-level jobs against one another, against the adult children of other immigrants, and against native-born high school dropouts.

Of the 15 industries employing the greatest percentage of foreign-born workers, half are low-wage service industries, including gardening, domestic household work, car washes, shoe repair, and janitorial work. To take one stark example: whereas 100 years ago, immigrants were half as likely as native-born workers to be employed in household service, today immigrants account for 27 percent of all domestic workers in the United States.

Although open-borders advocates say that these workers are simply taking jobs Americans don’t want, studies show that the immigrants drive down wages of native-born workers and squeeze them out of certain industries. Harvard economists George Borjas and Lawrence Katz, for instance, estimate that low-wage immigration cuts the wages for the average native-born high school dropout by some 8 percent, or more than $1,200 a year. Other economists find that the new workers also push down wages significantly for immigrants already here and native-born Hispanics.

Consequently, as the waves of immigration continue, the sheer number of those competing for low-skilled service jobs makes economic progress difficult. A study of the impact of immigration on New York City’s restaurant business, for instance, found that 60 percent of immigrant workers do not receive regular raises, while 70 percent had never been promoted. One Mexican dishwasher aptly captured the downward pressure that all these arriving workers put on wages by telling the study’s authors about his frustrating search for a 50-cent raise after working for $6.50 an hour: “I visited a few restaurants asking for $7 an hour, but they only offered me $5.50 or $6,” he said. “I had to beg [for a job].”

Similarly, immigration is also pushing some native-born workers out of jobs, as Kenyon College economists showed in the California nail-salon workforce. Over a 16-year period starting in the late 1980s, some 35,600 mostly Vietnamese immigrant women flooded into the industry, a mass migration that equaled the total number of jobs in the industry before the immigrants arrived. Though the new workers created a labor surplus that led to lower prices, new services, and somewhat more demand, the economists estimate that as a result, 10,000 native-born workers either left the industry or never bothered entering it.

In many American industries, waves of low-wage workers have also retarded investments that might lead to modernization and efficiency. Farming, which employs a million immigrant laborers in California alone, is the prime case in point. Faced with a labor shortage in the early 1960s, when President Kennedy ended a 22-year-old guest-worker program that allowed 45,000 Mexican farmhands to cross over the border and harvest 2.2 million tons of California tomatoes for processed foods, farmers complained but swiftly automated, adopting a mechanical tomato-picking technology created more than a decade earlier. Today, just 5,000 better-paid workers—one-ninth the original workforce—harvest 12 million tons of tomatoes using the machines.

The savings prompted by low-wage migrants may even be minimal in crops not easily mechanized. Agricultural economists Wallace Huffman and Alan McCunn of Iowa State University have estimated that without illegal workers, the retail cost of fresh produce would increase only about 3 percent in the summer-fall season and less than 2 percent in the winter-spring season, because labor represents only a tiny percent of the retail price of produce and because without migrant workers, America would probably import more foreign fruits and vegetables. “The question is whether we want to import more produce from abroad, or more workers from abroad to pick our produce,” Huffman remarks.

For American farmers, the answer has been to keep importing workers—which has now made the farmers more vulnerable to foreign competition, since even minimum-wage immigrant workers can’t compete with produce picked on farms in China, Chile, or Turkey and shipped here cheaply. A flood of low-priced Turkish raisins several years ago produced a glut in the United States that sharply drove down prices and knocked some farms out of business, shrinking total acreage in California devoted to the crop by one-fifth, or some 50,000 acres. The farms that survived are now moving to mechanize swiftly, realizing that no amount of cheap immigrant labor will make them competitive.