The large influx of immigrants in recent decades has led to an equally long, still unresolved debate over their effect on the labor market outcomes of native-born workers. Economic theory posits that an increase in the supply of labor, such as from immigration, will reduce the wages and employment of native-born workers. Studies, utilizing two approaches to test the theory, have produced conflicting results with differing implications for public policy.
The concentration of foreign-born workers in certain cities and skill groups led some economists to posit that immigration’s greatest impact would be felt by similarly skilled native-born workers living in those areas. Studies thus have compared differences in labor market outcomes between native-born workers who live in high- versus low-immigrant areas and who most often compete for jobs with foreign-born workers; given the composition of the recent immigrant flow, these would be low-skilled U.S. workers. Most inter-area analyses have found scant evidence that foreign-born labor adversely affects the labor market prospects of U.S. workers in general. A few inter-area studies have estimated a slight negative impact on low-skilled natives—who represent a small share of total U.S. employment.
Other economists have argued that the inter-area approach underestimates immigration’s consequences because it assumes that labor, capital, and goods do not rapidly adjust to the immigration-induced increase in the supply of labor. If, for example, native-born competitors quickly decide to leave high-immigrant areas, their movements would spread any employment and wage effects due to immigration across the nation, and thereby make it difficult for spatially based research to detect any impact. Some analysts, therefore, have concluded that immigration’s labor market effects can best be identified by examining data at the national level. The economy-wide approach is not without its limitations, however. The relationship between internal labor migration and immigration remains unsettled as well.
Several national studies have estimated that immigration, given its composition in recent decades, has hurt—albeit to differing degrees—the labor market opportunities of the least skilled and experienced U.S. workers. If a policy goal is to improve the prospects of U.S. workers who have not graduated from high school, this research suggests that changing the skill composition of legal immigrants and reducing the flow of unauthorized aliens might be fruitful courses of action.
However, some of the very limited number of analyses that focus on high-skilled workers in particular (e.g., those in computer science and engineering fields) estimate that an increase in foreign labor adversely affects comparably skilled native-born workers. Thus, shifting the immigrant supply toward higher-skilled workers might not only harm this native-born skill group, but also undercut the most often recommended means of ameliorating immigration’s impact on low-skilled U.S. workers, namely, pursuing additional education.