I've been putting a lot of work into it, and thus have been unable to post for a while. This could continue for another week or two. I apologize for the inconvenience, as I know you are all desperate to hear my ponderings on all matters. The truth is all the topics I planned to comment on before my recent job market blitz are now so stale that I will probably have to find new ones.
In the meantime, though, I thought some of you might find this piece at VoxEU interesting. It offers a plausible explanation and some additional evidence that increased immigration (legal or otherwise) does not hurt wages in the host country. On the contrary, if anything they seem to increase wages for native workers:
Several studies find that immigrants do not harm the wages and job prospects of native workers. This column seeks to explain these somewhat counterintuitive findings by emphasizing the scope for complementarities between foreign-born and native workers. Examining 14 European countries from 1996 to 2007, it finds that immigrants often supply manual skills, leaving native workers to take up jobs that require more complex skills – even boosting demand for them. Immigrants replace “tasks”, not workers.Non-economists may find the material a bit dry, but I did want to offer their explanation:
In a recent working paper (D’Amuri and Peri 2010), we provide a potential explanation for this phenomenon, analysing European labour markets and immigration over the period 1996-2007. Our paper follows a similar analysis one of us did for the US (Peri and Sparber 2009). Rather than considering the labour market as made up of homogeneous and identical workers with potentially different skill levels, we consider that production is divided into a series of tasks that can be organised in a continuum spanning from simple-routine and prevalently manual tasks to complex-interactive and prevalently cognitive tasks.
Companies have to perform a range of these tasks in order to produce goods or services; hence the increased supply of some of them may increase the demand for others. For instance, for a construction company the supply of more construction workers performing manual tasks (such as installing dry-walls and raising foundations) generates the need for more construction supervisors, technicians, engineers, clerks, and sale representatives (as the company grows) who typically perform more interactive and complex tasks. As these tasks are all needed to produce final goods (they are “complementary” with each other), if immigrants and native workers specialise in different segments of the task-specialisation spectrum, then more immigrants can generate higher demand for natives.This work is hardly the final word on the matter, but the simple fact that differences between workers matter means simple supply-demand logic isn't good enough to sort out the effect of more immigrant workers on native workers. The empirical evidence in the literature is pretty strong, so the burden of proof is really on those who want to say immigration hurts natives, rather than the other way around.
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Right, I suppose the question then becomes: do all the native workers who are now being out-competed at, say, manual labor actually find new jobs supervising, or just wind up un-employed. My anecdotally-based feeling is that it's a little of both.
Joel, I've actually seen some data on that very question, as it's an important one. I don't know the exact nature of the jobs themselves, but more than half (and my memory suggests closer to two-thirds, but don't quote me on that number) of workers displaced like this find jobs that pay at least as well as their previous jobs, and a fair number find jobs paying noticeably more. When you're comfortable in your job, you often don't look for a better one even if your skills improve... unless forced, of course.
The bad news is that it takes a while to find a new job, as long as 2-3 months in good economic times. Obviously longer now. And there are a fair number of people who can't earn what they previously did when immigrants take over the jobs or a company outsources a plant. This is in large part due to workers who were earning above market wages due to union contracts.
But the key to keep in mind is that virtually *no one* "winds up unemployed." Even right now, during the worst job market of our or our parents generations, there is a huge amount of hiring going on. The rate of discouraged workers is still fairly low (less than 1% the size of the labor force).
"The rate of discouraged workers is still fairly low (less than 1% the size of the labor force)."
Low relative to what? Total size? The recent jobs report shows that we hit a new record.
"A heartening jobs report last week masked an ominous statistic: Discouraged workers hit a record 1.2 million."
http://www.usatoday.com/money/economy/employment/2010-11-08-discouragedworkers08_ST_N.htm
What I worry about is if the over-55 workers cannot advance into these new more skilled positions. Some of them surely will, but many may already be at the top level of their performance
If these jobs are replaced by immigration where do they go?
As the Social Security programs increase the retirement age or as more Americans depend on social security payments as part of their retirement plan, how do manual laborers (low skilled) deal with working longer?
Their bodies cannot expect to operated as well as a 20-40yr old at age 60 in a manual labor environment and if they are unskilled in other ways, yet too young for Social Security payments, do they simply work until they are disabled from work?
Consider the plight of an older workforce that doesn't sit in a chair all day. Looks pretty bleak.
"Low relative to what?"
Relative to the size of the labor force. I don't mean to demean discouraged workers, only to point out that talking about people "winding up unemployed" in any sort of permanent fashion is an extremely rare occurrence, even as bad as things are now.
And yes, the most recent numbers are very bad, but our current high rates of discouraged workers are hardly due to an influx of immigrants, legal or otherwise. Actually, immigration of all sorts is substantially down recently. What would help these workers the most would be greater demand for all services, and increased immigration actually helps demand. I have yet to see any real evidence that an influx of immigrants now wouldn't make us all much better off, as such demographic shifts have done for the US in the past.
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