Immigration, Poverty and Low-Wage Earners
The Harmful Effect of Unskilled Immigrants on American Workers
A 28 page report
by Eric A. Ruark, Director of Research and Matthew Graham
by Eric A. Ruark, Director of Research and Matthew Graham
May 2011
Executive Summary
Today’s immigration system is dysfunctional because itis notresponsive to thesocioeconomic conditions of the country. Only a small share of legally admitted immigrants is sponsored by employers while the bulk are admitted because of family ties to earlier immigrants who may be living in poverty or near poverty. As a result, immigration contributes to an already-existing surplus of low-skilled workers, increasing job competition and driving down wages and conditions to the detriment of American workers. The presence of a large illegal workforce perpetuates a vicious cycle as degraded work conditions discourage Americans from seeking these jobs and make employers more dependent on an illegal foreign workforce. America’s massive low-skill labor force and illegal alien population allow employers to offer low pay and deplorable conditions.
These harmful effects of the immigration system were recognized in the reports of the U.S. Commission on Immigration Reform in the mid 1990s. The Commission’s immigration reform recommendations were welcomed by President Clinton and submitted to Congress, but have largely been ignored since then. Conditions for America’s poorest workers have continued to deteriorate because of both illegal and legal immigration. Reform of the immigration system to assure that it does not harm Americans and instead contributes to a stronger more equitable society is long overdue. The reforms that are needed include ending family-based chain migration and unskilled immigration, ending the job competition for America’s most vulnerable citizens by curtailing illegal immigration and unskilled legal immigration, and holding employers accountable for hiring illegal workers.
The U.S. has a responsibility to protect the economic interests of all of its citizens, yet the immigration system, which adds hundreds of thousands to the labor force each year, is bringing in workers faster than jobs are being created. Moreover, only a small portion of admissions are based on skills or educational criteria, creating an enormous glut of low-skilled workers who struggle to rise above poverty. In 1995, the U.S. Commission on Immigration Reform recommended curtailing family-based immigration and replacing the “failed and expensive regulatory system [for skill-based immigration] with one that is market-driven.” Along these lines, the Commission recommended that, “it is not in the national interest to admit unskilled workers” because “the U.S. economy is showing difficulty in absorbing disadvantaged workers.”1 Fifteen years later, U.S. politicians continue to ignore these recommendations, bowing to corporate demands for unskilled labor rather than taking a realistic look at immigration’s effect on poverty and the American worker.
Current calls for “comprehensive immigration reform” are nothing short of a push for a massive amnesty that would give permanent status to millions of illegal aliens who are not needed in the workforce, and it would reward unscrupulous employers who profited from hiring illegal workers, providing them with a legal low-wage workforce that would continue to have a negative impact on native workers. The border is not secured and there is much opposition to the mandatory use of E-Verify and interior enforcement. Those who argue against enforcement are not going to decide overnight to support these measures, and politicians have long ago proven that their promise to enforce immigration laws after granting amnesty are not to be believed.
This report contains the following findings:
- In 2009, less than 6 percent of legal immigrants were admitted because they possessed skills deemed essential to the U.S. economy.
- Studies that find minimal or no negative effects on native workers from low-skill immigration are based upon flawed assumptions and skewed economic models, not upon observations of actual labor market conditions.
- There is no such thing as an “immigrant job.” The reality is that immigrants and natives compete for the same jobs and native workers are increasingly at a disadvantage because employers have access to a steady supply of low-wage foreign workers.
- Low-skilled immigrants are more likely than their native-born counterparts to live in poverty, lack health insurance, and to utilize welfare programs. Immigrants and their children made up 32 percent of those in the United States without health insurance in 2009.
- Research done by the Center for American Progress has found that reducing the illegal alien population in the United States by one-third would raise the income of unskilled workers by $400 a year.
- Defenders of illegal immigration often tout the findings of the so-called Perryman Report to argue that illegal aliens are responsible for job creation in the United States; yet, if one accepts the Perryman findings as true, that would mean that only one job is created in the United States for every three illegal workers in the workforce.
- It is true that if the illegal alien population decreased the overall number of jobs in the U.S. would be reduced, but there would be many more jobs available to native workers –jobs that paid higher wages and offered better working conditions.
Importing Poverty
Immigration policy’s effect on the labor force should be carefully considered, but the vast majority of immigrants are not admitted based on education or skill level. In 2009, the U.S. admitted over 1.1 million legal immigrants, just 5.8 percent of whom possessed employment skills in demand in the United States. By contrast, 66.1 percent were based on family preferences, or 73 percent if the relatives of immigrants arriving on employment visas are included. 16.7 percent of admissions were divided among refugees, asylumseekers and other humanitarian categories, while 4.2 percent of admissions were based on the diversity lottery (which only requires that winners have completed high school). Some family-based immigrants may be highly educated or skilled, but the vast majority of admissions are made without regard for those criteria.
The immigrant population reflects the system’s lack of emphasis on skill. Nearly 31 percent of foreign-born residents over the age of 25 are without a high school diploma, compared to just 10 percent of native-born citizens. Immigrants trail natives in rates of college attendance, associate’s degrees, and bachelor’s degrees, but earn advanced degrees at a slightly higher rate (10.9 percent, compared to 10.4 percent for natives). Illegal immigrants are the least-educated group, with nearly 75 percent having at most a high school education. Overall, 55 percent of the foreign-born population has no education past high school, compared to 42 percent of natives.
The median immigrant worker has an income of $30,000 per year, trailing native workers by about 18 percent. At $22,500 per year, illegal aliens make even less than their legal counterparts. Though U.S.-born children of legal immigrants are no more likely to be in poverty than those in native households, the children of illegal aliens and foreign-born children of legal immigrants are nearly twice as likely to live in poverty.
Both legal and illegal immigrants lag significantly behind natives in rates of health insurance coverage. Just 14 percent of native adults were uninsured in 2008, compared to 24 percent of legal immi-grants and 59 percent of illegal aliens. Children were even more disproportionately uninsured. These low rates of insurance come despite a higher use of Medicaid than native households, 24.4 percent versus 14.7 percent in 2007. Overall, immigrants and their children make up about one-third of the uninsured population.
Immigrants in the Labor Market
A common argument adopted by defenders of illegal immigration is that illegal aliens only take jobs that natives are unwilling or unable to do. In reality, immigrants and natives compete in the same industries, and no job is inherently an “immigrant job.” Less than 1 percent of the Census Bureau’s 465 civilian job categories have a majority immigrant workforce, meaning that most employees in stereotypically “immigrant occupations” like housekeeping, construction, grounds keeping, janitorial service, and taxi service are actually natives.
The U.S. economy is oversaturated with unskilled labor. In May 2010, the unemployment rate for high school dropouts reached 15 percent, compared to just 4.7 percent among those with a bachelor’s degree. If one included workers who are employed part-time for economic reasons or want a job but have given up looking, many more millions of unemployed or underemployed workers are added to that total. Based on this measure, economists Andrew Sum and Ishwar Khatiwada used Current Population Survey data to peg the underutilization rate of high school dropouts at 35 percent, compared to 21 percent for high school graduates, 10 percent for bachelor’s recipients, and just 7 percent among advanced degree-earners.
Wage data and occupational patterns also indicate an unskilled labor surplus. The lowest rates of underutilization were found to be in “professional and managerial jobs” like legal, computer, and math-related occupations. Low skill jobs had by far the highest underutilization rates, with food preparation and service at 24.7 percent, building and grounds cleaning at 24.6 percent, and construction at 32.7 percent. Even before the current economic downturn, indicators revealed a surplus of unskilled labor, as real hourly wages declined by 22 percent among male high school dropouts between 1979 and 2007. For male high school graduates, the drop was 10 percent. Over the same period, real wages for college graduates rose by 23 percent.
The current economic slowdown has reduced labor demand and forced many out of work, making it more important than ever to address the unskilled labor surplus. The labor force participation rate dropped from 63 percent in 2007 to 58.5 percent in June 2010, even while the unemployment rate more than doubled. Job competition has also greatly increased since the onset of the recession. The number of job seekers per job increased from about 1.5 in April 2007 to 5.0 in April 2010, a figure that does not account for underemployed or discouraged workers.
Immigration policy and enforcement are two of the most important determinants of America’s labor supply, and the U.S. immigration system continues to contribute to the unskilled labor surplus, while the federal government has consistently failed to enforce the laws prohibiting the employment of illegal workers. Between 2000 and 2007, immigration increased the supply of high school dropouts in the labor force by 14.4 percent, compared to just a 2 to 4 percent increase for groups with higher educational attainment.18 A large share of the increase in unskilled labor was caused by illegal entry — over the same period, an estimated four million illegal immigrants took up residence in the U.S., about two million of whom had no diploma and another million of whom had no education past high school.
The large influx of unskilled, sometimes desperate workers has allowed employers to offer low wages and deplorable conditions. Special interests have successfully promoted the myth that Americans refuse to do some jobs, but in truth, immigrants and natives work alongside one another in all low-skill occupations. Reducing low-skill immigration, especially illegal immigration, would tighten the labor market and force employers to increase wages and improve working conditions.
The empirical attempts at supporting the claim that there are not enough Americans to do certain jobs are extremely short-sighted. Some reports, including the Immigration Policy Center’s “Untying the Knot” series, have taken any observable demographic difference between immigrants and natives to imply that they do not compete for jobs. In one case, the authors write that, “[t]here were 390,000 unemployed natives without a high‐school diploma who had no occupation, compared to zero employed recent immigrants without a high‐school diploma.” In other words, the authors limit the sample to people who report having no occupation, then claim that because no immigrants who do have an occupation have the same education level as some unemployed natives, there is no competition between immigrants and natives. This is not evidence of anything.
Every “finding” made in the “Untying the Knot” series is consistent with an assumed lack of immigrant-native competition. The authors attempt to prove that immigrants and natives of different skill levels live in different parts of the country by making observations like, “the largest share (26.9 percent) of all employed recent immigrants without a high school diploma lived in the Pacific states … [b]ut the largest share (18.9 percent) of unemployed natives without a high‐school diploma lived in the East North Central states.” These percentages gloss over the reality that there are millions of low-skill natives in Pacific states and millions of immigrants in East North Central states. The authors attempt to use slight differences in regional demographics to mask the fact that there are immigrants and natives competing within the same skill levels and occupations in every part of the country.
Just as importantly, the study’s attempt to use regional differences to disprove immigrant-native competition is seriously flawed. Downward wage pressure and job displacement occurs nationally, rendering local differences less significant. For example, the shift toward illegal labor in the meatpacking industry moved production from urban to rural areas and applied cost-cutting pressure to meat producers everywhere. Natives in one part of the country lost jobs to illegal immigrants in another part. The claims in “Untying the Knot” are meaningless and misleading, and the premise of the claims out of touch with the realities of the U.S. labor market. Nonetheless, pro-amnesty groups apparently found the report’s baseless conclusions to be quite useful — the Immigration Policy Center, an offshoot of the American Immigration Lawyers Association, touted the report as its second most utilized resource in 2009.
Others looking to justify a need for unskilled labor treat employers as if they were not interested parties. Employers often claim shortages of unskilled labor to justify their need for a constant supply of migrant workers, whether legal or illegal. These claims are not backed by wage patterns or employment data. In fact, employers do not take full advantage of existing unskilled worker programs. The H-2A visa for temporary agricultural workers is uncapped, meaning that employers could legally bring in as many seasonal laborers as they need through the H-2B visa program, the demand for which was so low in 2009 that USCIS extended the application deadline and ultimately left about 10,000 visas unclaimed at the end of the year.23 Claims that farmers would be unable to harvest their crops without illegal immigrants are pure fiction. Instead, they could use legal immigrants or natives.
In addition to the practice of hiring illegal aliens rather than using legal guest worker programs, employers have turned away from hiring teens. The steep decline in teen employment since the 1980s, both year-round and during the summer, is unprecedented for any demographic group in American history. Teen summer employment hit a 60-year low in 2008, with just 32.7 percent of teens holding a summer job. Over 3.4 million teens were either unemployed, underemployed, or part of the labor force reserve that summer. The households who have suffered most are the ones that would benefit most from another income-earner — low-income teens were nearly twice as likely to be underutilized as high-income teens.
Overall, there is a massive pool of unskilled natives that needs work. In May 2010, 7.1 million natives with a high school diploma or less were unemployed, another 3.1 million were not considered part of the labor force but reported wanting a job, and 2.7 million more were working part-time for an economic reason. It would make no sense to grant permanent legal status and full job market access to millions of unskilled illegal alien workers at the expense of these 12.9 million natives, not to mention the millions more whose wages have been undercut by low-skill immigration. Politicians should not succumb to corporate America’s addiction to evergrowing quantities of unskilled immigrant labor.
Impact on Poor Americans
Regardless of their views about the overall economic effect of immigration, almost all economists agree that poor native workers bear the brunt of its negative consequences. Foreign-born workers compete with natives on all skill levels, but because immigrants to the U.S. are disproportionately unskilled, they are especially likely to undercut the wages of low-skill natives. An analysis of America’s 25 largest metropolitan areas showed that in highskill industry groups like health professionals, technicians, administrative workers, and educators, immigrant earnings were usually within 10 percent of native wages; however, in unskilled groups like construction, machine operators, drivers, and farming, foreign-born workers consistently earned at least 10 percent less than their peers. Immigrant-native competition is an important concern in high-skill jobs, but is much more acute in low-skill industries.
Illegal aliens are the least skilled subset of the immigrant population, and therefore the most likely to undercut the wages and working conditions of low-skilled natives. Among seventeen industry categories named by the Pew Research Center as having the highest proportions of illegal aliens, data from the Current Population Survey reveal that noncitizens earned lower wages than natives in all but one of them. Data for noncitizens, which includes legal and illegal immigrants as well as temporary laborers, differ from data on illegal aliens because the latter tend to have lower wages and fewer skills. However, data on noncitizens are a much better fit for illegal aliens than using the foreign born population as a whole. In construction, noncitizens earned less than twothirds of natives’ wage salaries, and in the two agricultural categories, they earned less than half. Wage and salary differences demonstrate how illegal and unskilled immigrants place downward pressure on wages by providing an incentive for employers to choose them over natives. The opportunity to exploit workers is the reason big business clamors for more immigrant labor.
Most wage-effect studies do not analyze illegal immigrants as a separate group because most demographic data is not differentiated on that basis. However, what evidence does exist indicates that they constitute a major drag on unskilled wages. In 2010, Raúl Hinojosa-Ojeda of the Center for American Progress estimated that unskilled workers would on average make about $400 more per year if the illegal immigrant population were reduced by 4 million, or approximately one-third.30 In Georgia, where the illegal immigrant share of the labor force went from about 4 percent to 7 percent from 2000 to 2007, a study by the Federal Reserve found that the illegal labor caused a 2.5 percent wage drop overall and an 11 percent drop in construction wages over the period. This analysis used a confidential state employer database that helped identify Social Security mismatches, making it one of the most sophisticated estimates available.
Other estimates focus on the entire immigrant population, whose education is comparable to natives at the high end but overwhelmingly unskilled at the other end of the distribution. The National Research Council’s landmark 1997 study estimated that high school dropouts earn 5 percent less per year due to immigration, which totaled $13 billion in wage losses at a time when the illegal alien population stood at less than half its present number. Harvard University’s George Borjas concluded that immigration reduced wages for the poorest 10 percent of Americans by about 7.4 percent between 1980 and 2000 with even larger effects for workers with less than 20 years of experience.33 Other economists who have found that immigration depresses low-skilled wages include the Cato Institute’s Daniel Griswold. If legal and illegal immigration continue to add to the overabundance of unskilled workers, the consequences for poor natives will continue to grow.
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