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Immigration can bring small overall gains but uneven wage effects
edited by Lisa Lock , reviewed by Andrew Zinin
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Add as preferred source Immigration can produce a small economic gain for the native-born population overall while causing larger shifts in wages between different groups of workers, according to new research co-authored by King's Business School.
The model predicts that wages fall in lower-paid occupations, where migrant workers are overrepresented, and rise elsewhere. The findings suggest that headline averages can conceal important differences across the labor market.
In the paper , "The Immigration Surplus Revisited," researchers revisit the "immigration surplus," the idea that immigration can benefit the native-born population overall. First proposed by economist George Borjas in 1995, the theory suggests that immigration delivers an aggregate economic gain for previous residents, even though that gain may not be shared equally.
The paper, accepted for publication in The Economic Journal , shows that this result holds under a much wider range of economic conditions than previously established. This includes different mixes of workers and capital, different relationships between them, and situations in which immigration changes the prices of goods as well as wages.
Using U.S. data, the researchers estimated that increasing total employment by 1% through immigration would create an overall gain for the native-born population equal to around 0.01% of earnings. Although the overall benefit is small, the effects on wages in different occupations can be larger.
How those effects are distributed depends on the skills that migrants bring. If migrant and native-born workers have the same mix of skills, the model predicts no overall surplus and no redistribution between native-born workers. As the differences between the two groups increase, so does the overall gain, but the effects on relative wages also become greater.
Because governments often influence the skill mix of immigration, the findings suggest that policy choices help determine both the overall economic effect and how wage gains and pressures are distributed across the labor market.
The paper also cautions against using wages alone to judge whether workers have benefited. Immigration can move native-born workers into better-paid jobs, but the additional pay may compensate for extra training or less attractive work. A higher wage does not therefore necessarily mean that someone is better off overall.
"Immigration cannot be assessed through a single average wage figure. The overall gain may be small, while the effects on pay in different parts of the labor market can be larger. Higher pay does not automatically mean that a worker is better off, either. It may compensate for additional training or less attractive work, so wages tell only part of the story," said Dr. Michael Amior, reader in economics at King's Business School.
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