Is Ted Cruz Right that Immigration Drives Down Wages?

Is Ted Cruz Right that Immigration Drives Down Wages?

Original Article on TheStreet

Immigration to the U.S. is an “economic calamity,” according to Ted Cruz — but only if it happens to you.

That’s the image Texas Senator Ted Cruz painted this week at the Republican’s fifth presidential debate: immigrants driving down the wages of U.S. citizens. But the public wouldn’t know that, argued the son of Cuban immigrants, because the media won’t report on it. Why? Because Cruz says it’s not happening to news reporters:

“If a bunch of people with journalism degrees were coming over and driving down the wages in the press, then we would see stories about the economic calamity that is befalling our nation,” he said, after saying the politics of the issue would be different if “lawyers” and “bankers” were “crossing the Rio Grande.”

Conservatives loved that zinger — poking fun at the media is a surefire path to applause. But there’s one problem: It’s misleading, and many not be true.

Over the past 30 years, cities and towns across the country, especially smaller cities and rural areas, have been remade by an influx of foreign-born workers. It’s not uncommon to find states as disparate as North Carolina, Iowa and Oregon with large immigrant populations. The population of Louisville, Ky., for instance, would have fallen in recent years had it not been for an influx of immigrants.

There were more than 40 million immigrants in the U.S. as of 2012. Of those, 11.7 million are undocumented, according to the left-leaning New York-based Economic Policy Institute. Newer immigrants, especially the undocumented, tend to take low-skilled jobs that don’t compete with native-born workers because such jobs — agriculture, landscaping, car washing — don’t require them to interact with customers, according to a  December 2014 study from the conservative Manhattan Institute. 

Cruz’s argument implies that an influx of low-skilled workers cripples local municipalities, driving down wages for locals and having a deflationary effect on regional economies. But researchers from the National Bureau of Economic Research in an April 2015 study of U.S. Census data from 1980 to 2000 found that the overall impact was the opposite. That, over time, such regional economies grow as their populations expand and immigrants become consumers as well as workers.

“In general equilibrium, immigrants will affect not only labor supply, but also labor demand,” said the Bureau’s study. “Local real wages can rise as a result of immigration, even in a model where native-born and immigrant labor are perfect substitutes.” On average, each immigrant was found to generate 1.2 local lobs for local workers, with most of those going to native-born workers.

In fact, when it comes to immigrants taking jobs, the most at-risk population is previous immigrants, according to a survey of population data between 1994 and 2007 by the Economic Policy Institute. That’s because they work in jobs for which they can be easily substituted, and newer immigrants may be willing to work for even lower wages.

“For native-born workers, the effects [of immigration] tend to be very small, and on average, modestly positive,” the Institute said.

Native-born, low-skilled laborers often, though not always, take different kinds of jobs than immigrant workers. As opposed to working in agriculture and food service, they tend to take positions as security guards or funeral service workers, the Manhattan Institute’s Diana Furchtgott-Roth wrote in the December 2014 study cited above.

And what of those higher-skilled workers Cruz highlighted at the debate? 

The same goes for these kinds of workers, who tend to be concentrated in scientific research or computer engineering versus law, banking or even journalism, as Cruz argued. Immigrants in these areas largely expand the workforce rather than cannibalize it.

“Both high- and low-skill immigration, on net, boost economic growth,” reads the Manhattan Institute’s 2014 study. “It expands America’s workforce and encourages more business start-ups [and] because immigrants’ educational backgrounds typically complement, rather than displace, the skills of the native-born labor market, immigration increases economic efficiency by supplying more labor to low- and high-skill markets.”

The libertarian Cato Institute sees similar patterns. 

“Nowhere will you find a tradeoff where one additional immigrant means that one American loses a job in the economy,” said Cato’s Alex Nowrasteh. “Immigrants either lower the wages of some American workers by about 2% or raise them by about 2% in a dynamic economy.” 

Cruz’s zero-sum portrait of immigrants fails to understand the dynamics of an economy that expands and specializes over time.

Congressional Budget Office study analyzing the comprehensive 2013 Immigration Modernization Act (that Florida Senator Marco Rubio helped write and then kill) showed that “average wages for the entire labor force would be 0.1% lower in 2023 and 0.5% higher in 2033 due to the effects of the bill if passed.

That’s a broad view based on legislation that may or may not be adopted. Whoever becomes the next U.S. president will likely have to grapple with the dynamics of local and regional economies that are ever-evolving.

Such a picture, though, may not be as politically useful in a contentious primary race as a portrait of bankers, lawyers and journalists surging into the U.S. from its southern border.