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Immigration offers the nation a net benefit; but it comes with strings

WASHINGTON—Immigration is an emotionally charged and politically sensitive issue, as Congress wrestles with rewriting the law, but its impact on the vibrant U.S. economy isn't very controversial.

"The consensus view is it is a net benefit to the country," said Jim Smith, a senior economist and immigration expert at the Rand Corp., a research center in Santa Monica, Calif.

Unemployment is 4.8 percent, close to what economists view as full employment. That means immigrants are basically filling empty jobs, not taking them away from U.S. citizens.

Yet while immigration is a net economic benefit, it's one so modest that Smith cautioned that it "would not be on my top 10 list" of what's driving the U.S. economy.

Harvard University economist George Borjas recently published a study on the economic effects of immigration. He thinks the costs and benefits are a wash. Small gains to the broader economy are offset by social and fiscal costs such as providing health care to poor immigrants and schooling children who don't speak English.

"It would not be farfetched to say there would be zero gain from this," he said in an interview.

The larger economic consequences of immigration are likely to be felt years from now as U.S. demographics evolve. In 2000, Hispanics were 12.6 percent of the U.S. population. The Census Bureau projects that, barring significant changes in immigration patterns, Hispanics will make up almost 25 percent of the population by 2050.

This will occur as baby boomers—Americans born from 1946 to 1964—start retiring. The first boomers turn 65 in 2011.

"We've got 77 million people, baby boomers, getting ready to retire. How are we going to replace them?" Thomas Donohue, the president of the U.S. Chamber of Commerce, asked in a recent interview. "We haven't got 77 million people ready to go to work."

The American economy, he said, doesn't need cheap labor. It just needs labor, "and we're going to be significantly without it."

The future is now in the building trades, a sector already hampered by the graying work force.

"You don't see a lot of 60-year-olds scrambling around on the roof," said Craig Silvertooth, the director of federal affairs for the National Roofing Contractors Association in Washington. "What we're seeing in our industry, the makeup of the labor force is increasingly Hispanic, but the majority is foreign-born. It's pretty much the case everywhere in the country."

The trade group, which represents about 60 percent of the nation's large commercial contractors, supports efforts in Congress to help legalize the estimated 12 million undocumented workers who already are in the United States and to permit more foreigners to enter for jobs.

Also supporting more liberal immigration is the Service Employees International Union, whose 1.8 million members include janitors, landscape workers and home health-care providers.

"We are going to need more people to take care of older people. Nursing homes and assisted living is going to be huge in terms of the need for workers," said Eliseo Medina, the union's executive vice president and the son of an undocumented farm worker.

The latest Census Bureau data, which tracked employment of foreign-born Mexicans and Central Americans in 2004—legal and undocumented—showed that 30 percent were in service jobs, the strongest sector of the U.S. economy. An additional 24 percent worked in production and transportation, 22 percent were in construction-related work and 12 percent had sales and office jobs. Only 3.7 percent worked in farming, though they made up 24 percent of farm workers.

Although most economists see a small net benefit from immigration, they note that it isn't spread across the economy. Instead, illegal immigration drags down wages for those at the bottom.

"Where you see immigration competition play out most clearly is among high school dropouts," said Jared Bernstein, an economist with the union-funded Economic Policy Institute in Washington. "I'd say there's clearly immigrant competition among the least-skilled workers, but natives are a shrinking share while immigrants are a growing share."

Illegal immigrants effectively lower the income of blacks and native-born Hispanics, who make up a large share of the 11 percent of the U.S. work force that lacks a high school diploma. Some economists, such as Rand's Smith, suggest that immigration depresses wages by 3 percent to 5 percent at the bottom, while others, such as Harvard's Borjas, suggest that it's as much as an 8 percent drag on pay.

"There's a small negative or adverse effect on low-skills (jobs), both on natives and previous immigrants," said Madeline Zavodny, an economist at Agnes Scott College in Atlanta. She's a co-author of a 2003 study on immigration and wages published by the Atlanta Federal Reserve Bank. "For high-skilled workers there's not much evidence of any negative effect and some evidence of a positive wage impact."

Borjas found that Mexicans now make up 4 percent of the U.S. work force, or one in 25 workers. That's up dramatically from 0.4 percent in 1970. That swelling immigrant population drove down pay in construction, landscaping and similar day-labor jobs.

Roger Faulkner, the owner of the Four Seasons Roofing Co. in Springfield, Mo., routinely finds his firm underbid by companies that rely on illegal immigrants who are paid less than his workers.

"They're always taking away work, and undercut everybody," he complained. Faulkner said these companies bid 20 percent to 50 percent less on work and "they take one market, then another, then another."

One unlikely solution to Faulkner's woes is rooting out and deporting the 12 million undocumented immigrants in the United States. But with the economy near full employment, that could lead to worker shortages. Even then, it's unclear that U.S. citizens would take many of the jobs that immigrants now hold.

"The question no one knows for sure is if the border were closed, would wages in those jobs be high enough that Americans would take them?" asked Zavodny, the Agnes Scott economist. "Would picking lettuce pay $10 an hour if the border were closed? No one knows."


(c) 2006, Knight Ridder/Tribune Information Services.

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