The Immigration-Wage Myth

Subscribe here: Apple Podcasts | Spotify | YouTube | Overcast | Pocket Casts

Why are people frustrated by high levels of immigration? As refugee crises proliferate, this has become a central political question. In order to justify anti-immigration policy or rationalize restrictionist sentiment, commentators and elected officials have repeatedly returned to one hypothesis: Immigration must be bad for American workers.

There’s just one problem: This hypothesis is wrong. Economists have studied this question repeatedly, in a variety of contexts and in every segment of the population, and they have found that the demand effect consistently outweighs the supply effect. Simply put, when immigrants come to a place looking for jobs, they also demand goods and services—thus creating jobs for native-born workers. Immigrants need legal services and taxi drivers; they need groceries and cars. The question has always been which effect is bigger. And the literature has resoundingly answered that the demand effect wins out.

This doesn’t explain away all immigration worries. But it should force politicians to seriously reckon with why xenophobia exists instead of resigning themselves to treating new immigrants as an economic burden, when, for example, they were actually the “sole source of growth in the U.S. working-age population in 2021 and 2022.”

On today’s episode of Good on Paper, I’m joined by my colleague Rogé Karma who recently dove into the economics literature, originally expecting to find some negative effects on wages, only to be repeatedly struck by the truth: Anti-immigration sentiment has no economic justification.

“I think there is a lot of this deep discomfort with non-materialist explanations,” Rogé argues. “I think one of the most revealing things here is that the demographic that is most opposed to immigration are older folks living in rural areas, many of whom are retired. And the people who tend to be most supportive of immigration are working-age people living in big cities where immigrants are more common. So if you thought, Okay, this is a product of the people who immigrants are directly competing with … you would think, Oh, this would show up where the immigrants are, and it doesn’t.”

The following is a transcript of the episode:

Jerusalem Demsas: It’s Election Day, and in place of any exit-poll astrology, we’re going to talk about something that’s been a driving force in the campaign: immigration, specifically the research about the relationship between immigration and wages.

A common line bandied about in politics is that immigration reduces the wages of native-born Americans. It’s most commonly been pushed by restrictionists on the right, like J. D. Vance and Donald Trump.

J. D. Vance: And then I think you make it harder for illegal aliens to undercut the wages of American workers. A lot of people will go home if they can't work for less than minimum wage in our own country. And by the way, that will be really good for our workers who just want to earn a fair wage for doing a good day’s work.

Donald Trump: Decades of record immigration have produced lower wages and higher unemployment for our citizens, especially for African American and Latino workers.

Demsas: However, I’ve noticed a growing openness to the idea that immigration hurts American workers, not just from longtime restrictionists, but also from Democrats and liberals who are scarred by their loss in 2016 and fretting over the possibility of losing the 2024 election. But sometimes a lot of smoke is just a smoke bomb.

[Music]

This is Good on Paper, a policy show that questions what we really know about popular narratives. I’m your host Jerusalem Demsas. I’m a staff writer here at The Atlantic, and today I’ve asked my colleague Rogé Karma to come on the show. We’re going to talk about a recent deep dive he did into the economics literature on the relationship between immigration and wages.

The common thinking goes: If you increase the supply of labor, then you’ll reduce the price of that labor. If immigrants simply weren’t allowed in, then companies would be forced to pay American workers high wages. It seems so obvious, so why does study after study find this to be so wrong?

[Music]

Rogé, welcome to the show!

Rogé Karma: Thanks so much for having me. It’s great to be here.

Demsas: This is one of those episodes where I’m actually having trouble deciding which narrative is the conventional narrative.

Karma: (Laughs.) It’s because you’ve been steeped in the economic literature for far too long.

Demsas: Exactly. But there’s the conventional wisdom in academic circles that immigrants do not reduce native-born wages. But that’s not, I think, the average person’s perception of this, especially if they’re listening to politicians who, on both sides of the aisle, will be kind of making these arguments.

So I want to walk through the evidence together here because, Rogé, you recently wrote a piece, and you’ve spent a big chunk of time this year diving into the research space and really trying to figure out what’s going on. Like, Where is the evidence actually leading us? And I want to start with the Mariel Boatlift. Can you tell us what that is and then what economist David Card found when he looked into it?

Of course. And the first thing I will say is: I do think there is a little bit of a man-on-the-street, common-sense view that goes something a little bit like, And so I think there is a little bit of an intuitive sense that more immigrants would mean lower wages and lower employment prospects. And I think this was actually the conventional view on both sides of the aisle for much of the 20th century, in much