United States (FEE) – The continuing controversy over immigration, legal and illegal, smothers long-standing flattering descriptions of the United States as a “nation of immigrants.” Ditto for “melting pot” and e pluribus unum (“out of many, one”). I enjoy asking people opposed to immigration when it was that immigrants began to undermine the US economy. Answers laced with smugness about immigrants “stealing our jobs” and racial or ethnic animus are common. Amusing to me was a relative who said that immigrants “went bad after our people arrived.”
It is good to recall that before 1882, US immigration policy was “Y’all Come.” That is, immigration was unencumbered but immigrants had to work to survive. Restrictions began in 1882 when the first of three Chinese exclusion acts became law. More general restrictions simmered in Congress mingled with presidential vetoes starting in the 1890s until finally becoming law in the 1920s.
So what is it about immigration? Why the outcry? Why does a nation of immigrants react so vehemently to whoever is the immigrant target group of the day/month/year? Working immigrants, legal or illegal, put into play two opposing forces on living standards of resident Americans.
“Stealing Our Jobs”
First, working immigrants represent wage competition for working Americans. These Americans obviously lose. Second, those who buy these immigrants’ services gain — that is, both employers of immigrants and buyers of what immigrants produce gain.
A simple numerical example shows that the second force outweighs the first, meaning that when immigrants allegedly “steal our jobs,” they increase the size of resident Americans’ economic pie! It’s when immigrants don’t work (no supposed job theft) that they lower overall living standards of resident Americans. Not quite what you hear coming from immigration’s opponents, is it?
Immigration is not an employment issue.
Suppose that prior to immigration, American potato chip workers earned $12 per hour. An influx of immigrants reduces the potato chip workers’ wage to $8 per hour. American potato chip workers will fall into two categories. First will be those whose alternative earning capabilities are below $8 per hour. These Americans will stay put, employment-wise, losing the full difference between the pre and post-immigration wages ($12 minus $8 equals $4) per hour. Their jobs aren’t stolen, they’re just less lucrative.
The second group will be those with alternative earning capabilities superior to the now lower potato chip wage ($8 per hour) but less than what they were earning prior to the immigration ($12 per hour). They also lose. But it will be less than those in the first group because they will be moving to their next best alternative job.
For both groups, immigration is not an employment issue. Members of the first group lose $4.00 per hour; those in the second group lose less than $4.00 per hour. Jobs are not stolen, they just become less lucrative. Immigration is not an employment issue.
Working Immigrants Are a Net Benefit
Does what is lost by American potato chip workers accrue to immigrants? To many, the answer is an emphatic “Yes.” After all, immigrants gain and their American competitors lose. What could be more obvious, they say? “Simple and obvious,” but nothing could be further from the truth. Immigrants get paid $8, not the difference between what their American competitors earn before and after the immigrants’ arrival.
Rather, working Immigrants re-slice the pie among Americans — from potato chip workers to potato chip employers and consumers. Equally important, these immigrants increase the size of the pie for resident Americans. Recall that those potato chip workers with alternative earning capabilities greater than $8 exited the industry. Assume these capabilities on average equal $10. That means when these folks had been producing potato chips, resident Americans gave up on average $10 per hour of other things that could have been produced. When immigrants earning $8 per hour are substituted for $10 per hour American workers, it means Americans have the potato chips and $2 more for other things.
Everything changes when immigrants are non-working.
It’s just like hiring a professional roofer to fix your roof because he costs you less than fixing it yourself (including the cost of your time). The roofer is analogous to an immigrant coming to your household. In either scenario, your roof is repaired, but hiring the lower cost roofer means you have more of other things. Giving up less means having more.
Lower potato chip prices also mean uses of chips that were not economic at their higher price become economic. This represents further increases in US living standards.
American potato chip employers and consumers get a larger piece of a larger pie while continuing American potato chip workers and those moving on to their next-best employment opportunity get a smaller piece from the larger pie. A rising economic tide needs not raise all economic ships.
Everything changes when immigrants are non-working. While immigrants may be better off living on the public dole, their American lunch is not free as far as their American “hosts” are concerned. Resident Americans foot the bill for this lunch. No additions to Americans’ consumption of other things. No utilizing potato chips for previously lower valued uses. Only higher taxes. So, the lesson of immigration is “Y’all come, but No Work, No Eat.” End of story.
T. Norman Van Cott, professor of economics, received his Ph.D. from the University of Washington in 1969. Before joining Ball State in 1977, he taught at University of New Mexico (1968-1972) and West Georgia College (1972-1977). He was the department chairperson from 1985 to 1999. His fields of interest include microeconomic theory, public finance, and international economics. Van Cott’s current research is the economics of constitutions.