Tag: Borjas

Immigrants Don’t Lower Blue-Collar American Wages

Yesterday, Senator Tom Cotton (R-AR) gave a speech on the floor of the Senate about “putting an end, once and for all, to chain migrations.”  The main argument that Senator Cotton made is that immigrants lower the wages of blue-collar American workers.  Senator Cotton said:

That means that you have thousands and thousands of workers with absolutely no consideration for what it means for the workers who are already here … The wages of people who work with their hands and work on their feet hold the type of jobs that require you to take a shower after you get off work, not before they got to work.  Blue-collar workers have begun to see an increase in their wages over the last year for the first time in decades and that is in no small part because of the administration’s efforts to get immigration under control.

There is vast empirical evidence that contradicts Cotton and shows that the wage effect is minuscule, concentrated on only high school dropouts, or that immigration actually increases the wages of lower-skilled Americans.  Even worse for Cotton’s argument, the wages for low-skilled American workers actually rose less slowly the last time the government cut low-skilled immigration to raise wages.  I’ve provided evidence pushing against Cotton’s position in previous posts but this one will present new evidence from the Mariel Boatlift. 

The last major academic debate on the wage effects of immigration concerned the Mariel Boatlift when about 125,000 Cuban refugees surged into Miami over a few months in 1980.  Indeed, this debate was so important that even Trump Administration White House aide Stephen Miller cited it in a press conference in 2017

The Mariel Boatlift a wonderful quasi-natural experiment that economists have exploited numerous times to estimate the effect of immigrants on wages.  David Card wrote a paper in 1990 showing that the effect of Mariel on wages and employment was near zero.  Recently, George Borjas of Harvard wrote another paper that found Mariel actually had an enormously negative effect on wages – a result that has been challenged by Giovanni Peri and Vasil Yasenov and Michael Clemens and Jennifer Hunt.  Professor Borjas responded here.  I added a bit to this debate by pointing out that under Borjas’ methods, the wages of Miamians with only a high school degree rose at the same time as the Boatlift and that wages for Hispanic dropouts in Miami rose rapidly shortly after the Boatlift, a perplexing result for the most-substitutable workers. 

The rest of this blog will ignore the criticisms of Borjas’ Mariel Boatlift paper and instead use his methods to show that the wages of blue-collar Miamians were not negatively affected relative to the placebo cities.  This will use some of the most recent and relevant economics research to see whether Senator Cotton can make a convincing case that immigrants lower the wages of blue-collar American workers.  We used the same CPS dataset that Borjas used for the full empirical exercise of 1977-2003.  The placebos are comparison sets of cities.  They are all cities that aren’t Miami (labeled as “Miami”), those selected by David Card, those that are similar to Miami in terms of employment prior to 1980, and those with similar low-skilled work forced prior to 1980.  I define blue-collar workers in two ways.  The first is all workers with less than a college degree.  The second is all workers who have at least a high school degree but less than college. 

Wage Effects of Immigration Are Small

Immigration has small long-run relative wage impacts on American workers by education (Figure 1). These estimates are the most popular and widely cited in the immigration debate. They were completed by George Borjas and Gianmarco Ottaviano and Giovanni Peri. Their findings are very close but diverge most appreciably for the wages of dropouts, even though the effect is small and positive for all native-born workers lumped together. According to the 2015 American Community Survey, 9.4 percent of native-born Americans over the age of 25 are dropouts. Thus, over 90 percent of American workers are in education-skill categories where immigration increased relative wage, according to the most negative finding (Figure 1).

Figure 1

Relative Impact of Immigration on Native Wages by Education

 

Sources: Borjas, p. 120; Ottaviano & Peri, Table 6.

Note: Borjas looks at 1990-2010. Ottaviano and Peri look at 1990-2006.

Borjas and Ottaviano and Peri find that the wages of immigrant workers are most affected by new immigrants (Figure 2). That’s because new immigrants have skills and education levels most similar to previous immigrants, so they compete against each other more than with natives who have very different levels of skill and education. As we point out in Figure 25 of this bulletin, immigrants still support liberalized immigration despite the negative wage effects they experience. There are at least three explanations for this.

The Mariel Boatlift Raised the Wages of Low-Skilled Miamians

Harvard economist George Borjas recently published an important paper on how the unexpected surge of 125,000 Cubans (henceforth Marielitos) to Miami in 1980 lowered the wages of native-born male Miamians with less than a high-school degree. Because at least 60 percent of the Marielitos were high school dropouts, Borjas found that the negative wage effects were concentrated on Miamians with the same level of education.  

There are excellent criticisms of Borjas’ paper that show his results hinge on the control cities he chose, his exclusion of women, the age group of the workers, whether Hispanics are included, whether high-school-or-less or no-high-school-at-all are included, and whether datasets with the larger samples are used. For the sake of argument, supposing that Borjas made the correct methodological choices on every single point above, the Mariel Boatlift still raised the wages for low-skilled U.S. workers collectively due to wage complementarities. That’s because native-born Miamians with only a high school degree (no associate degree, no education after high school) experienced significant wage increases immediately after Mariel relative to workers with the same levels of education in the control groups, or placebos, of other cities. Borjas’ supporters ignore this finding but he does not. 

In his Mariel paper, Borjas reports the wage of high school dropouts relative to high school graduates in Figure 3(C) and the wage of Miami high school graduates across an all cities permutation in Figure 4(B), but he doesn’t have a dramatic graph like this that shows what happened to the relative wages of high school graduates after Mariel. 

Another working paper by Borjas and Monras on the wage effects of refugees also found that “the rate of wage growth for high school graduates, a group whose size was only increased modestly by the Marielitos, is noticeably higher in Miami than outside Miami.”  They go on to write that, “the predominantly low-skill Marielitos … raised the wage of workers with a high school education, and this effect is both numerically and statistically significant. The cross-wage elasticity is about +0.7 [compared to -0.9 for high school dropouts].”  They do not find any employment effects for high school dropouts but they did uncover positive and statistically significant employment gains for those with a high school degree. Furthermore, Figure 7.5 on page 148 of Borjas’ new book We Wanted Workers hints at a wage increase for high school graduates immediately after Mariel.              

My intern Cole Blondin and I followed Borjas’ methods to create graphs for the wages of high school graduates before and after the Boatlift. We used the March Current Population survey (March CPS) and combined the May Current Population Survey and the May Outgoing Rotation Group (May CPS-ORG) datasets. The only differences are that we present the figures in dollars rather than logs, we did not use three-year averages to smooth the data, and we did not recreate the synthetic control. One final note, the wage effect of the Marielitos must be compared to placebos because there was only one Miami in 1980 and we can’t actually observe what would have happened to that city had the Marielitos not arrived. We used the same sets of placebo cities as Borjas.

Even under Borjas’ assumptions, native-born male Miamians with a high school degree or less saw a ­net-wage increase after the Mariel Boatlift.    

A Tale of Two Studies

Academics and professional economists have critiqued many well known academic papers on immigration in the last year. The first was by Alan de Brauw and Joseph R.D. Russell and it replicates and expands a famous 2003 paper by Harvard University economist George Borjas entitled “The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market.” 

Borjas famously found that from 1960-2000 there was a  wage elasticity of -0.38, meaning that a 10 percent increase in the size of the labor force due to immigration in a particular skill-cell lowered the average weekly wages in that cell by 3.8 percent relative to workers in other skill-cells.  Borjas’ paper is an impressive piece of scholarship and has been the lynchpin of arguments to close the border in order to protect wages.  Many economists disagree with Borjas

De Brauw and Russell had three findings.  Their first finding was that the wage elasticity dropped to -0.22 when they extended Borjas’ study to 2010. That is an important finding by itself – if the Borjas model was correct then why would the impact of immigrants on wages decrease as more of them entered the labor force between 2000 and 2010? 

Their second set of findings is that small changes in variable definitions turned some of Borjas’ ideas into statistically insignificant results. While not definitive, that suggests that the conclusions in his paper are not reliable.     

That leads to De Brauw and Russell’s third set of findings. They looked at the relationship between annualized male and female wages in the skill-cells when women entered the workforce in significant numbers. The correlation turned out to be positive­, which means men and women with the same skill level are complementary.  Thus, they argued that Borjas’ model is misspecified as it assumed immigrants and natives in the same skill-cells are more substitutable than they really are. If this finding is true, it would call into question the assumptions Borjas’ built in to his model, namely that immigration and natives are substitutable rather than complementary.

I’m still eagerly awaiting Borjas’ response to De Brauw and Russell’s paper. The critique of Borjas’ paper was serious because it replicated his work, extended it another decade, and found the results didn’t hold up. Many academics have already contested Borjas’ claims in numerous ways as I document here and here but this challenge cuts deep.