Tag: working class

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. 

Globalization’s So-Called Winners and Losers

A recent Washington Post analysis has argued that political events as diverse as the Brexit and the rise of Donald Trump can be explained by a “revolt” of the world’s economic “losers.”

Before proceeding, it is important to keep in mind that all income groups in the world have seen gains in real income over the last few decades. That said, some have gained more than others. Between 1988 and 2008, for example, the lowest gains were made by people whose incomes fit beteen the world’s 75th to 90th income percentiles. That includes much of the middle and working class in rich countries.

The Washington Post calls the people in this group the bitter “losers” of globalization. But, are they?

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There are at least two problems with characterizing such people as “losers.” First, it seems to suggest that income growth rate matters more than absolute income level. Yet a person in the 80th income percentile globally would not want to trade places with or envy someone in the bottom 10th percentile, despite the latter’s much higher income growth rate.

Consider real GDP per person, adjusted for differences in purchasing power, in China and the United States. Between 1988 and 2008, China’s per person GDP grew by over 340 percent. America’s per person GDP, in contrast, grew by “only” 40 percent. China may be making gains more quickly, but it would be wrong to argue that the United States was a “loser,” for American GDP per person in 2008 was $52,704 and China’s $8,104.

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Poor countries are seeing faster income gains partially because their starting point is so much lower—it’s a lot easier to double per person GDP from $1,000 to $2,000 than from $40,000 to $80,000.

The second problem is that the Washington Post piece suggests that the incredible escape from poverty that has occurred in poor countries during my lifetime has come at the expense of the middle classes in the developed world. (This is a fascinating reversal of the more popular, but equally inaccurate, opinion that the Western riches came at the expense of poor countries).

Thus, the Washington Post piece claims, “global capitalism didn’t always work so well for workers in the United States and Europe even as—or, in some cases, because [emphasis mine]—it pulled hundreds of millions of people out of poverty everywhere else.”

Fortunately, prosperity is not a zero sum game.

When trying to understand the “winners” and “losers” of globalization, it is important that we do not compare income growth rates over the last few decades with some imagined ideal. Instead, we should compare income growth to what would have happened in a world without globalized trade. In such a world, hundreds of millions of people would have remained in extreme poverty. And the middle class of the developed world would also have made fewer gains. Just look at the amazing reduction in price of consumer goods that we have collected at HumanProgress.

A few individuals in select industries would benefit from protectionism, like the U.S. sugar industry does now. But on average everyone would be poorer, just as in 2013 Americans collectively paid 1.4 billion dollars more for sugar than they would have without protectionism. (The U.S. manufacturing industry, it may be worth noting, would not be among the “select industries” to benefit—most manufacturing job losses have come from mechanization rather than outsourcing, and have been offset by new jobs in other sectors).

Thanks to trade and exchange, people in all income percentiles have made real gains, and living standards for the middle class in advanced economies have soared in ways not captured by looking at income alone. America’s middle class is getting richer, and the people in the world’s 75th to 90th income percentiles are also winners.