purchasing power) of native consumers.11
Higher business profits benefit those with personal investments, savings, and pension holdings. Even if some immigrants have the short-term effect of depressing wages in particular sectors, natives experiencing wage loss may be able to make up for those losses on account of the higher business profits which result. For example, if a native worker sees that her wage is being depressed by immigrant competition, she can contribute a little less to the pension fund to compensate for that lower wage, but still take solace in the fact that her pension fund is paying her a return. Increased business profits also make possible greater amounts of capital investment and innovation to the benefit of all.
The concern is that although the aggregate benefits may outweigh the costs, this scenario raises serious equity problems. The aggregate-benefit-to-all argument may actually be hard to swallow for native workers whose wages are being depressed if they do not have pension plans or personal holdings. Higher-skilled native workers who have such assets are relatively immune from competition. Few lower-skilled workers have pensions or holdings, and are therefore unable to make adjustments or reap benefits from increased profits; the higher-skilled workers (and management) benefit from the higher returns to capital without losing anything at all.
STUDYING IMMIGRANTS AND THE LABOR MARKET
The array of studies that have examined the labor market effects of immigration can be categorized as regional or sectoral. Regional studies examine the effects of immigrants upon the entire labor market of a particular geographical segment of the country, such as Miami or California. Sectoral studies examine the effects of immigrants upon a single labor market—that related to a particular job sector such as the automobile or restaurant industry. Each perspective has its own advantages and disadvantages, and both are helpful to a better understanding of the way immigrants impact America’s labor market.
Looking at job displacement and wage issues from a regional perspective causes us to consider the significance of variations in regional economies and demographic characteristics. Jobs are not distributed equally across the country. Nor are immigrants distributed evenly throughout the United States; different immigrant groups have unique histories in different regions of the country. For example, those who are foreign-born make up approximately 22 percent of the total population in California, about 10 percent in the Northeast (16 percent in New York and 13.5 percent in New Jersey), 13 percent in Florida, and about 9 percent in Illinois and Texas. Most of the foreign-born in Florida are Cuban, in Texas Mexican, in California Mexican and Asian, and in New York a small percentage of each. The majority of Asian Indians reside in a single state, New Jersey.
Given regional variations in labor markets as well as the uneven geographic and ethnic distributions of immigrants, the impact of immigrants no doubt varies according to the region of the country. Consequently, we should wonder about the impact of Cubans and Haitians in Miami versus that of Mexicans, Central Americans, and certain Asians in Los Angeles. But even considering Cubans in Miami, one might wonder about differences between the effects of Cubans who entered in the 1960s versus those who entered as part of the Mariel boatlift around 1980. And given the long social and economic relationship between the United States and Mexico, one also suspects that there is a unique set of effects in places such as California, New Mexico, Arizona, and Texas.
Some general themes emerge with respect to regional differences. In terms of geographic distribution, Asian and European immigrants tend to be dispersed throughout the general population, in contrast to Mexicans, Cubans, and other Latinos, who tend to be concentrated in particular regions. The legalization (or amnesty) program in the late 1980s revealed that a substantial portion of the undocumented population in the United States enters from Mexico and resides in the West. During a period of significant labor force growth between 1970 and 1980 in the West, foreign-born workers contributed nearly 20 percent of the growth. Differences between jobs held by foreign-born and native workers are greater between Latinos and natives than between Asians and natives, and greater for women than for men. Occupational differences between immigrants and natives are greater in California, Texas, and Illinois than in Florida and New York. And the data suggest that the concentration of Mexican immigrants in the West depresses the average human capital and earnings of the foreign-born population in the region.12
A sectoral perspective compels one to consider the different effects that might be found between different industries such as manufacturing versus agriculture, or food processing compared to high-tech industries. Sectoral studies raise the further question of whether the presence of immigrant workers causes a delay in implementing technological advances or prompts reconsideration about the relocation of certain plant facilities to a different country. In the latter situation, the unavailability of immigrant workers would not necessarily open up jobs for native workers.
Regional studies are considered first.
1. REGIONAL AND LOCAL DIFFERENCES
a. Regional Unemployment Statistics
Economist Donald Huddle created a commotion in 1993 when he issued a report that purports to be the “first comprehensive study of the public sector costs of legal and illegal immigration.”13 Huddle argues that part of the cost of immigration is the cost of public assistance to those whose jobs are displaced by immigrant workers. In order to calculate the cost of public assistance to these displaced U.S. workers, Huddle assumes that for every one hundred immigrant workers that enter the labor market, twenty-five low-skilled U.S. workers lose their jobs (a 4:1 ratio).
Huddle provides no basis for this assumption. Presumably relying on INS data (he fails to offer a clear explanation), he determines that the percentage of less skilled immigrant workers who entered in 1992 was 62.2 percent. Extrapolating, he figures that 4.24 million low-skilled immigrants have entered the labor force since 1970. Therefore, applying a displacement coefficient of 25 percent to this number, he estimates that legal immigrants caused more than a million U.S. workers to lose their jobs in 1992. He further hypothesizes that because undocumented and formerly undocumented (amnestied) aliens have
markedly lower skills than legal immigrants and higher labor force participation, their displacing effect on less skilled native born workers is more severe. The number of less skilled among 3.7 million undocumented labor force members is almost 3.0 million—80 percent. Assuming a displacement rate of 25 percent, 741,000 low-skill U.S. workers are jobless because of [undocumented] immigration. Some 265,000 additional workers are displaced by amnestied alien workers.14
The most questionable aspect of this analysis is, of course, the displacement rate of 25 percent. The figure is completely undefended in the paper, other than a brief mention of an unpublished piece by Huddle entitled “Immigration and Jobs: The Process of Displacement.”15 In light of theoretical and empirical works that suggest that immigrants actually create jobs, it seems unsound that such an important figure would go unexplained. In fact, if every four immigrants also created one job opening, there would be no adverse displacement effect from immigration. Another well-publicized 1993 report, by the Los Angeles County Internal Services Department on the public sector costs of immigrants, recognizes that most of the extant empirical studies “have found no evidence to show that immigrants displace native workers.”16 The Urban Institute, responding to both the Huddle and LA reports, points out that labor market empirical work does not support this supposition of job displacement by immigrants.17 (The public sector cost aspects of these reports are discussed in chapter 5.)
One way to test the economic theory that immigrants create more jobs than they take, thereby facilitating increased job opportunities, is to examine regional unemployment statistics. If, as much political commentary charges, immigration takes