ABSTRACT: Labor Market Aspects of Immigration
Philip Martin
IX Southern Labor Studies Conference

Most of the immigrants arriving in industrial nations are unskilled, meaning that they have less than the median level of education of native born adults. Since immigration pressures are rising, and immigration control is getting more difficult, this paper asks a simple question--why bother with control, or how much resources and energy should be devoted to controlling unskilled/illegal immigra tion?

This question has been avoided regularly by immigration commissions in the US. Their normal justification for doing more to curb illegal immigration is that, in a nation of laws, illegal immigration is wrong and, if it persists, antipathy toward illegal i mmigrants might lead to a less open front door to legal immigrants.

Immigrants in industrial countries are a small part of the worldwide labor force and a marginal part of industrial country workforces, so that any effects they have will be marginal for both developing and industrial nations. It was also noted that econom ic theory finds that it is not optimal to completely stop unwanted activities such as pollution and illegal immigration because the costs of achieving a zero level outweigh the benefits.

In Europe, it seems to be easier for blue-collar workers to push society toward a "too restrictive" immigration policy, while in the US employers and ethnic groups have been able to organize themselves to get a "too open" policy toward unskilled/illegal i mmigration.

Immigration is neither good nor bad; it produces economic and other tradeoffs. Three economic tradeoffs seem especially important in evaluating unskilled immigration. First, unskilled immigrants on balance hurt unskilled native workers through wage depres sion, displacement, and changing patterns of hiring and training. However, these changes affect less than 20 percent of all native workers, and many occur in a fashion that is not visible to in statistical studies of immigrant impacts. The fact that these impacts are not easy to measure does not mean that they do not exist.

Second, the availability of immigrant workers affects the evolution or trajectory of those sectors of the economy where immigrants are concentrated. In the US economy, there are only three occupations with 1 million or more workers in which immigrants are a majority of the workforce--farmworkers (2.5 million), janitors (2 million), and household help (1 million). These sectors are also not well studied in comparison to other economic sectors, so it is not always easy to see what would happen without immig rants. However, in the case of agriculture, the termination of the bracero program in 1964 spurred a cost-reducing series of innovations that made the US a world leader in processed tomato products.

Third, the immigrants arriving in the US today, if arrayed by the best single predictor of earnings, years of education, have an hourglass or barbell shape. This means that current immigration patterns are increasing economic inequality.

Immigrants have many economic effects, sometimes improving the position of some native workers, as when unskilled immigrants in the fields create or preserve jobs for truck drivers. It was also noted that the trajectory of an industry is not shaped just b y immigration. In US transportation industries, for example, the major changes in the labor market are traceable to de-regulation.

Foreigners willing to work for low wages can affect domestic workers directly via immigration, or indirectly through trade and investment flows.

If unskilled/illegal immigration is to be controlled in the 1990s, countries need have flexible policies that adapt to changing patterns of movement. Economic differences between industrial and developing countries are widening, increasing incentives to e nter industrial countries enough so that e.g., Chinese nationals pay $30,000 to be smuggled into the US to fill unskilled jobs.

Trade and Migration

Free trade and investment are the only instruments guaranteed to eventually reduce migration pressures. But there is a short-run migration hump, meaning that the disruptions and dislocations associated with deregulating and opening an economy increase mig ratory pressure. If there are established migratory links, the same polices that reduce migration in the long run can increase migration in the short run.

Labor migration is a big business. The remittances sent to countries of origin by the 20 to 25 million foreign workers in industrial countries are in the $40 to $50 billion range, as each worker remits perhaps $2000 annually. If the industrial countries w ere to succeed in stopping migration, or removing the foreign workers already there, countries of origin might lose a major source of foreign exchange.

Economic growth is the ultimate answer for economically-motivated migration, but economic growth does not have to equalize wages to stop migration. Analyses and experience suggest that once economic differences are reduced to 4 or 5 to 1, and there is con fidence that wages will continue to increase in the country of origin, migration pressures fall sharply.

The world community has not yet figured out how to deal with economically-motivated migration in international organizations and agreements. Most countries are avowedly not destinations for immigrants, making them more likely to cooperate to reduce immigr ation than to establish the rules under which it should occur. However, regional trade agreements, which tend to be more comprehensive than global agreements such as the GATT, increasingly deal with migration.

Mexico is the ninth most populous country in the world, with about 90 million people and a labor force of about 30 million. The country grew rapidly with an import substitution policy during the 1950s and 1960s, and thought that it could continue this pol icy when oil prices rose in the 1970s. Debt rose, oil prices fell, and in 1982 the country was in crisis.

Mexico changed its economic policies in the mid-1980s, embracing policies that aimed to attract foreign investment and to create jobs in export-oriented industries. One of the fastest-growing sectors of the Mexican economy have been maquiladoras, the 2000 factories in the border areas that employ 500,000 Mexican workers to turn imported components into products that are mostly exported to the US.

NAFTA plus "correct" economic polices in Mexico promise faster economic growth in the 1990s. But the need for faster economic growth is larger than even freer trade and investment can provide--Mexico has 1 million new workforce entrants annually, so that even creating 500,000 "real jobs" each year is not sufficient for new entrants plus those displaced from inefficient industries such as agriculture. Furthermore, Mexico has a very unequal distribution of income, so that the benefits of fast growth are not automatically shared in a manner that leaves especially poor people in rural Mexico satisfied with their lot.

Mexican researchers expect illegal Mexican immigration, estimated at 800,000 to 2 million entries per year today, to decline significantly after NAFTA plus Mexico's current polices have been in effect for at least 10 years--50 percent of the Mexican estim ate of 800,000 illegal entries were apprehended at least once by the US Border Patrol. However, the next 10 years promise very contentious debates over persisting illegal immigration.

There is a fundamental difference in the definition of the migration problem. Mexicans see migration as an economic issue. They note that it is not the bottom of the Mexican workforce that migrates to the US, and that the wages earned by unauthorized immi grants in the US are just as legitimate as the profits earned by their US employers. The Mexican perspective is that if the US really wanted to stop illegal immigration, it would crack down on US employers, since their demand for Mexican workers is what m otivates Mexicans to cross the border.

The US perspective, in the Mexicans' view, is that unauthorized Mexican workers are criminals. This prevents, they say, useful negotiations toward a bilateral migration agreement.

Europeans tend to favor aid rather than trade to reduce migration pressures, in part because many of the emigration countries would, with freer trade, export agricultural products to Europe. In other words, agricultural protections are in part responsible for urbanization and migration pressures from Morocco to Turkey.

Philip Martin
Dept of Agricultural Economics
UC-Davis
Davis, CA 95616
Fax: 916-752-5614
email:martin@primal.ucdavis.edu