Why Unskilled Immigrants Hurt America
The day after Librado Velasquez arrived on Staten Island after a long, surreptitious journey from his home in Chiapas, Mexico, he headed out to a street corner to wait with other illegal immigrants looking for work. Velasquez, who had supported his wife, seven kids, and his in-laws as a campesino, or peasant farmer, until a 1998 hurricane devastated his farm, eventually got work, off the books, loading trucks at a small New Jersey factory, which hired illegals for jobs that required few special skills. The arrangement suited both, until a work injury sent Velasquez to the local emergency room, where federal law required that he be treated, though he could not afford to pay for his care. After five operations, he is now permanently disabled and has remained in the United States to pursue compensation claims.
"I have no other way to live except if I receive some other type of compensation. I need help, and I thought maybe my son could come and work here and support me here in the United States," Velasquez said through an interpreter at New York City Council hearings. Velasquez's story illustrates some of the fault lines in the nation's highly charged debate on immigration. Since the mid-1960s, America has welcomed nearly 30 million legal immigrants and received perhaps another 15 million illegal immigrants, numbers unprecedented in our history. These immigrants have picked our fruit, cleaned our homes, cut our grass, worked in our factories and washed our cars. But they have also crowded into our hospital emergency rooms, schools and government-subsidized aid programs, sparking a fierce debate about their contributions and costs.
Advocates of open immigration argue that welcoming the Librado Velasquezes of the world is essential for our American economy: our businesses need workers like him. Like tax cuts, supporters argue, immigration pays for itself.
But the tale of Librado Velasquez helps show why supporters are wrong about today's immigration, as many Americans sense and so much research has demonstrated. America does not have a vast labor shortage that requires waves of low-wage immigrants; in fact, unemployment among unskilled workers is high—about 30 percent. Like Velasquez, many of the unskilled, uneducated workers now journeying here labor in shrinking industries, where they force out native workers, and many others work in industries in which cheap labor has led businesses to suspend investment in new technologies that would make them less labor-intensive.
These workers come at great cost. Increasing numbers of them arrive with little education and none of the skills necessary to succeed in a modern economy. Many may wind up stuck on our lowest economic rungs, where they will rely on something that immigrants of other generations didn't have: a vast U.S. welfare and social- services apparatus that has enormously amplified the cost of immigration. Just as welfare reform and other policies are helping to shrink America's underclass by weaning people off such social programs, we are importing a new, foreign-born underclass. As famed free-market economist Milton Friedman puts it: "It's just obvious that you can't have free immigration and a welfare state."
Immigration can only pay off again for America if we reshape our policy, organizing it around what's good for the economy by welcoming workers we truly need and excluding those who, because they have so little to offer, are likely to cost us more than they contribute, and who will struggle for years to find their place here.
EARLIER IMMIGRANTS HAD SKILLS
Hampering today's immigration debate are misconceptions about the so-called first great migration 100 years ago, with which today's immigration is often compared. We envision that first great migration as a time when multitudes of Emma Lazarus' "tired," "poor," and "wretched refuse" made their way from destitution to American opportunity. If America could assimilate 24 million mostly desperate immigrants from that great migration, surely, so the story goes, we can absorb the millions of Librado Velasquezes now venturing here.
But that argument distorts the realities of the first great migration. Though fleeing persecution or economic stagnation in their homelands, that era's immigrants brought important skills that fit easily into the American economy and helped supercharge the work force. A 1998 National Research Council report noted "that the newly arriving immigrant nonagricultural work force . . . was (slightly) more skilled than the resident American labor force": 27 percent of them were skilled laborers, compared with only 17 percent of that era's native-born work force.
Many of these immigrants quickly found a place in our economy, participating in the work force at a higher rate even than the native population. Their success at finding work sent many of them quickly up the economic ladder: those who stayed in America for at least 15 years, for instance, were just as likely to own their own business as native-born workers of the same age, one study found.
WELCOME TO THE WELFARE STATE
What the newcomers of the great migration did not find here was a vast social-services and welfare state. They had to rely on their own resources or those of friends, relatives or private, often ethnic, charities if things did not go well, which was why many of them left when the economy sputtered. One often hears that restrictive anti-immigration legislation ended the first great migration, but what really killed it was the crash of the American economy. Even with the 1920s quotas, America welcomed 4.1 million immigrants, but in the Depression of the 1930s, the number of foreign immigrants tumbled far below quota levels, to 500,000. With America's streets no longer paved with gold, 60 percent of those already here left in a great remigration home.
Today's immigration has turned out so differently in part because it emerged out of the 1960s civil rights and Great Society mentality. In 1965, a new immigration act eliminated the old system of national quotas, which critics saw as racist because it greatly favored European nations. Lawmakers created a set of broader immigration quotas for each hemisphere, and they added a new visa preference category for family members. Senate immigration subcommittee chairman Edward Kennedy reassured the country that, "contrary to the charges in some quarters, [the bill] will not inundate America with immigrants," and "it will not cause American workers to lose their jobs."
But, in fact, the law increased immigration by 60 percent in its first 10 years. Sojourners from poorer countries around the rest of the world arrived in ever-greater numbers, so that where half of immigrants in the 1950s had originated from Europe, 75 percent by the 1970s were from Asia and Latin America. Legal immigration to the United States soared from 2.5 million in the 1950s to 4.5 million in the 1970s to 7.3 million in the 1980s.
Meanwhile, the widening economic gap between the United States and many of its neighbors also pushed illegal immigration to levels that America had never seen. In particular, when Mexico's move to a more centralized, state-run economy in the 1970s produced hyperinflation, the disparity between its stagnant economy and U.S. prosperity yawned wide. With Mexican farmworkers able to earn seven to 10 times as much in the United States, by the 1980s illegals were pouring across our border at the rate of about 225,000 a year, and U.S. sentiment rose for slowing the flow.
But an unusual coalition of business groups, unions, civil rights activists and church leaders thwarted the call for restrictions with passage of the inaptly named 1986 Immigration Reform and Control Act, which legalized 2.7 million unauthorized aliens already here, supposedly in exchange for tougher penalties and controls against employers who hired illegals. The law proved no deterrent, however, because supporters, in subsequent legislation and court cases argued on civil rights grounds, weakened the employer sanctions, and the flow of illegals into the country rose to between 300,000 and 500,000 a year in the 1990s.
UNSKILLED IMMIGRANTS LOWER WAGES
The flood of immigrants, both legal and illegal, from countries with poor, ill-educated populations, has yielded a mismatch between today's immigrants and the American economy and has left many workers poorly positioned to succeed for the long term. Unlike the immigrants of 100 years ago, whose skills reflected or surpassed those of the native work force, many of today's arrivals, particularly the more than half who now come from Central and South America, are farmworkers in their home countries who come here with little education or even basic training in blue-collar occupations. Nearly two-thirds of Mexican immigrants, for instance, are high school dropouts, and most wind up doing either unskilled factory work or small-scale construction projects, or they work in service industries, where they compete for entry-level jobs against one another, against the adult children of other immigrants, and against native-born high school dropouts. Of the 15 industries employing the greatest percentage of foreign-born workers, half are low-wage service industries, including gardening, domestic household work, car washes, shoe repair and janitorial work.
Studies show that immigrants drive down wages of native-born workers and squeeze them out of certain industries. Harvard economists George Borjas and Lawrence Katz, for instance, estimate that low-wage immigration cuts the wages for the average native- born high school dropout 8 percent, or more than $1,200 a year. Even economists who don't find as much of an impact on all native Americans admit that the new workers push down wages significantly for immigrants already here and native-born Hispanics. Consequently, the sheer number of immigrants competing for low-skilled service jobs makes economic progress difficult. A study of the New York City's restaurant business, for instance, found that 60 percent of immigrant workers do not receive regular raises, while 70 percent had never been promoted.
ENDING UP ON SOCIETY'S MARGINS
In many American industries, waves of low-wage workers have also retarded investments that might lead to modernization and efficiency. Faced with a labor shortage in the early 1960s, when President Kennedy ended a 22-year-old guest-worker program that allowed 45,000 Mexican farmhands to cross over the border and harvest 2.2 million tons of California tomatoes for processed foods, farmers complained they would be forced out of business. Instead they swiftly automated, adopting a mechanical tomato-picking technology created more than a decade earlier. Today, just 5,000 better-paid workers—one-ninth the original work force—harvest 12 million tons of tomatoes using the machines.
The savings prompted by low-wage migrants may even be minimal in crops not easily mechanized. Agricultural economists Wallace Huffman and Alan McCunn of Iowa State University have estimated that without illegal workers, the retail cost of fresh produce would increase only about 3 percent in the summer-fall season and less than 2 percent in the winter-spring season, because labor represents only a tiny percent of the retail price of produce and because without migrant workers, America would probably import more foreign fruits and vegetables.
As foreign competition and mechanization shrink manufacturing and farmworker jobs, low-skilled immigrants are likely to wind up farther on the margins of our economy, where many already operate. For example, although only about 12 percent of construction workers are foreign-born, 100,000 to 300,000 illegal immigrants have carved a place for themselves as temporary workers on the fringes of the industry. In urban areas such as New York and Los Angeles, these mostly male illegal immigrants gather on street corners, in empty lots, or in Home Depot parking lots to sell their labor by the hour or the day, for $7 to $11 an hour. A New York study found that four in 10 employers who hire day laborers are private homeowners or renters wanting help with cleanup chores, moving or landscaping.
Because so much of our legal and illegal immigrant labor is concentrated in such fringe, low-wage employment, its overall impact on our economy is extremely small. A 1997 National Academy of Sciences study estimated that immigration's net benefit to the American economy raises the average income of the native-born by up to $10 billion a year—about $120 per household.
If the benefits of the current generation of migrants are small, the costs are large and growing because of America's vast range of social programs and the wide advocacy network that strives to hook low-earning legal and illegal immigrants into these programs. A 1998 National Academy of Sciences study found that more than 30 percent of California's foreign-born were on Medicaid—including 37 percent of all Hispanic households—compared with 14 percent of native-born households. The foreign-born were more than twice as likely as the native-born to be on welfare, and their children were nearly five times as likely to be in means-tested government lunch programs.
Native-born households pay for much of this, the study found, because they earn more and pay higher taxes—and are more likely to comply with tax laws.
The study's conclusion: immigrant families cost each native-born household in California an additional $1,200 a year in taxes.
This is a sharp turnaround since the 1970s, when immigrants were less likely to be using the social programs of the Great Society than the native-born population, said Harvard economist Borjas, who suggests that welfare and other social programs are a magnet drawing immigrants and keeping them here when they run into difficulty.
Pols around the country, intent on currying favor with ethnic voting blocs by appearing immigrant-friendly, have jumped on the benefits-for-immigrants bandwagon, endorsing "don't ask, don't tell" policies toward immigrants who register for benefits, giving tax dollars to centers that find immigrants work and aid illegals, and enacting legislation prohibiting local authorities from cooperating with federal immigration officials. In New York, for instance, Mayor Michael Bloomberg has ordered city agencies to ignore an immigrant's status in providing services. "This policy's critical to encourage immigrant day laborers to access . . . children's health insurance, a full range of preventive primary and acute medical care, domestic violence counseling, emergency shelters, police protection, consumer fraud protections, and protection against discrimination through the Human Rights Commission," the city's Immigrant Affairs Commissioner, Guillermo Linares, explains.
IMMIGRANTS DON'T CLIMB THE LADDER
Despite our cherished view of immigrants as rapidly climbing the economic ladder, new arrivals and their children face a lifetime of economic disadvantage, because they arrive here with shortcomings not easily overcome. Mexican immigrants, who are up to six times more likely to be high school dropouts than native-born Americans, not only earn substantially less than the native-born median, but the wage gap persists for decades after they've arrived. A study of the 2000 census data, for instance, shows that the cohort of Mexican immigrants between 25 and 34 who entered the United States in the late 1970s were earning 40 to 50 percent less than native-born Americans in that age group in 1980, but 20 years later they had fallen even further behind their native-born counterparts.
Given these realities, several of the major immigration reforms now under consideration simply don't make economic sense—especially the guest-worker program favored by President Bush and the U.S. Senate. Careful economic research tells us that there is no significant shortfall of workers in essential American industries desperately needing supplement from a massive guest-worker program.
The potential woes of a guest-worker program far overshadow any economic benefit, given what we know about the long, troubled history of temporary-worker programs in developed countries. The economic and cultural consequences of guest-worker programs have been devastating in Europe, and we risk similar problems.
When post-World War II Germany permitted its manufacturers to import workers from Turkey to man the assembly lines, industry's investment in productivity declined relative to such countries as Japan, which lacked ready access to cheap labor. Even worse, descendants of these workers have been chronically underemployed and now have a crime rate double that of German youths.
If low-wage immigration doesn't pay off for the United States, legalizing illegals already here makes as little sense as importing new rounds of guest workers.
Merely granting illegal aliens legal status won't suddenly catapult them up our mobility ladder, because it won't give them the skills and education to compete.
At the same time, legalization will only spur new problems, as our experience with the 1986 immigration act should remind us. The legislation swamped the Immigration and Naturalization Service with masses of fraudulent, black-market documents by illegals hoping to gain permanent status, so that the INS eventually rubber-stamped tens of thousands of dubious applications.
END SOCIAL AID TO IMMIGRANTS
If we do not legalize them, what can we do with 11 million illegals? Ship them back home? Their presence here is a fait accompli, the argument goes, and only legalization can bring them above ground, where they can assimilate. But that argument assumes that we have only two choices: to decriminalize or deport. But what happened after the first great migration suggests a third way: to end the economic incentives that keep them here and prompt the same kind of remigration that saw some 60 percent of previous immigrants return home. We could prompt a great remigration home if, first off, state and local governments in jurisdictions such as New York and California would stop using their vast resources to aid illegal immigrants. Second, the federal government can require employers to verify Social Security numbers and immigration status before hiring, so that we bar illegals from many jobs. And it can refuse to give those who remain the same benefits as U.S. citizens.
Instead, we must look to other developed nations that have focused on luring workers who have skills that are in demand and who have the best chance of assimilating. Australia, for instance, gives preferences to workers grouped into four skilled categories: managers, professionals, associates of professionals, and skilled laborers. Such an immigration policy goes far beyond America's employment-based immigration categories, like the H1-B visas, which account for about 10 percent of our legal immigration and essentially serve the needs of a few Silicon Valley industries.
America benefits even today from many of its immigrants, from the Asian entrepreneurs who have helped revive inner-city Los Angeles business districts to Haitians and Jamaicans who have stabilized neighborhoods in Queens and Brooklyn to Indian programmers who have spurred so much innovation in places like Silicon Valley and Boston's Route 128. But increasingly over the last 25 years, such immigration has become the exception. It needs once again to become the rule.
Steven Malanga is a contributing editor of City Journal. This is adapted from an upcoming issue.