Do Immigrants Have an Impact on Wages of the Locals?

Have you ever stopped to imagine the impact that refugees have in the native country? People have divided opinion as to whether the impact is positive or negative. And one of the most important questions is related to the economics of labor, and one that is unanswerable. Do immigrants have an impact on the wages on the wages of the locals? A country with several immigrants may witness a burgeoning growth of wages; it does not mean that the growth is directly related to the number of immigrants.

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There are those who have argued that the best way to find a solution to the problem is carrying out an experiment under conditions where the supply and demand of labor shifts exogenously. An event of this kind had occurred before when Mariel Boatlift conducted an experiment on the subject of labor economics. In 1980, Fidel Castro as the president of Cuba lessened the restrictions on emigration in the country, and act that prompted a massive movement of the population out of Cuba. That year witnessed up to 125,000 Cubans move into the United States. The impact was that the labor supply in Miami grew by 55,000.

Under the Mariel experiment above, a huge number of the people were low skilled. The numbers indicated that less than half the number of migrants had college degrees. In the year 1990, an economist David Card conducted an experiment using the Mariel numbers and determined that the shock did not have an adverse impact on the wages of the American-born workforce.  The so-called Mariel supply shock did not have an adverse impact on the wages of the locals of Miami and experiment that highly disputed the notion that had widely been held by the public. The debate on this issue had been settled, but it was recent, in the year 2015 when it arose once more. George Borjas from Harvard made a publication on the same issue and determined that low-skilled native Miami residents fell slightly after the famous Mariel boatlift.

It was after Borjas’ publication that controversy was developed once more. The work was challenged widely, and most notably by three respected researchers. It has been argued that it is not feasible to look at a small population of low-skilled workers and make a general conclusion from its outcome. The nature of Mariel’s experiment was to capture a wide group of the labor force; therefore, the sample selected from the whole by Borjas does not reflect the original intention. Even though Borjas has responded to the critiques, there are areas in the research that raise questions.

The studies that were conducted by Mariel were of great political importance, but the fact that they have provided varied outcomes is due to the varied and ill-advised technical decisions made by various authors. One of the key elements that might have led to the difference in outcome between Mariel’s work and Card’s work is the fact that the definition of the low skilled labor was different and that cities that were chosen for comparison with Miami were also different. It has also been argued that the difference between Borja’s work and Mariel’s work was due to an intentional change in the survey that had been used initially by Mariel. There are years in which Borjas has used sample sizes that are so small and includes only 20 people.

Using simple economics reasoning, it is possible to argue that under short run circumstances, the partial effect of the huge influx of migrants into a country or city. When the labor demand curve slopes downwards, it is expected that a sudden increase in supply will lead to a reduction in the wages. It should not be controversial or surprising when the study by Borjas indicates that there is wage decrease due to the influx of immigrants. What is important and worth noting is that as much as the wages are affected, it should only be in the short run and should not end up having an impact on the element of public policy.

Lawmakers in most cases should be concerned with the long run impact of immigrants on the wages and not the short run impact. Theoretically, what should be looked at is how the immigrants end up affecting the composition of the skilled workforce. If several unskilled workers are moving into the country, it will be expected that the wages of the unskilled workers will drop relative to other categories of workers in the economy. To determine the negative impact that immigration has on wages of the native citizens, researchers are expected to analyze data with keen precision. In the long run, immigrants will only impact the wages of the past immigrants whose skills overlap with the newcomers. The studies that have been carried out have indicated that the real impact of immigrants on the wages of the locals is not easy to establish, and in any case, there is an impact, it is only significant in the short run and not in the long run.

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