Why Immigration Helps Wages in California

As the white house revives immigration reform—an issue the president is discussing with congressional leaders—it may want to ponder the effects of curbing foreign labor. While immigrants are blamed for dragging down American wages and stealing jobs, University of California, Davis, economist Giovanni Peri comes to a different conclusion. In a National Bureau of Economic Research working paper, Peri trowels through nearly five decades of immigration data and finds that foreign workers have boosted the economy, jacking up average income without crowding out American laborers. For each percentage of the workforce that is foreign-born, he found an almost 0.5 percent bump in average wages. In California, where the percentage of immigrants in the workforce has jumped more than 25 points since 1960, that means an almost 13 percent bonus—roughly $8,000. Immigrants, Peri says, push native-born workers into better-paying positions, expanding the size of the job pie so unskilled Americans aren't left out.

What's obvious to an economist, however, is hard to translate into politics. The most popular stances on immigration involve citizenship for illegals already here and border security to shut out everyone else. Less likely to land votes: a guest-worker program that brings in labor to meet demand and keep wages afloat. But without such a program, says Peri, "the U.S. is essentially giving up on gains."