Immigration and wages

Some of you have objected to my earlier post in favour of free immigration on the grounds that immigration depresses the wages of native workers. As luck would have it, two new reports suggest these objections are wrong.
First, via New Economist, comes this report (pdf) from the European Citizen Action Service, which argues that east European immigration has benefited the economies of Sweden, UK and Ireland.
Second, this paper (pdf) by Gianmarco Ottaviano and Govanni Peri has found that immigration into the US raises the average wages of native-born workers:

For a flow of migrants that increases total employment by 10% and a skill distribution that mirrors the one observed in the 1990s, US-born workers experience a 3-4 percentage point increase in their wages.

This is because immigrant labour is not a perfect substitute for native labour. As a result, the depressing effect on wages of an increased labour supply is offset by the positive effects caused by removing production bottlenecks. How, exactly, are my wages depressed by an inlfow of Polish plumbers?
It is the case that these gains flow to more educated workers; the impact on unskilled wages is mildly negative. But this is, I think, not important; it's a case for better education of natives or (more arguably) for progressive taxation. Immigration is a potential Pareto-improvement if not an actual one.
This doesn't mean there are no arguments against immigration - there are. It's just that the best arguments aren't economic ones.

Comments

[1skeptic]

While importing a polish plumber is similar to importing a polish mixer tap (bear with me), the difference is that the former is more than just a unit of labour. Next year he may train additionally as a gas fitter. Then he may go to night school and become an economist. In the process, the polish plumber may meet a woman who adores his piping, and thereby add further potential units of semi-polish (and semi-british)labour to the market.

This is all fine, the problem is when these other aspects of importing units of labour are not discussed. There is need for allocating adequate provision for housing, social security, healthcare and education where these are in the majority provided or tightly regulated by the state. These are also economic considerations, not matters of taste, and it seems strange not to discuss these when talking about immigration.

[Laban Tall]

There may indeed be arguments against immigration - but there aren't any in that particular post of mine. I tend more towards

a) dissing many of the pro-immigration arguments, though Migrationwatch do a much better job. But refuting a pro-immigration argument isn't the same as advancing an anti-immigration argument.

b) trying to point out the actual size of the immigrant population and doing some simple maths. For example, saying 'what's the problem ? Immigrants are only 10% of the population' is true as far as it goes, but if that 10% have 30% of the children, you're leaving out a very important fact. Which economist said 'compound interest is a wonderful thing' ?

I do have, not exactly an argument against immigration, but a fear. That comes from looking at the history books and looking at other ethnically divided societies. The past is not necessarily a guide to the future, but it is foolish to ignore its evidence.

PS keep up the excellent economic stuff - it's a pleasure to read.

[New Economist]

Chris

I was also reading the Ottaviano and Peri paper today, but your post beat me to it. An interesting analysis, though I'm not 100% convinced by its assumptions.

[curious]

Well done !!!
Tell it like it is. None of that sugar-coating.

[Blimpish]

Laban: "dissing"?

[1skeptic]

For some reason I couldn't get into the links into the studies earlier, but heres my pick and mix

The first study mentions

(a) skills shortages - here an empirical method may be more useful. Tell me any skill you need, and I will find a skilled person from the yellow pages.

(b) half a million vacancies - quoted without context. Is that too many or too few vacancies given the size of the employment market, and the number of existing unemployed

The second study mentions the impact of immigration wages going up by about 3%, and house prices going up by 10%. Is this good news for all?

On particular professions, like dentists - could there be a problem to do with the number of training places available? Similarly, in plumbing, there is a long list of people waiting for an apprenticeship. By the way, I hear that doctors qualifying this year in the UK are facing unemployment.

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