The last few years have seen considerable angst aimed at immigrants, who people worry are taking the jobs of native people, or at least undercut the wages of them.  Of course, research doesn’t really bear these concerns out, and data actually shows that immigrants create more jobs than they take.

There is, of course, a degree of nuance to these findings, and the impact of immigration on native workers’ employment does differ according to things such as skill, sector, region, and occupation.  New research from INSEAD aims to add a further dimension to the mix by exploring the role “tradability” plays.  This is defined as the ease with which the output of our work can be easily sold beyond the region in which the work took place.

For instance, manufacturing has high tradability because goods can be sold around the world.  Computer science is another areas, whereas many service jobs, such as hairdresser or waiter, come under the low tradability banner.

Tradable skills

The researchers gathered data on hundreds of local labor markets from across the United States from 1980 to 2012.  They tracked 50 distinct occupations, half of which were considered tradable, and the other half non-tradable.

The analysis suggests that immigration can have a negative impact on non-tradable jobs performed by immigrants, such as housekeepers, but has little impact on non-tradable jobs done by natives, such as firefighters.

What’s more, immigrants also have next to no impact on tradable occupations, regardless of whether those roles are filled by immigrants or non-immigrants.  As such, they argue that the tradability of the local economy is a key consideration in whether immigration will be beneficial or not.

On an aggregate level, the research also found that immigration usually results in higher output across both tradable and non-tradable jobs in immigrant-intensive industries, but that it also lowers nominal wages.

The challenge is that tradable sectors can benefit from the increase in labor by increasing production and exporting the output.  In non-tradable sectors, this isn’t really possible.  This means that immigrants hired by factories or farms are less impactful to the chances of natives than housekeepers or other non-tradable jobs.

Of course, one thing the research doesn’t seem to cover is the growth in the local market by the increase in the local population caused by an influx of immigrants.  They too will need to get their hair cut or visit a therapist, so will increase the size of the market for these non-tradable professions.

Modeling change

The researchers then ran a couple of models that were ostensibly designed to mimic two scenarios that correlate with life under either Donald Trump or Hillary Clinton.  For instance, under the Clinton condition, the number of college-educated immigrants in the country doubled, whereas, in the Trump condition, the number of Latin American immigrants was halved.

The models suggest that when college-educated immigrants were introduced, average real wages rose, even for low-educated natives, with a rise of 5.2% found in San Jose.  When Latin American immigrants were introduced, however, the wages of low-educated natives fell in all locations, with the biggest drop of 3.1% seen in Miami.

Of course, these are just models so should be caveated as such, but the researchers believe their results add nuance to the general consensus that native wages rise on aggregate when there are more immigrants, with the influx often resulting in higher productivity among native workers.

They argue that the impact of immigration on wages and job security is more likely to be felt within the same job market than it is across job markets.  They also suggest that taking data at the aggregate level may fail to capture the true reality of things on the ground.