In a recent article, I wrote about the value of low-skilled immigration to a country, and that it would be a mistake to assume that only high-skilled immigration is important. A common argument against low-skilled immigration is that it produces an influx of labor that competes against low-skilled natives.
Research from Dartmouth highlights how mistaken this view is. Indeed, the paper shows that because low-skilled immigrants do work that low-skilled natives don’t, it actually helps rather than harms the prospects of low-skilled natives.
Economic impact
The study examines the impact of low-skilled immigration on both the employment prospects of native workers and also the investment plans of the organizations that employ them.
“The U.S. has a long history of limiting contract foreign labor for low-skill work,” the researchers explain. “In this tradition, H-2B visas are quota restricted, by law, to avoid “adversely affecting the wages and working conditions of similarly-employed U.S. workers.” While plausible, these concerns run counter to employers’ plausible counterclaims that the survival of their businesses depends on access to foreign workers for low-skill jobs.”
The researchers scrutinized both claims and used the random allocation of H-2B visas to do so as this allowed them to compare the prospects of firms who were able to hire workers via this route with those who weren’t. The random nature of this process made for a robust research environment.
The results show that firms who were able to hire low-skilled immigrants not only experienced higher profitability, but they were also “more” likely to hire American workers. What’s more, it was also found to be the case in both rural and urban firms. This beneficial outcome is all to do with the lack of real substitutes for low-skilled immigrants in the domestic labor market.
“We find that U.S. workers do not substantially substitute for foreign workers on H-2B visas,” the researchers explain. “Second, unlike in other low-skill industries like agriculture or manufacturing, there appears to be little potential to simply “automate away” labor shortages.”
Instead, the study shows that hiring low-skilled immigrants is linked with greater capital investment. This suggests that companies look to complement new hires with capital rather than use it as a substitute. Of course, the immigration policy debate is seldom informed by this kind of evidence, so both the researchers and myself are not expecting material change any time soon, but their evidence is nonetheless welcome.
