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February 28, 2007
Study: Immigrant Influx Raises Wages of Native-Born Workers

The influx of immigrants from 1990 to 2004 increased the average real wages of native-born workers in California by 4 percent, according to a study by the Public Policy Institute of California (PPIC).

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The PPIC's study, which looked at more than 40 years of data, found that wage effects differ across education and experience categories. From 1990 to 2004, for example, wages increase by about 3 percent for native-born workers with a high school diploma or a college degree and about 7 percent for native-born workers with some college.

"The strong positive effect on native workers' wages seems remarkable if you assume that by increasing the labor supply, immigrants reduce the demand for native workers," says study author Giovanni Peri, an associate professor of economics at the University of California, Davis. "But because the data reveal that these groups actually complement--rather than compete with--each other, the positive wage effects make economic sense."

The researchers note that as the number of immigrants available for certain jobs and tasks increases, so does the need for complementary jobs in managing, organizing, and training--work typically done by native workers.

"Native workers benefit because they are able to specialize more," says Peri. "In other words, the increased supply of one type of worker fuels the demand for another."

The study found that the actual losers in the equation are prior immigrants, whose wages are hurt by the newcomers. In 2004, immigrants who had entered California before 1990 lost between 17 and 20 percent of their real wages due to the entry of new foreign-born workers. Put another way, previous immigrants would have experienced wage gains of as much as 1.4 percent per year over that time--had no more immigrants arrived and their services become scarcer as native employment grew.

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