Wayne O'Leary

The Economics of Immigration

Despite losing partial control of Congress, the way in which the 2022 midterm elections played out for Democrats was fortunate. The political debate revolved primarily around inflation and abortion policy, and secondarily around democracy. This placed immigration, the intractable problem that never goes away, on the back burner and allowed the Biden administration, which doesn’t know how to deal with the borders mess, to ignore it for the time being. In the words of Rep. Henry Cuellar (D-Texas), the administration is basically “waiting, thinking that things are going to get better.”

They probably won’t. Like climate change, immigration is one of those issues that will be here festering long after more immediate concerns are resolved. It’s a worldwide issue roiling politics all around the globe, from Europe to Australasia to North America. Populations are on the move, and immigration, often considered a unique hallmark of American civilization, is changing the composition of countries everywhere and upsetting longstanding political balances in unimagined ways.

In both multiparty Italy and social-democratic Sweden, the quasi-fascist right is on the verge of taking power, with a promise to turn those democracies into copies of Orban’s Hungary; the driving issue (in addition to economic dislocations wrought by globalization and the pandemic) is antipathy toward immigration.

In Australia, where one in four citizens is now an immigrant, moves are under way to address perceived urban overcrowding and excessive population growth by capping legal immigration. In our neighbor Canada, which conversely has made accelerated immigration official government policy under the ruling Liberals — 23% of the population now consists of immigrants — an adverse reaction is setting in that could eventually lead to a Conservative comeback.

The issue comes down to whether immigration is a socioeconomic positive or a negative. Canada’s government takes the former position: immigration as a means to grow the economy and ensure an expanding population. Italy and Sweden take the opposite stance: immigration as a purveyor of economic degradation and social disorder. So, the question is, does immigration constitute a net plus?

For Americans, the question has usually been answered in the affirmative, but not always. Through most of the 19th century and into the 20th, immigrants were valued here for their physical labor, mainly by the business interests that exploited them; migrants, primarily Irish early on and later Chinese as well, built the highways, canals and railroads that opened up an empty country.

The downside was that the competition of cheap “foreign” labor also undercut wage rates and depressed the domestic labor market. It was not without reason that robber baron and immigration advocate Jay Gould could confidently assert in the 1880s that “labor is a commodity that will in the long run be governed by the law of supply and demand.”

Gould did not reckon on the rise of organized labor, but for decades unions were unable to make progress in the face of a steady inflow of migrant industrial workers hard to organize, reluctant to strike, and willing to work for less. One result was that during the run-up to World War I, organized labor, especially the AFL (founded 1886), emerged as the leading force favoring immigration restriction. Industry, on the other hand, benefiting from a constantly replenished pool of unemployed workers that enabled it to bid down wages, was a consistent supporter of unlimited immigration.

At least through the 1960s, US historians generally agreed that free-flowing immigration had disadvantaged the American urban working class over time, stifling any broad increase in real wages and living standards up to circa 1920. One distinguished text (“American History: A Survey” by Current, Williams and Friedel, 1966), while acknowledging the role played by racial and cultural animus toward newcomers in the opposition to immigration, mainly credited economic factors arising from organized labor’s ongoing struggle against entrenched big business in an era of growing monopoly. Wrote the authors: “Cheap labor was one of the reasons for high profits; unrestricted immigration was one of the reasons for cheap labor.”

What began to turn the tide for labor was the restrictive Immigration Act of 1924, enacted with the support of a business community now fearful of imported political radicalism in the wake of Russia’s 1917 Communist revolution. Under this legislation, which remained in force for 40 years, the traditional American labor surplus came to an end. As immigration fell from 4.1 million in 1921-30 to 0.5 million in 1931-41, wages began to trend upwards. The new labor shortage was reinforced in the 1930s by New Deal legislation establishing union-organizing rights and collective bargaining, further accelerating wage growth.

With supply and demand suddenly in labor’s favor, the US embarked on its post-1945 economic golden age and built its middle class. But in recent decades, unrestricted immigration, inadvertently encouraged by the 1965 liberalization law, has once more become a debilitating fact of American economic life. Notwithstanding the informed opinions of eminent economists like Paul A. Samuelson (“Economics,” 1973) and Lester C. Thurow (“The Future of American Capitalism,” 1996) that increased immigration was bound to negatively impact American domestic wages, a new generation of politically “woke” academics views it as a wholly positive social development.

Typical of the revisionist thinking is Reece Jones’ “White Borders” (2021), which portrays the history of American immigration restriction as a purely racist exercise geared to preserving the US as a lily-white country — most contemporary migrants are nonwhite — rather than the diverse, multicultural society it should presumably become. Such expressions of identity politics, the main product of today’s academia it seems, fail to account for other, less politicized research on both America’s attitude toward immigration and immigration’s impact on America.

Reporting by The Economist magazine (2/15/20) revealed that in 2018 and 2019, temporarily declining immigration to the US, brought about by Trump administration policies as well as the post-Great Recession economic downturn (together generating less of a “pull” effect on potential migrants), resulted in a 3% increase in US wages, including a 10% rise in the wages of unskilled or less-educated American workers.

In this case, a smaller labor pool meant better pay for that portion of the native workforce normally in direct competition with migrant workers. Historically, such economic factors, as much or more than racist xenophobia, have been responsible for America’s intermittent bouts of anti-immigrant feeling. Something to consider in the formulation of a sensible, nonhysterical immigration policy.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.

From The Progressive Populist, December 15, 2022

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