A more recent line of research considers the opportunities created
by immigrants in the labor market for firms to increase their productivity
and their employment of native workers. One common empirical
finding in the literature is that immigrants are paid less than
natives with similar characteristics and skills. This is in part due to the
fact that many immigrants, because of less attractive outside options
(such as having to go back to their home country), have lower bargaining
power with the firm. In this case firms pay immigrants less
than their marginal productivity, increasing the firms’ profits. Such
cost-savings on immigrants act as an increase in productivity for
firms. Ottaviano, Peri, and Wright (2010) show that if a firm can cut
costs in some productive tasks by hiring immigrants, this allows the
firm to expand production and employ more people in the complementary
tasks, many of which are supplied by natives. Chassamboulli
and Palivos (2010) show that the availability of immigrants pushes
firms to create more jobs to take advantage of the lower cost of hiring
them. Some of those jobs go to natives, whose unemployment
rate can actually decrease as a consequence of this. Notice, also, that
as immigrants are employed in productive tasks different from
natives, the fact that they are paid less than their marginal productivity
is not easily classifiable as “discrimination” because their jobs are
not directly comparable to those of native workers.
In summary, an economy will respond to immigration along several
margins—through increased investment by firms, specialization
of natives, complementarities between natives and immigrants, technological
response by firms, and job creation. All those responses
attenuate the “partial effect” due to a movement along the labor
demand curve generated by increased labor supply. This explains
Labor Markets
why a long tradition of empirical economic studies (Friedberg and
Hunt 1995; Card 2001, 2009; Ottaviano and Peri 2006, 2008; and
Peri 2011) has found very small to no effect of U.S. immigration on
native wages and employment at the national and at the local level.
Other studies (e.g., Borjas 2003, 2006) have found negative wage
effects on less-educated workers at the national level in the order of
3 percent over the 1980–2000 period. Even those studies, however,
find positive wage effects for workers with a high school
diploma and some college education- of 1.0 to 1.5 percent. The small
negative wage effects found in Borjas are possible but, in my opinion,
they focus mostly on the competition channel and overlook the margins
of adjustment described above.