Impact of the Mexican Immigrant Labor Force

in the United States Economy

Maria A. Padilla

Center for International Studies

University of St. Thomas

Houston, Texas

Prepared for delivery at the 82^nd annual meeting of the

Southwestern Social Science Association, New Orleans, Louisiana

March 27-31, 2002

It is virtually impossible to speak of the United States without mentioning its long-rooted immigration history. The immigration experience of this country has proven to be a dynamic phenomenon, affecting all American citizens in one way or another. All Americans are either immigrants themselves, or descendents of individuals that have migrated to this country in search of advancement and more opportunity to enhance their standard of life.

In the past three decades, immigration has emerged as a contentious issue and has received wide public attention. Reasons for this large concern are attributed to the latest wave of immigrants entering the United States, which differ greatly from the immigrant flow of the past in terms of size, legal status, and composition by national origin. Although a vast amount of academic research and literature on immigration has surfaced as a result of it becoming highly publicized, no consensus has been reached on what the impact is on the country. The contradictory conclusions derived by scholars have left many misinformed on the issue, culminating into a heated public debate. There are contending perspectives to the extent that immigration is beneficial to the United States economically and on the implications it will have for the country socially, culturally, demographically, etc. Proponents of immigration argue that it stimulates economic growth, allows consumers to purchase goods and services at a lower cost, and fills jobs in the labor market that natives do not desire, which is crucial in keeping the economy performing at its full potential. Immigrants are often credited with helping firms stay in business and remain competitive as well. Those in support of immigration also place much value on the diversity, talent, entrepreneurship, motivation, and work ethic that new immigrants bring with them, which in turn has the effect of enriching the country through innovative creation and thinking. Proponents claim that immigrants generate more jobs than they take, as well as pay more in taxes than they receive in public services. Despite the significant amount of tax payments immigrants and those of undocumented status contribute to the country’s government programs, they are often ineligible for the benefits. Many also argue that immigrant use of welfare is largely attributed to the use among refugees and the elderly. With respect to culture, supporters of immigration maintain that this nation has been and always should remain a country of immigrants because of the profound contributions each wave of newcomers has made throughout history. The interaction among different cultures is what enhances and is fundamental about American life, not the elements of a single culture. On the other hand, opponents argue that immigration harms the economy by lowering wages and increasing unemployment for American citizens. They claim that immigrants have a higher rate of public program and welfare usage than U.S. natives. In addition, they suggest that taxpayers have to bear the burden of providing government services, such as education, health, and welfare to the new entrants. Opponents believe that immigration will ultimately have a negative effect on the social structure of the U.S. population as it leads to increased conflict between ethnic groups and a deterioration of the American culture. Many are concerned whether the new wave of immigrants, dominated primarily by non-English speakers from Latin America and Asia, will be able to successfully assimilate into the American mainstream.

Since immigration is of significant importance to U.S. national interests and is of a complex nature, the subject matter deserves further examination. Although this issue is multi-faceted in nature, this paper will focus primarily on immigration’s impact on the United States’ labor market, namely its effect on the employment and wage levels of U.S. nationals. Given that the Hispanic population is the fastest growing minority group in the country, and that those of Mexican origin constitute the main source of this growth, this paper will provide an analysis of the Mexican immigrant labor force in order to determine the labor market impact of this particular group. It will be maintained that the net contribution of immigration exceeds the cost, even though the benefits and costs are not equally distributed among all socio-economic segments and geographic regions in society. The paper begins by examining the labor market characteristics of the immigrant population in general, as well as those specifically attributed to the Mexican immigrant population. It will then go on to provide a general discussion about the changes and experiences of the U.S. economy and labor market during the past three decades, at a time when an increasing number of newcomers were entering into the country. Since access to the labor market fundamentally depends on immigration policy, an overview of these laws will be provided in order to illustrate how the United States has modified its position on this issue over time. Finally, policy recommendations for the future will be offered.

In order to assess the labor market impact that immigration has on the U.S. domestic economy, it is necessary to determine what types of human capital new immigrants are bringing into the nation. Several attributes including, the magnitude of the immigrant population (legal and illegal), educational attainment, labor force participation, occupational profile, and wage levels will briefly be discussed for the entire immigrant population, as well as those attributed to Mexican immigrants because of their direct relevance in assessing the economic impact (see table 2). Although it is recognized that English proficiency is a valuable asset for economic advancement in the U.S. labor market, examination of this factor is beyond the scope of this paper.

According to the March 2000 Current Population Report on the Foreign-Born Population in the United States conducted by the Census Bureau, 28.4 million foreign-born persons (including those naturalized) resided in the United States, representing 10.4 percent of the total U.S. population (Lollock 2001, 1). While the absolute number of foreign-born persons in the country is at a record high, the share of the population that is foreign-born is much lower than it was throughout the 1870-1920 period, when it was close to 15 percent of the total population. Therefore, given the fact that the U.S. population was only about one-third its current size, immigrants entering the country in the early part of the century arguably had a larger impact on the labor market than the new entrants of today. The annual flow of immigrants who enter and stay is slightly more than 1.1 million (legal and illegal), which matches the previous historical peak. In order to fully capture the effect on the population, one must subtract the number of immigrants who die each year (about 200,000) and the number who leave again (also about 200,000). The final result is that the foreign-born population grows by about 700,000 each year due to entry, exit, and death, which accounts for one third of the net annual total population growth of the country (Fix and Passel 1994a, 5-6; Simon 1999, 52; Suárez-Orozco 1999, 232).

Much controversy surrounds the number of undocumented immigrants residing in the country because of the inherent difficulty of estimating the number of a virtually hidden segment of the population. The United States Immigration and Naturalization Service (INS) estimates that in October 1996, 5 million undocumented immigrants were living in the country, representing about 1.9 percent of the total population. The population was estimated to be growing annually by 275,000, which is consistent with several other experts that estimate that the illegal population to be growing within the range of 200,000 to 400,00 per year (Fix and Passel 1994a, 18; Rivera-Batiz 2000, 491; Simon 1999, 52; Suárez-Orozco 1999, 227). These numbers clearly demonstrate that the millions of illegal immigrants entering the United States every year often reported by the media and other observers is invariably overstated. Contrary to popular perception, less than half of the undocumented cross the country clandestinely, while the majority enter legally and overstay their visas (Fix and Passel 1994a, 6).

Educational attainment is one of the most important factors in the U.S. labor market because it contributes to a person’s earnings potential and socio-economic status by determining what type of job a person is able to qualify for. When compared to the native-born, immigrants are more likely to have a lower educational attainment, but are also more likely to have a college degree or better by a figure only marginally greater. According to the March 2000 Current Population Report of the U.S. Census Bureau, 22.2 percent of the foreign-born over age 25 had less than a ninth grade education compared to 4.7 percent of the native population. The most recent cohort of immigrants has improved its education levels. When comparing data from the 1990 census and the 2000 census, the 1990 census reported that 26 percent of the foreign-born age 25 and over had less than nine years of education. In 2000, 25.8 percent of the foreign-born held a bachelor’s degree or more compared to 25.6 percent of natives, whereas in 1990 only 24 percent of the foreign-born held advanced degrees (Lollock 2001, 4; Fix and Passel 1994a, 25) (see table 1). Julian L. Simon also agrees that the average education of immigrants has been increasing with each successive cohort. He states, "The proportion of adult immigrants with 8 or fewer years of education has been trending downward, and the proportion of adult immigrants with 16 or more years of education has been trending upward." (Simon 1999, 52).

It is important to note that immigrants are a heterogeneous group, which is apparent when examining the educational attainment of immigrants of different national origin or legal status. For instance, in 2000, among the foreign-born in Latin America, those from South America were the most likely to have a high school education (79.6 percent) and those from Central America were the least likely (37.3 percent). On the other hand, Asians, Europeans, and those from other regions possessed the highest percentages of high school graduates (83.8 percent, 81.3 percent, and 86.6 percent, respectively). The proportions that had attained a bachelor’s degree ranged from 44.9 percent for those from Asia to 5.5 percent for those from Central America (Lollock 2001, 5). The large educational differences among immigrants from different countries illustrate the problems associated with generalizing about immigrant quality. Michael Fix and Jeffrey S. Passel of the Urban Institute also find that when U.S. census data is disaggregated, recent legal immigrants actually exceed natives on conventional measures of "quality" (Fix and Passel 1994b, 153). The Census and other major data sources hide significant information by grouping family-based immigrants, employment-based immigrants, refugees or asylees, temporary-legal workers, students, or visitors, and illegal aliens all into a noncitizen alien category because the education, skills, and wages of individuals in one admission status can vary markedly from those in the next. The inclusion of illegal and refugees lowers the estimated average education, skill, and earnings level. Despite this discrepancy in data collection, the Census and other major data sources provide information that forms the basis for public debates on immigration policy, leaving people with an inaccurate picture of all immigrants (U.S. Department of Justice-INS 1999, 91).

While the rising immigrant entries of the past three decades translates into a growing share of foreign-born workers in the U.S. labor force and in turn, a larger impact on the labor market, it is nowhere near the historical peak. The INS’ Triennial Comprehensive

Comparison of Foreign-Born vs. U.S. Nationals:

Report on Immigration maintains, "In 1890, 5.1 million foreign-born workers made up fully 26.1 percent of the labor force. In 1990, 11.6 million foreign-born workers made up 9.3 percent of the labor force. As of 1994, the 12.0 million foreign-born workers accounted for 10.0 percent of the U.S. labor force" (U.S. Department of Justice-INS 1999, 84). The report goes on to state, "Immigrants contributed more than one-quarter to the labor force growth during the 1980’s, double their contribution in the 1970’s, and Urban Institute demographers project that under current immigration law . . . immigration will account for approximately one-third of the labor force growth during the 1990’s. (U.S. Department of Justice-INS 1999, 85).

Since most immigrants come to the United States at the prime age of their work lives and motivated by economic gain, it is reasonable to conclude that they have a high labor force participation rate. In 1993, the proportion of natives ages 25-34 years of age in the total population was 17 percent compared to 26 percent for immigrants. The large concentration of immigrants in the younger working ages is especially important in light of the anticipated increase in the proportion of natives age 65 and over, who will need to be supported by working persons (Simon 1999, 34). In terms of level of education, native men and women aged 25-64 years with less than a high school diploma are more likely to be unemployed than immigrant men and women with comparable educational levels (with native males at 33.4 percent, native females at 56.6 percent, immigrant males at 20.3 percent, and immigrant females at 53.6 percent). In contrast, native men and women aged 25-64 years with a college degree or more are less likely to be unemployed than immigrant women and men with comparable educational levels (with native males at 7.2 percent, native women at 19.2 percent, immigrant males at 11 percent, and immigrant females at 28.4 percent) (Fix and Passel 1994a, 26-27).

As previously mentioned, the occupations of immigrants reflect their educational attainment, providing a diverse picture of how well they are faring in the U.S. economy. The two occupational categories that immigrants are concentrated in are manufacturing, which includes operators, laborers, and fabricators, and service workers with 40 percent of all foreign-born workers in those two occupational groups versus 30 percent for natives. Given the fact that recent immigrants are more represented in these two occupational groups than immigrants who arrived before 1980, suggests that immigrants acquire skills and learn more about alternative job opportunities as they become accustomed to living in their new home country. By a slight difference, natives are more likely than immigrants to possess clerical, professional, and managerial positions—30 percent of natives hold such jobs compared with 25 percent of the foreign-born (Fix and Passel 1994a, 27). Other scholars contend that although the foreign-born are more commonly found working in lower-skilled jobs, such as waiters, agricultural graders and sorters, and private household workers, they are also more likely to possess high-skilled jobs, such as college teachers, engineers, medical scientists, and economists, than the native-born (Edmonston and Smith 1997, 218). Illegal immigrants in particular appear to fill occupations at the lower end of the job market. They are represented more heavily in unskilled occupations, such as farm workers, service workers, and non-farm laborers, and in semiskilled occupations, such as operatives. A significant number are in the skilled blue-collar category of craft workers, while few were found in white-collar occupations (Briggs 1984, 159).

In addition to occupational differences, on average, immigrants have lower wage levels than natives. The fact that schooling and skills from abroad are not entirely transferable to the U.S. can account for some of the lower earnings. It is estimated that in 1989, 66 percent of immigrants in the labor force had wage and salary incomes of less than $20,000 compared with 57% of natives. Fix and Passel argue,

Julian L. Simon claims, "Within a few years in the U.S., the average contemporary immigrant male head of a family comes to earn more than does the average native male head of a family" (Simon 1999, 96-97). Also, if one excludes the Mexican foreign-born, all immigrants in 1993 earned an approximate hourly wage of $10 to $16 and an annual income of approximately $20 to $28,000 (Greenwood and Rosenfeld 1996, 1055).

The United States and Mexico share a unique relationship, unlike any other due to close proximity and a long shared history. The events in one country have tremendously shaped the outcomes in the other in ways unlike any other, whether it is economically, socially, or politically. Mexicans have migrated northward across the frontier established in 1884, since the settlement of both countries, when U.S. employers recruited Mexican workers to build the Southwest’s railroads and work on the region’s farms. Throughout the history of both countries, it is clear that the robust demand for low- and medium-skilled workers in the United States has relied increasingly on a Mexican supply of such workers—both authorized and unauthorized (U.S. Commission on Immigration Reform and Mexican Ministry on Foreign Relations 1997, 1; García 1997, 200; Carnegie Endowment for International Peace 2001, 6 & 9). As a result, the Mexican immigrant population serves as a valuable subject of further examination not only because of its distinctive relationship with the U.S., but also because it constitutes the largest source of legal and illegal immigrants coming into the nation.

Most Mexican immigrants move to the United States in an attempt to solve economic problems at home and are motivated by wage differentials that exist between both nations. Mexican migrants are concentrated in California, Texas, and Illinois and primarily live in metropolitan areas because of the family and social networks that draw them to these areas. According to the Binational Study on Migration Between Mexico and the United States, in 1996, there were 7 to 7.3 million Mexican-born persons residing in the country (U.S. Commission on Immigration Reform and the Mexican Ministry of Foreign Relations 1997, 2). The Carnegie Endowment for International Peace projected the most current estimate to be at 8 million Mexican-born persons living in the U.S (Carnegie Endowment for International Peace 2001, 11; Durand and Massey 2001, 29). The Mexican immigrant population represents almost one-third of the total foreign-born population, approximately 3 percent of the overall U.S. population, and is equivalent to 8 percent of the overall national population of Mexico. (U.S. Commission on Immigration Reform and the Mexican Ministry of Foreign Relations 1997, 2; Suárez-Orozco 1999, 232; Marcelli and Cornelius 2001, 115; Camarota 2001, 15). The INS informs that in 1996, the annual legal Mexican immigration was almost 164,000, which is consistent with other sources that claim that annual legal immigration exceeds 130,000 persons per year (Durand and Massey 2001, 29). It is estimated that about 40 to 55 percent of illegal immigrants in the United States are of Mexican origin, (U.S. Department of Justice-INS 2001; Suárez-Orozco 1999, 229; Rivera-Batiz 2000, 491) while the actual count of this population is projected to be within the range of 2 to 2.7 million persons (U.S. Department of Justice-INS 1997; U.S. Commission on Immigration Reform and the Mexican Ministry of Foreign Relations 1997, 2; Suárez-Orozoco 1999, 240). Durand and Massey maintain, "the Immigration and Naturalization Service (INS) estimates the net annual migration of undocumented immigrants is around 150,000 persons, with a total of three million undocumented Mexicans now living in the United States (Durand and Massey 2001, 29; Carnegie Endowment for International Peace 2001, 2; Camarota 2001, 58).

Overall, the Mexican foreign-born are characterized by low levels of educational attainment when compared to other foreign-born and natives. Michael J. Greenwood and Marta Tienda compare the average years of education and percent with a high-school diploma among Mexican natives, Mexican foreign-born, other foreign-born, white natives, and black natives in the three states containing the largest representation of Mexican immigrants: California, Texas, and Illinois. They find that among the men and women of prime working ages (25-54), the Mexican foreign-born averaged 7.4 to 8.2 years of education, Mexican natives averaged 11 to 12 years, and the foreign-born, native white, and native black averaged 12 to 13 years, depending on state of residence (Greenwood and Tienda 1997, 264-271). A study conducted by Michael J. Rosenfeld and Marta Tienda reveals the average years of education for Mexican immigrant workers to be higher at about 9.4 years, and it finds the average years of education for natives to be about 12 to 13, which is in agreement with the study previously mentioned (Rosenfeld and Tienda 1996, 1054-55). Michael J. Greenwood and Marta Tienda also discovered that among the men and women of prime working ages (25-54), 25.1 to 30.5 percent of the Mexican foreign-born possessed a high school diploma or more, 64.0 to 73.0 percent of Mexican natives, 70.5 to 77.2 percent of the other foreign-born, 71.6 to 84.6 percent of native blacks, and 87.4 to 91.2 percent of native whites (Greenwood and Tienda 1997, 264-271). Their conclusions confirm the validity of the argument that Mexican immigrants have lower levels of education according to U.S. standards. Based on the March 2000 Current Population Survey (CPS), Steven A. Camarota finds a similar result of those aged 25-64 by stating, "Almost two-thirds of adult Mexican immigrants have not completed high school, compared to less than 10 percent of natives . . . 22 percent of all high school dropouts in the U.S. labor force were born in Mexico" (Camarota 2001, 5). While most Mexican immigrants have low levels of educational attainment it is important to note that more than one-seventh of new legal immigrants are college graduates (U.S. Commission on Immigration Reform and the Mexican Ministry of Foreign Relations 1997, 4).

Marcelli and Cornelius conducted a study using four surveys implemented from 1994 to 1996 in both Los Angeles and San Diego, as well as data from Mexico in order to prove that the demographic profile of Mexican migrants to the United States since 1970 has changed. Specifically, their data revealed that the Mexican migrant flow has become more selective with respect to education because the proportion with more than ten years has been rising since the mid-1980s, while the proportion of those having less than four years of schooling has been declining (2001, 105-111).

The undocumented Mexican immigrant population does not belong to the lowest strata of Mexican society and does not have the lowest levels of education. According to Rivera-Batiz,

According to a study by Francisco L. Rivera-Batiz, surveys reveal that many Mexican immigrants see their move to the United States as an economic investment, consisting of long hours of labor at their prime working age of life to accumulate enough money to send back home. Given that their primary motive for coming to the United States is economic, it is reasonable to conclude that they have intensive participation rates in the labor market (Rivera-Batiz 2000, 489). Michael J. Greenwood and Marta Tienda claim, "At younger ages, Mexican migrants have a substantial labor force participation advantage over their U.S.-born counterparts. Tienda and Singer reported high labor force participation rates among newly legalized immigrants, around 95 percent for men." (Greenwood and Tienda 1997, 271). Michael J. Rosenfeld and Marta Tienda also state,

From 1994-1998 there was a narrowing of gap between the unemployment rates between native-born workers and those born in Mexico. Employment rates for Mexican males and females have increased and a rising share of these workers are also working full time. (White House CEA 2000, 110).

With respect to the undocumented Mexican immigrants, Francisco L. Rivera-Batiz uses the Legalized Population Survey to find that the labor participation rate of this population was 83 percent, substantially above the labor force participation of the overall U.S. population at the time, which was 76 percent. He states, "The strong labor commitment of the illegal immigrants suggests that their purpose entering the U.S. is not to seek welfare or other public benefits, but instead, to work and make money." (Rivera-Batiz 2000, 497).

As a consequence of their lower educational attainment, Mexican immigrants tend to be concentrated in lower-skilled occupations. Steven A. Camarota’s study compares the occupational distribution of natives and Mexican immigrants 18 and over in 1999 by using the U.S. Census Bureau March 2000 Current Population Survey. He finds that contrary to popular impression, more than 80 percent of illegal Mexican immigrants work outside of the agricultural sector. Most undocumented and legal Mexican immigrant workers hold non-private household service occupations, precision production craft occupations, or are operators, fabricators, and laborers. Although both legal and illegal Mexican immigrants share many similarities, there also exist some differences in the type of occupations that they hold. While almost 18 percent of illegal Mexican immigrants are employed as agricultural laborers, only 10 percent of legal Mexican immigrants are in this occupation. Also, one out of four legal Mexican immigrants was employed in managerial and professional or technical sales and administrative support occupations, whereas only 6 percent of illegal aliens were. Compared to the 60 percent of natives who work in higher-skilled occupations, relatively few legal and illegal Mexican immigrants are employed in these types of professions. In terms of distribution across industries, Steven A. Camarota finds that almost two-thirds of legal and illegal Mexican immigrants work in manufacturing, construction, agriculture, and retail, while only about 40 percent of native-born workers are employed in these industries (Camarota 2001, 19-20). Michael J. Greenwood and Marta Tienda’s study agrees with Steven A. Camarota’s findings in terms of what industries the Mexican foreign-born are more heavily represented in. They find that in California, Texas, and Illinois, most of the Mexican foreign-born men work in retail trade, manufacturing, construction, agriculture, and business, repair and other services. For the Mexican foreign-born women, they find that they are more heavily represented in higher skilled-occupations, such as retail trade, manufacturing, business, repair, and other services, and professional business services (Greenwood and Tienda 1997, 273-278; McCarthy and Vernez 1998, 62). It is important to note that although most Mexican immigrants in the U.S. are low-skilled workers in the lower-wage sectors, over one-seventh of all Mexican immigrants in the U.S. are professionals (Suárez-Orozco 1999, 234).

The lower wage levels of Mexican immigrants are reflective of their lower educational attainment and lower-skilled types of employment. Many scholarly studies agree that in general, their economic standing is lower than that of natives and other foreign-born, and their wages have been declining over time. For instance, George Borjas contends,

The Binational Study on Migration Between Mexico and the United States claims that in 1996, 11 percent of recently arrived households had incomes of less than $5,000, whereas in 1990, only about 5.5 percent had such low incomes. In contrast to this decline in earnings, the average U.S. household experienced income gains between 1990 and 1996. Also, unauthorized status to work in the United States is a factor because the annual earnings of legal immigrants in 1996 were more than $19,000 (U.S. Commission on Immigration Reform and the Mexican Ministry of Foreign Relations 1997, 5). Rosenfeld and Tienda find that the male Mexican immigrant worker (excluding farm workers) averaged an hourly wage rate of only $8 in 1993, which is considerably lower than most other natives and immigrant groups. Also, the average annual wage and salary income of male Mexican immigrant workers lingered around $15,000 in 1993, which is almost 50 percent below that earned by non-Hispanic white immigrants and 24 percent below that earned by U.S.-born Mexicans (Rosenfeld and Tienda 1996, 1053).

Contrary to various academic studies, the White House Council of Economic Advisors’ 1999 Economic Report of the President states that the wages of Mexican immigrants have been rising. It reports that since 1995, (one year prior to the statistics of

wage decline reported by the Binational Study on Migration Between Mexico and the United States) the median real wage of Mexican born immigrants has risen by a total of 6.8 percent for men and 3.8 percent for women. Also unlike previous findings, the report reveals that the earnings gap is narrowing between immigrant and native workers (White House CEA 2000, 111).

It is important to understand what type of environment has prevailed in the country during the last three decades, at a time when it has had to absorb an increasingly large number of immigrants each year. Significant changes have occurred within the U.S. economy, which in turn has had directly transformed the labor market. First, throughout the 1970’s and 1980’s the economy experienced persistent inflation, periodic high employment rates, slow growth in productivity, and rising wage inequality. These trends changed beginning in the 1990’s, when the country demonstrated economic recovery with strong productivity growth, rising incomes, low rates of unemployment, and low inflation. Secondly, the economy increased its transformation from one that is manufacturing-based to one that is service-based, which has restructured the labor market in terms of what type of workers are in demand and the type of occupations that compose the labor force. It will be discussed more in depth as to what has happened to the wages and employment of the disadvantaged group in the labor market during this time period, since Mexican immigrant workers are mostly concentrated in this lower-skilled segment of the labor force and are alleged of increasing the employment competition within this segment of the labor force.

The United States witnessed one of its longest periods of economic expansion during the 1990’s. The indicators of labor market progress—employment, unemployment, and wages showed that the nation’s labor market was performing at remarkable levels: the number of workers was at an all-time high, the unemployment rate was at a 30-year low, and real (adjusted for inflation) wages were increasing after years of stagnation. Within this tight labor market and high-employment economy, more men and women who were looking for a job were finding them, and finding them faster (White House CEA 2000, 99; Carnegie Endowment for International Peace 2001, 12).

In the past few decades, one of the best-documented labor market trends has been the decline in real wages among men, especially those in the lower socioeconomic segment of the population . The Current Population Survey of the U.S. Census Bureau reports that between 1979 and 1993, the median real wage for men fell by 11.1 percent. Progress has been made however. Since 1996, the median real wage for men rose by 1.7 percent in 1997 and by 2.3 percent in 1998. As for women, they witnessed a slightly stronger median real wage growth in 1997 of 1.9 percent, but their wages remained constant in 1998 (White House CEA 2000, 99-102).

In particular, a strong labor market has been especially important to workers with less education and at the lower end of the wage distribution, given their experience from the late 1970’s to the early 1990’s, when wage inequality grew and less skilled workers faced declining wages, on average. The reason that a tight labor market, as experienced in the 1990’s, is significant is because wages can be pulled upward for disadvantaged workers. If labor is scarce, these workers can demand better pay than at other times. Employers are also more willing to hire and train workers whom they typically might pass over when they have fewer openings and an abundance of applicants, if it is difficult to fill vacancies (White House CEA 2000, 103).

Although the strong labor market has sharply reduced unemployment rates for workers at all levels of education, the employment rate has been greater for workers without a high school diploma than it has for workers with more education from 1993 to 1998. There has been more than a 9 percent increase for those with less than a high school education, about a 3 percent increase for those with a high school diploma and some college education, and only about a 1 percent increase for those with a college degree. The economy created a large enough number of low-skilled jobs to employ more people without a high school education and to keep employed those already in the workforce. Disadvantaged workers not only saw employment gains with the strong labor market, but also wage gains. Between 1979 and 1993 the real hourly wages of male and female workers 16 and older in the 10^th percentile of the wage distribution declined by 14.8 percent and 15.8 percent, respectively. However, since 1993, these lowest paid workers have received significant gains as the real hourly wages for men in the 10^th and 20^th percentiles have increased by 6 percent and for women in the 20^th percentile by 4.7 percent. With respect to educational attainment, male high school graduates aged 20 and over without any college attendance experienced a real increase in their median wage of 2.8 percent from 1993 to 1998. Although this is a small increase, it is an improvement over their experience from 1979 to 1993, when their median wage fell by 21.8 percent. In 1998, for the first time since at least 1979, the median real wage of male high school dropouts aged 20 and over increased by 7 percent (White House CEA 2000, 104-106).

The increasing transition of the U.S. economy from one that is goods-producing to one that is service-producing has caused a rapid decline in significance of the goods-producing sector. Most of the industries in this sector have declined significantly in terms of the percentage of the nation’s jobs they provide to the economy, while the industries that comprise the service-producing sector have increased the absolute number of persons they employ and most have also dramatically increased their relative share of the nation’s total employment (Briggs 1984, 250-51) (see table 3). The Bureau of Labor Statistics projects that in 2008 manufacturing will be one of the two industries that will experience declines in employment (mining the other), while it projects that the service industry in 2008 will grow at more than twice the rate of total employment (Bureau of Labor Statistics 2001).

These shifts in employment patterns have increased the premium on education, particularly on workers who have at least a bachelor’s degree. Due to this structural change that has placed an increasing demand and value on skilled labor, many low-wage workers saw a decrease in real wages from the 1970’s to early 1990’s. The good news

for less educated workers is that although employers are now demanding a more highly educated workforce, they also continue to need workers across the entire spectrum of skills and educational backgrounds due to the jobs that will be added to the labor market during the first decade of the 21^st century. Throughout 2008, the most skilled jobs (i.e., typically requiring a bachelor’s degree) could witness the largest percent increase in employer demand, although employment will also expand among jobs with lesser skill requirements, but at much slower rates. Despite the differences in rates of new job creation, the skill distribution of employment in the year 2008 will look much as it did in the year 1998: about 50 percent of the jobs will require post secondary education and the other 50 percent no more than a high school diploma (see Table 4). This projection illustrates that contrary to popular belief, the absolute size of low-skilled jobs are not disappearing. Many occupations with limited educational requirements are experiencing above-average rates of job growth or substantial increases in employment levels (about 10 to 13 percent). Almost one-fourth (4.7 million) of jobs resulting from economic

Source: Levine, Linda 2000 (p. 11)

growth projected until the year 2008 could lie in moderately low-skilled occupations, while another 16 percent (3.3 million) of new jobs could be added to the lowest skilled category. These less-skilled workers will be needed to fill jobs that may not be the most desirable, but nonetheless essential in the operation of the U.S. economy. It is important to note that many low-skilled workers will be needed to fill not only new jobs, but also to fill existing positions that are expected to become available as many of the baby-boomers retire, others move into different occupations, or otherwise leave the labor force. The lowest skilled workers have the educational level to compete for 26 percent of the 55 million new and existing jobs expected to open up by 2008 (Levine 2000). These statistics have significant implications for Mexican immigrant workers because they fall into the lower-skilled segment of the U.S. labor force. Prospects do not appear bleak for this category of workers, as jobs will continue to be in abundance for workers with no more than a high school education in the near future. This is important because the likeliness of competition between Mexican immigrants and natives for employment and wages will most likely be less. These findings also seem to refute Steven A. Camarota’s argument that a large share of unskilled Mexicans come at a time when the U.S. economy offers limited opportunity to unskilled workers (Camarota 2001, 57).

A noteworthy study conducted by Wayne A. Cornelius illustrates the manner in which labor was being utilized in immigrant concentrated sectors in San Diego County, California in 1996. Despite the inherent difficulty with generalizing a society at large based on one case study, San Diego County is valuable to examine as it is representative of cities throughout the United States that contain sectors that rely heavily on the use of Mexican immigrant labor for survival and economic growth. Through the use of interviews, it was revealed that on average, employers classified 83 percent of their production work force as unskilled or low skilled. This is a key finding, in view of conventional wisdom that the new information-based economy requires numerous highly skilled, college-educated workers, but very few less skilled employees. The above result also suggests that there are many types of businesses that continue to serve as easy entry points into the US labor market for immigrants, regardless of skill: not just restaurants and farms, but even high-tech operations. Furthermore, the proportion of low-skilled jobs in immigrant-using firms has risen in the past thirteen years from 58 percent in 1983 to 68 percent in 1996 (Cornelius 1998, 120).

Mexican immigrant workers appear to be filling job positions not only that require less educational and training requirements, but that will experience growth between 1998 and 2008 (see table 5). In terms of industry employment outlook, the retail trade, construction, and agricultural services are important to examine since many Mexican immigrants hold jobs in these industries. In retail trade, many Mexican foreign-born have occupations in the eating/drinking and grocery store components of the industry. In eating and drinking places, job opportunities are projected to be plentiful because turnover is high, little or no formal education or previous training is required, and earnings are low. Employment is expected to increase by 17 percent over the 1998-2008 period, which is somewhat faster than the 15 percent growth projected for all industries combined. Numerous job openings should be available in the grocery store segment as well because of the industry’s large size and high rate of turn over. Employment in grocery stores is expected to increase about 6 percent by the year 2010, compared with the 15 percent growth projected for all industries combined. Construction, one of the economy’s largest industries, is expected to have good job prospects for workers. Employment is expected to grow about 9 percent through the year 2008, slower than average for all industries. Over the 1998-2008 period, employment growth is projected to add about 550,000 new jobs in construction. In particular, employment in heavy construction is projected to increase about as fast as the industry average. Growth is expected in highway, bridge, and street construction, as well as repairs to prevent further deterioration of the nation’s infrastructure. In the agricultural services industry, employment is projected to increase 25 percent through the year 2008. Numerous job openings will arise from the very high turnover rate, low pay, and high physical demands.

Although demand for agricultural services is expected to remain strong, the rate of

employment growth is expected to slow over the 1998-2008 period. Over the long run though, overall employment should slowly increase (U.S. Department of Labor-Bureau of Labor Statistics 2000).

It is not surprising that the American public became so alarmed by increased immigration during the 1970’s to early 1990’s, at a time when the economy was unhealthy and undergoing increased transformation. Concern has been greatest for low-skilled U.S. workers who have been the most adversely affected by the restructuring

and economic slump of this time period. Since the labor market opportunities of less-skilled workers have improved significantly as the economy underwent recovery beginning in 1993, even at the same time that the country continued to receive more and more immigrants each year, suggests that the economic climate had a larger influence on the adverse economic standing of the lower-skilled than immigration itself. It may well be the case that increased immigrant inflows contributed in a partial manner to the unfavorable circumstances of disadvantaged workers at the time by decreasing the labor market opportunities of these respective workers. Although it is important to note that immigrants have often served as scapegoats for explaining all the ills of the economy, such as high employment, low wages, etc., when they may have not been largely responsible for these realities. The U.S. Bureau of Labor Statistics predicts that by 2008 the United States will have a large proportion of newly created jobs that will require minimal education and modest training. This favorable forecast for the disadvantaged, together with fact that Mexican immigrants are concentrating in industries that will experience job growth, translates into decreased labor market competition between U.S. nationals and Mexican immigrants. With regards to the labor force prospects for Mexican immigrants, the country continues to transform itself in ways that inevitably increases the demand for immigrant labor such as growth in retail, hotel, restaurants, construction, and low-level service.

Although the immigration phenomenon of the United States has been shaped by multiple factors, immigration policy has remained throughout the years one of the leading factors responsible for the volume and composition of new entrants into the country, as well as their impact on the U.S. economy. Since access to the labor market is largely dependent on the immigration laws implemented by the federal government at a given time, several pieces of legislation that have been recently passed in the last three to four decades will be reviewed because of their direct bearing on the Mexican immigrant worker population.

Prior to 1965, U.S. immigration policy was guided by a national-origin quota system, which resulted in biased admissions favoring Northern and Western Europeans. Under this system, individuals from the Western Hemisphere were exempt from quotas and faced no numerical restrictions on the number of visas, presumably because of the close political and economic ties between the United States and its neighbors. Applicants from the Western Hemisphere were awarded visas on a first-come, first-served basis. Also, from 1942 to 1964, the U.S. and Mexican government implemented the Bracero Program in an agreement to allow seasonal agricultural workers to be admitted on a temporary basis from Mexico to initially satisfy U.S. agricultural labor shortages during World War II. The program came to an end when critics made the undocumented claim that the Braceros adversely affected the wages, working conditions, and job opportunities of U.S. natives (Borjas 1997, 156-57; Edmonston and Smith 1997, 26-27).

Following the World War II victory, the American public adopted a more liberal perspective on international migration. This sentiment carried on about twenty years later and was expressed in the 1965 Immigration and Nationality Act Amendments, removed the quotas and placed all visa applicants on a level playing field, regardless of their country of origin or hemispheric location. It established family reunification as the central goal of immigration policy, with visas being awarded mainly to applicants who had immediate relatives (spouses, children, and parents) already living in the U.S. (Borjas 1997, 157; Espenshade and Huber 1997, 103-07). The number of immediate relatives of U.S. citizens was "uncapped" and not subject to numerical limits. The outcome of this provision, which few policymakers foresaw, was increased immigration, particularly from developing countries. This act also placed the first ceiling on immigration from the Western Hemisphere, which was then given a 20,000 per country limit with the implementation of the 1976 Immigration and Nationality Act Amendments. (Edmonston and Smith 1997, 27; Fix and Passel 1994a, 10).

Since the latest wave of illegal immigrants from Mexico has increased starting with the late 1960’s, more recent legislation has focused on how to deal with the problems associated with these undocumented entrants. In general, the late 1970’s and early 1980’s saw a wave of neo-restrictionist attitude, which can be attributed to concerns about the condition of the economy and growing anxiety over economic insecurity, perceptions of immigrants’ undesirable traits, and as well as concerns related to an increase in unauthorized immigration (Espenshade and Huber 1997, 1038). The 1986 Immigration Reform and Control Act (IRCA) was at the cornerstone of the effort to decrease the number of illegal immigrants by legalizing the status of certain unauthorized migrants already present in the U.S., increasing border enforcement, and instituting a system of employer sanctions designed to penalize employers who knowingly hire illegal aliens. The result of this statute was the legalization of about 2.7 million persons, the overwhelming majority of who were Mexican, who had been residing in the U.S. before 1986 as illegal immigrants. Employer sanctions and enhanced border interdiction appeared not to have significantly diminished the flow of undocumented immigrants, although this issue is widely debated (Edmonston and Smith 1997, 29). The IRCA may have had the unintended effect of strengthening family and friend networks that can prearrange jobs, while at the same time transforming a portion of the Mexican migration flow from sojourner to settler (Cornelius 1998 138; U.S. Commission on Immigration Reform and the Mexican Ministry of Foreign Relations 1997, 5). While the IRCA pertained to the problem of illegal immigration, the Immigration Act of 1990 (IMMACT90) reformed the laws relating to legal immigrants for the first time in twenty-five years. It was enacted in an environment of economic expansion combined with substantial industrial restructuring. It increased legal immigration ceilings by 40 percent and tripled employment-based immigration. From the perspective of labor market impact, the most important changes were the following: it increased the employment-based immigration limit from 54,000 to 140,000 persons per year by reducing the number of visas for unskilled workers, and simultaneously increasing the number of visas for priority workers and professionals with U.S. job offers. This increase was in response to the projection that the U.S. labor market would face a shortage of skilled workers that could not readily be alleviated by our education and training system, as well the recognition of the demand for specialized labor in an increasingly competitive and global economy. Secondly, it created several nonimmigrant visa categories to accommodate perceived U.S. needs of several classes of temporary foreign workers, including performing artists and entertainers, religious workers, international cultural exchange program participants, and those with extraordinary abilities in the sciences, arts, education, business, or athletics. Thirdly, it placed an annual numerical limit of 65,000 on admissions of temporary "specialty occupation" workers or aliens entering under the H-1B nonimmigrant visa to fill occupations requiring a baccalaureate degree or equivalent work experience (U.S. Department of Justice-INS 1999, 86-87).

Finally, the 1996 Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) was another attempt to reduce illegal immigration to the United States. It sought to accomplish this goal in two ways. It set up a pilot project through which employers could verify by telephone the immigration status of potential employees. This effort was made in order to prevent the use of fraudulent identification records and hinder illegal immigrants in their search for employment opportunities. In addition to strengthening worksite enforcement, the act strengthened border patrol by adding guards and bolstering the physical barriers where crossing traffic is heaviest (Edmonston and Smith 1997, 29). This law has become widely debated and its passage owes much to the widely held notion that unauthorized Mexican immigrants impose excessive socioeconomic costs because of their fewer labor-market skills and alleged negative economic effects on social services, schools, welfare assistance, and earnings on similarly skilled U.S. natives (Marcelli and Cornelius 2001, 115).

The labor market impact is the most fundamental and intensively studied dimension of the debate concerning immigration. It addresses two interrelated notions:

1.) Does immigration cause a reduction in wages for domestic workers? 2.) Do immigrants displace domestic workers from their occupations? The following assessment of impact, based primarily on a scrutiny of existing empirical research and evidence dedicated to this subject matter, will attempt to provide clearer answers to these underlying questions with regard to the entire immigrant population in general and Mexican immigrant workers in particular. Many immigration experts agree that the net contribution of immigrants exceed the costs for the nation. Although this is the case, it is essential to understand that these benefits come at a price because the benefits and costs are not distributed equally across all socio-economic segments and geographic regions of the population.

A final consensus on the labor market effects of immigration is difficult to achieve because some scholars consider purely measurable economic factors, while excluding significant factors that are less quantifiable, many use different levels of analysis, many use different methodology, some differ in their assumptions about whether (and how) the labor market is segmented, and authors exhibit philosophical differences. A further complication in reaching an agreement is that the nature and magnitude the of impact manifest themselves differently at national, regional, and local levels, and vary over time, partly because some are cumulative, and partly because migrants assimilate economically and socially in the United States, thereby changing the character and magnitude of impacts inter-generationally. The changing economic conditions will also have a bearing upon whether an impact is positive or negative. For example, if the economy is creating a large supply of jobs and labor is in demand, or vice versa. The locales and industries where the majority of immigrants reside and work will have more pronounced impact (Greenwood and Tienda 1997, 255).

The production theory is the most common approach to evaluating the economic impact of immigrants on the U.S. domestic economy and labor market. It illustrates how employers mix various combinations of workers and capital to produce goods and services for sale, as well as how an influx of workers into the labor force can alter the production levels of workers and capital by increasing the supply of labor. (U.S. Department of Justice-INS 1999, 99). The theory argues that if immigrants are "complements" to U.S. native workers and are subject to a rise in marginal productivity, the workers may gain higher wages, be attracted into the work force, or migrate into the local market if they did not already live there. On the other hand, if immigrants are "substitutions" to U.S. native workers and subject to diminished marginal productivity, the workers may witness a depreciation of their wages, quit their jobs and become unemployed, or leave the local labor market and seek better jobs elsewhere (Heer 1996, 183-84). The majority of the academic literature that utilizes this theory agrees that in the United States, owners of capital or land and higher-skilled workers are complementary to the most recent wave of immigrants (1960 to present), whereas less-skilled native workers and especially already resident immigrants are more likely to serve as substitutes. In addition to the migrants themselves and capital owners being the primary beneficiaries of immigration, the American consumers also gain because the lower labor costs lead to cheaper goods and services. All in all, the gains accruing to those who use or consume immigrant services exceed the losses suffered by U.S. native workers. As a consequence, the United States as a whole is better off. The benefits are larger when immigrants are sufficiently ‘different’ from the stock of native productive inputs (Borjas 1997; Edmonston and Smith 1997; Heer 1996; U.S. Commission on Immigration Reform and the Mexican Ministry of Foreign Relations 1997). The dual market theory or segmentation hypothesis is another plausible explanation for the economic effects that immigrants have on the labor force. It predicts that unskilled immigrants (Mexican immigrants) will relieve the natives of the necessity of taking the most unpleasant jobs in the marketplace, allowing natives to rise to higher occupational positions. (Isbister 1996; Kposowa 1998).

Previous empirical studies typically have been in agreement regarding the small national-level impact of immigration on the wage and employment levels of U.S. domestic workers. Even in areas receiving large immigrant inflows and among groups seemingly at special risk from immigration (low-skilled and minorities), the impact is small. The largest adverse impact of immigration is on immigrants from earlier waves, for whom the recent immigrants are close substitutes (Borjas 1997; Simon 1999; Fix and Passel 1994a; Fix and Passel 1994b; U.S. Department of Justice, INS 1999; LaLonde and Topel 1991; Espenshade and Huber 1997; Greenwood and Tienda; Isbister 1996; Edmonston and Smith 1997; Heer 1996). Studies of specific labor markets reveal small negative impacts on low-skilled workers in stagnant or declining economies, but not in other types of economies. According to Fix and Passel, "In strong local economies, immigrants increase economic opportunities for natives; in weak ones, they have a small negative effect on the economic opportunities of low-skilled workers (Fix and Passel 1994b, 156). Since a large amount of research findings are consistent with regards to the labor market impact, the following will summarize some of the major contributions (aggregate statistical studies and local market case studies) on this issue.

The bulk of available research on immigrants’ labor market effects has been conducted using primarily 1980 Census data, reflecting the initial effects of increasing immigration in a restructuring U.S. economy during the 1970’s. Although research exists based on 1990 Census data, reflecting the effects during the 1980’s, a full assessment of immigration’s impact during the 1990’s will not become available until 2000 Census data is examined. This more recent analysis is important because immigration and the transformation of the economy have accelerated since then (U.S. Department of Justice, INS 1999, 99). As previously mentioned, it is important to keep in mind that the inherent data limitation in using census information is that it does not differentiate between legal immigrants, refugees, and undocumented immigrations.

David M. Heer documented a study carried out by Thomas Muller and Thomas Espenshade from the Urban Institute on the impact of Mexican immigration on unemployment in the five-county Los Angeles metropolitan statistical area using census and survey data from the decade of 1970 to 1980. They find in 1970, prior to the beginning of mass Mexican immigration, the unemployment rate for all persons in the Los Angeles area had been higher than for the entire country. In contrast, after a mass influx of Mexican immigrants, by 1980 the unemployment rate in the area is lower than in the United States for the total population. From these findings, the researchers conclude that the influx of Mexican immigrants had no adverse effect on employment (Heer 1996, 185-86). These results are significant because they demonstrate that within California, the state with the highest Mexican immigrant concentration, there was no discernible negative impact.

Many scholars caution against the misleading nature of local labor market studies or the problems inherent in their design. It may be possible that immigration does in fact adversely effect the wages and employment opportunities of low-skilled workers, but this correlation is masked or negated as Americans move out of cities with high immigration to labor markets where they perceive better opportunities (Espenshade and Huber 1997; Edmonston and Smith 1997; Borjas 1997; Isbister 1996; Heer 1996). Indeed, Muller and Espenshade address this problem by pointing out that the lack of impact found in their study was due to the mass net out-migration of non-Hispanic whites. They find an overall net out-migration of 93,699 persons who were not college graduate and a net in-migration of 64,858 college graduates. They state,

With regards to internal migration, it is important to take other factors into consideration. Areas of higher immigrant settlement attract capital because of the possible wage depressing effect they may have. The inflow of capital together with the net out-migration of native workers places upward pressure on the wage rates of local natives. Whereas, the net in-migration of native workers to areas with few immigrants, coupled with slower rates of capital accumulation in these areas, places downward pressure on wages in these other localities. The net result is that native wages are equalized across areas, and the impact of immigration is arbitraged across the nation. The arbitrage hypothesis is troubling especially for Mexican immigrants who continue settling in the same places as their predecessors. The continued entry of Mexican immigrants who are good labor market substitutes for earlier immigrants results in continued employment competition, which restricts their wage growth and makes it difficult for them to improve their economic status relative to other foreign-groups. Their low rates of internal migration may restrict their access to areas that provide favorable economic opportunities (Greenwood and Tienda 1997, 325-26). As many other scholars, the Triennial Comprehensive Report on Immigration states, "Taken together, the migration impact does not offer strong support for the hypothesis that immigrant/native job competition is a prominent cause for natives to out-migrate. Except in the cases of New York City, Los Angeles, and Miami, native in-migration inflows during the 1980’s were actually positively correlated with inflows of recent immigrants" (U.S. Department of Justice-INS 1999, 103).

The Triennial Comprehensive Report on Immigration documented another study conducted by R.J. LaLonde and R.H. Topel. These researchers also examined six metropolitan areas of foreign-born populations, including Chicago, Houston, Los Angeles, Miami, New York, and San Francisco. They discover that workers in these cities, even when considering minorities separately, do not experience a strong impact of immigration in the 1970’s. The major impact was on new immigrants themselves because doubling of the rate of immigration could have the result of reducing relative wages of new immigrants by about 3 percent. (U.S. Department of Justice-INS 1999, 100).

After scrutinizing selected studies that use aggregate statistics, Fix and Passel of the Urban Institute discover that the displacement effects on natives by immigrants are trivial for the nation. For instance, they find that increasing the immigrant share of labor market from 10 to 20 percent produces declines in native labor force participation of less than 1 percent. The researchers explain three reasons for why these results go against what is typically brought up in the debate on immigration. First, aggregate studies take into account the employment-creating activity of immigrants, which is seldom taken into concern in the debate. Second, recent immigrants may lack the typical characteristics of U.S. workers, such as English fluency, prior education, and work experience, which would tend to segment the labor markets and insulate natives from direct competition with immigrants. Finally, the internal migration by natives to regions with high concentrations of immigrants is slower than out migration from those regions, which may spread the effects of immigration and dampen direct competition. They also contend that a number of studies agree that immigration has no discernible effect on wages overall. For both unskilled and skilled workers, wage growth and decline appear to be unrelated to immigration. It can even be the case that wage growth is no slower and may be faster where immigration rates are high than where they are low. In conclusion, they find that the group most clearly disadvantaged by newly arrived immigrants are other recent immigrants who are the closest substitutes for newcomers. The consensus among researchers in this area of study is striking because most agree that a 10 percent increase in the number of immigrants reduces other immigrants’ wages by 9 to 10 percent (Fix and Passel 1994a, 35-36).

According to the Triennial Comprehensive Report on Immigration, "The available national-level studies indicate that immigration’s net impact did not increase between 1980 and 1990. On average, natives in areas of medium to high immigration actually experienced increases in real wages" (U.S. Department of Justice-INS 1999, 100). The report provides an overview of Schoeni’s 1996 study of the impact of immigration during the 1970’s and 1980’s on the labor market outcomes of 16 native demographic/schooling groups of workers. He concludes that there is little evidence that immigrants affected the wages of any native workers in the 1980’s. Schoeni finds that among schooling groups, natives with more than a high school degree have not been largely affected negatively with regards to either employment or wages. Whereas, non-Hispanic white and non-Hispanic black native male high school dropouts experience substantive employment declines in areas of greater immigration (U.S. Department of Justice-INS 1999, 100).

Michael J. Greenwood and Marta Tienda also conducted a noteworthy cross-sectional analysis using 1990 U.S. census data. They included 122 metropolitan areas, mostly in California and Texas, to test the percentage change in real wage and employment of various labor skill groups due to a 20 percent increase in low-skilled, foreign-born Mexican labor. They find the following results: for all 122 areas, the average real wage of the foreign-born, low-skill Mexican workers falls by 3 percent. Since workers in this category withdraw from the labor force due to this lower wage rate, the employment of this group increases by 19.39 percent and not by 20 percent. This reflects a displacement effect of about 0.6 percent. It is significant to note that the wage rates of other labor categories remain almost unchanged. For instance, native, low-skill females of Mexican ancestry witness a wage loss of only about 0.3 percent and their employment falls by about 0.2 percent. Therefore, for the average United States region, even relatively large increases in Mexican-born labor do not appear to have large impact on native domestic workers. For California and Texas, the two states with the largest Mexican immigrant populations, the major impact of a 20 percent increase in foreign born, low-skill Mexican labor was on this group. The results for Texas are similar to California, but are slightly more moderate. For example, this group in California suffered a wage loss of 6.9 percent and a decline of unemployment of 1.3 percent. In Texas, on the other hand, they suffered a 5.0 percent wage decline and about a 1.1 percentage point displacement. The job displacement effect is never more than 0.5 percent for any group in California and never more than 0.25 in Texas. Areas of high concentration of foreign born, low-skill Mexican clearly saw the largest effects of a 20 percent increase in this labor category. For 13 areas for which this labor group comprises 60 percent or more of the foreign-born population, there was an 11.4 percent decline in wages and a 2.4 percent decline in employment of this labor category. Native, low-skill females of Mexican ancestry also experience a 1.3 percent wage decline and a 0.4 percent job displacement effect, which are not very large impacts (Greenwood and Tienda 1997, 308-318) (see table 6 & table 7).

The researchers provide three suggestions for the repeated empirical finding that the effects of even relatively large increases in Mexican foreign-born labor do not appear to have great impact on native workers. First, since the foreign-born population is a relatively small fraction of the population and the labor force, the effect may not be

detectable. Second, offsetting increases occur in labor demand and supply relationships with the effect that the wage changes tend to cancel. Third, efficient U.S. markets result in the effects quickly arbitraging themselves across the nation, with the result that the effect is difficult to detect (Greenwood and Tienda 1997, 318).

Labor Market Impact of Undocumented Immigrants. Although the labor market impacts of the undocumented population proves to be one of the most challenging to estimate, some scholars have undertaken this difficult task. Due to their low skill-levels and incentive to work, even for very low wages, they are thought to have the largest adverse impact on natives. Contrary to this wide held belief, most of the studies to date

have found only small national-level impacts on the wages and employment opportunities of U.S. native workers.

David M. Heer documented a study conducted by Frank Bean, B. Lindsay Lowell, and Lowell Taylor on the impact of undocumented Mexican immigrants on the average wages of whites, blacks, and native Hispanics in forty-seven metropolitan areas in the southwestern states. They find that a 10 percent increase in the number of undocumented Mexican immigrants was associated with a 0.1 percent increase in the average wage of white males, a 0.1 percent decrease in the average wage of black males, and no change in the average wage of Hispanic males. This finding confirms that the illegal population has only small effects on the labor market opportunities of natives (Heer 1996, 190). Another study carried out by the same three researchers in 1988 and documented by Michael J. Greenwood and Marta Tienda finds that undocumented workers exert little impact on the earnings of natives in each of the five other labor force groups. Most importantly, the earnings impact of undocumented workers on workers, when significant, more often was positive than negative (Greenwood and Tienda 1997, 322). After reviewing the few labor market studies, Fix and Passel find a conclusion consistent with the results previously mentioned. They state, "Most studies that employ aggregate statistics report that undocumented immigration either has no effect on native workers or actually increases their labor market opportunities (Fix and Passel 1994a, 37). Bean, Lowell, and Taylor conclude that the results of small complementary impacts between undocumented Mexicans and some native-born groups, in conjunction with the substitution impacts found with legal immigrants, are more consistent with the notion that undocumented migrants hold jobs that natives shun than with the view that undocumented migrants directly compete with natives for employment. The General Accounting Office (GAO) also used case studies to conclude that little or no evidence indicated that undocumented workers concentrate in industries that are declining. Instead, it suggests that certain activities could not have been maintained in the Untied States without the availability of legal or undocumented migrant workers (Greenwood and Tienda 1997, 321-22).

A variety of channels exist through which immigrants can positively influence the domestic labor market and economy directly or indirectly. Among the most important are: the demand for goods and services, entrepreneurship, keep companies from going out of business and moving overseas, economies of scale impact, and the effect of remittances.

A growing body of research indicates that immigrants play a large role in job creation through their contributions to production, their own demand for goods and services, and entrepreneurship (Isbister 1996; Fix and Passel 1994a; Fix and Passel 1994b; Rosenfeld and Tienda 1996; Greenwood and Tienda 1997; Anderson 1998; Simon 1999; U.S. Department of Justice-INS 1999). A particular study explored the employment effects of immigrants and native groups separately. Using cross-sectional 1980 U.S. county data on population and employment, it was found that during the 1970’s, on average, 100 native in-migrants created 124 additional jobs, while 100 foreign immigrants created 150 additional jobs. This finding suggests that immigrants moving into an area did not diminish native job opportunities, but rather they created enough jobs to employ themselves and others (U.S. Department of Justice-INS 1999, 102). The results of this study is consistent with Fix and Passel’s claim that "they (immigrants) create more jobs than they themselves can fill and recent immigrants from abroad create as much employment growth as internal migrants from other areas of the United States" (Fix and Passel 1994a, 38).

Immigrants create jobs because they spend money to consume, which leads to growth in sales and production, which in turn leads firms to hire additional workers. They purchase fixed capital, such as housing and property, as well as day-to-day goods and services, such as clothes, food, healthcare, etc. Although a precise measure of the job-creating impact of immigrants spending has not yet been quantified, the effect is clearly significant (Fix and Passel 1994a, 38). For example, since 1990, the Latin American population in the United States grew by more than 30 percent (much of this growth attributed to immigration), while its buying power has grown by more than 65 percent to about $350 billion in 1997 (Suárez-Orozco 1999, 244).

Another important source of job creation is the entrepreneurial activity of immigrants. They increasingly open new businesses employing natives and relying heavily on other immigrants. Ethnic enterprises are visible throughout the United States, especially in metropolitan areas. Loyalty among ethnic groups allows foreign entrepreneurs to take advantage of a natural ethnic market for unique products that are in demand by those of the same ethnicity. Many immigrants are often more familiar with specific consumer needs as well. Immigrants bring with them the knowledge based on experience on how things are done in other places, and may therefore be highly productive in the host society, despite limited formal education (Rosenfeld and Tienda 1996, 1063). Julian L. Simon claims that immigrants have a higher propensity to start new businesses and to be self-employed. He cites even a proponent of more restrictionist immigration policy, George Borjas, as agreeing with his assertion. Using the 1970 and 1980 censuses, Borjas concludes, "Immigrants are more likely to be self-employed than similarly skilled native-born workers." A key reason for this differential is that geographical enclaves of immigrants increase self-employment opportunities, particularly for immigrants who share the same nation background as the residents of the enclave (Simon 1999, 90). A compilation of the fastest-growing corporations in America, Inc. 500, demonstrated in 1995 that about 12 percent of all the companies included in the collection were started by immigrants. These include renowned businesses, such as Intel, Lam Research, Computer Associates, AST Computer, etc. This finding proves that although immigrants increase the supply of labor, they also increase the demand for labor (Anderson 1998, 236).

Contrary to popular perception, there exists plenty of economic innovation and entrepreneurship among Mexican immigrants, despite their low levels of education. A survey conducted in Little Village in Chicago revealed the considerably higher rate of self-employment for Mexicans (especially Mexican immigrants) than had previously been found. While 1980 Census data suggested that the Mexican self-employment rate was around 2 percent, it was at a rate of 10 percent in Little Village. It also uncovered that much self-employment takes place in the informal economy (source of economic innovation at the margins of a developed economy), which is the type of economic activity that formal accounting systems and surveys seldom take into account. It is worth mentioning that a sizable proportion of the formally self-employed Mexican immigrant in Little Village started those businesses in the informal sector, which implies that the informal economy can be considered a pipeline into the formal economy. Many immigrants use the informal sector as a means of acquiring skills and capital needed to start a business in the formal labor market (Rosenfeld and Tienda 1996, 1065; Greenwood and Tienda 1997, 331-32).

They also have the positive employment effects of keeping companies from going out of business, as well as retaining industries that would otherwise have moved overseas. For instance, according to David M. Heer, as well as Michael Fix and Jeffrey S. Passel, if Mexican immigration to Los Angeles County had not occurred during 1970 to 1980, there would have a loss of 53,000 manufacturing jobs, 12,000 high-paying manufacturing jobs, and 25,000 jobs in related industries. For a similar analysis, it was found that Mexican immigration provided a boost to California’s economy, especially in the Los Angeles area, by enabling many low-wage industries to continue to expand at a time when their counterparts across the nation were contracting due to foreign competition (Heer 1996, 189; Fix and Passel 1994a, 38). Despite their fewer years of formal education, Mexican immigrants have been credited with contributing largely to the more rapid growth of California’s economy relative to that of the nation throughout the 1970 to 1990 time period. They did not lower productivity, which caused California’s value added to remain consistently higher than the rest of the nation (McCarthy and Vernez 1998, 65).

Referring back to the comparative study conducted by Cornelius of how immigrant labor is being utilized in San Diego County in 1996, there was strong evidence proving that demand for Mexican immigrant labor has become structurally embedded in the U.S. economy. First, native-workers were virtually absent from the applicant pools of most of the sample firms, at least for entry-level production jobs. This may be due to the nature of jobs typically offered to entry-level workers in immigrant-using firms (not just low-paying, but also involving boring, often dirty and even hazardous tasks, with no career ladder). Second, the proliferation of social networks that connect employers to potential employees all throughout Mexico (Cornelius 1998, 125-126). These networks deliver eager new immigrant job-seekers to the employer’s doorstep with little or no effort on his or her part, as well as save employers substantial amounts of money. They save employers the costs of advertising and training because informal training may occur before the migrant actually begins work and these networks also install social controls on workers behavior, such as attendance, work effort, resistance to unionization, etc (Greenwood and Tienda 1997, 323). This process ultimately has the effect of reducing natives from applicant pools. Third, employers perceive and evaluate immigrant workers more positively than their potential native-born substitutes. They often prefer immigrants because of their reliability, flexibility or willingness to work overtime, nights, weekends, and strong work ethic. (Cornelius 1998, 126). Kevin F. McCarthy and Georges Vernez claim that the literature on immigration indicates that immigrants do not create major problems in the workplace and describes these individuals as being "hard working," "motivated," and possessing "a strong work ethic." Based on these desirable traits, employers have often reported their preference for hiring immigrants over other workers (McCarthy and Vernez 1998, 67). David M. Heer documented Roger Waldinger’s study on the attitudes of employers in the restaurant and hotel industries in Los Angeles County, which indicated why white and black natives may lose out to Mexican and Central American immigrants. While employers generally stated that natives were less hard working, they had only positive comments to say about immigrants. They regarded immigrants as hard-working and willing to work long hours; individuals that had a particular liking for work (Heer 1996, 188-89). These positive traits are important to keep in mind because of job displacement effects. The jobs of natives may be taken from them not because of wage competition (employers pay migrant workers less for comparable work), but due to employer preference emerging from the positive characteristics of immigrants. Many studies fail to clearly indicate why displacement occurred in the first place (Greenwood and Tienda 1997, 257).

Finally, Wayne A. Cornelius argues that another factor creating a structurally embedded demand for Mexican immigrant labor is that employers have no realistic alternative to using this labor source. He reports that more than two-thirds (67 percent) of the firms in the San Diego sample had already experimented with one or more alternatives to employing foreign workers, such as rationalization of production to reduce labor requirements, mechanization, subcontracting, etc. As a result, only 11 percent of the firms reported that doing any of these things had actually helped them reduce the proportion of foreign-born workers in the labor force. A vast majority of these firms actually anticipate the same or even higher levels of reliance on immigrant labor in the future (Cornelius 1998, 135). From the results of the study, Cornelius concludes, "Employer preferences are too well defined, alternatives to this labor source are quite limited, and the terms of employment in immigrant-dependent firms are unlikely to improve sufficiently in the foreseeable future to induce the reentry of native-born workers into firms and job categories dominated by immigrants." The results also underscore the vital role played by immigrant labor in the creation, survival, and growth of a significant stratum of businesses in San Diego (Cornelius 1998, 125 & 141).

Besides job creation, immigrants can benefit the economy through increasing returns to scale. The importance of returns to scale over time cannot be overlooked because the assumption of constant returns to scale builds an inherent bias against possible economic benefits of immigration. Michael J. Rosenfeld and Marta Tienda’s study cites Samuel H. Preston and Julian Simon as stressing the positive economic potential of population growth. They claim that the marginal cost of providing a service decreases as the population grows because the growth will lower the per capita cost of that service and everyone will benefit from increasing returns to scale. For example, public goods, such as public defense, do not depend directly on population size. An increase of the population of the U.S. ought not to increase the need for this good, but instead increase the number of people paying for it, thus lowering the burden on native residents. Michael J. Rosenfeld and Marta Tienda also cite Simon Kuznets for arguing that not only are there increasing returns to scale in industry because of greater specialization and technical innovation, but also for technological innovation itself. There will be a greater number of innovators and geniuses in larger populated societies, which in turn will feed off each other’s work to create an economy of scale for innovation, which in turn makes the entire society more efficient. It is necessary to note that technological innovation does not only mean scientific geniuses are part of the knowledge process. In reality, many technological advances come from people who are neither well educated or paid. Immigrants are constantly taking resources that are wasted and returning them into the economy by their own hard work, practicality, and innovative use to better life for themselves (Rosenfeld and Tienda 1996, 1060-63).

A final channel of economic influence are the remittances immigrants send back to their home countries. Although this avenue of influence would appear to only benefit the home country, it also proves to be beneficial for the U.S. economy and labor force. Borjas estimates that in 1990, remittances sent to Mexico totaled $3.2 billion, or 1.5 percent of Mexican GDP (Borjas 1997, 170). The most current estimate of remittances sent by Mexican immigrants to their families and communities in Mexico is between $6 and $8 billion dollars per year (Carnegie Endowment for International Peace 2001, 4). In 1995, remittances sent to Mexico were equivalent to 57 percent of the foreign exchange available through foreign direct investment and 5 percent of the total income supplied by exports. Since the average remittances received by migrants’ families are equivalent to the household’s other earnings, they have played a large role in financing productive investments, housing, and urban development. The beneficial effects of the remittances have been spread some by markets to other households and businesses, even though the direct beneficiaries are the households that receive the money (U.S. Commission on Immigration Reform and the Mexican Ministry of Foreign Relations 1999, 7). Douglas S. Massey and Emilio A. Parrado’s 1998 study of thirty Mexican and U.S. destination areas, demonstrates how the receipt of U.S. earnings by households and communities significantly increases the odds of business formation and productive investment in Mexico. The researchers contend,

The positive role that Mexican migration to the United States and remittances play through promoting entrepreneurial activity, business formation, development, and economic growth in Mexico, is also felt in the United States because these factors help to discontinue large flows of Mexican immigration in the future. If the economic lot of the average Mexican citizen improves, they will be encouraged to remain home and will have no reason to migrate into their northern neighbor.

Since Mexico is the source of the largest number of legal and undocumented immigrants, as well as a NAFTA partner, the United States first needs to address migration from this country. It is vital that the U.S. continues bilateral negotiations with Mexico in order to come to a formal agreement on labor. This is an issue that cannot be pursued unilaterally by the U.S., since it requires the cooperative management of both countries in order to maximize the benefits and minimize the costs for both parties. The progress on regional integration as envisioned in the NAFTA agreement will be hindered if on one hand, the free flow of capital, goods, and services has been institutionalized and expanded, while on the other hand, the flow of labor continues to be subject to massive enforcement efforts and legal restrictions. The incompatibility of these two postures illustrates that it will be impossible for both countries to be partners on economic issues, while antagonists on migration issues if there is hope for increased integration in the future (Carnegie Endowment for International Peace 2001, 1).

The first objective of the United States should be to change current U.S. immigration policy towards Mexican immigration because it is often based on a misunderstanding of what the true impact of immigrants are on the country, and because of the detrimental effects it has caused over recent years. According to Jorge Durand and Douglas S. Massey,

Furthermore, these researchers find from interviews that most immigrants are not motivated to migrate by a desire to live where they can maximize earnings, as most Americans tend to imagine. In reality, most migrants move in an attempt to solve economic problems at home. They leave countries that possess inadequate capital, credit, mortgage, and insurance markets. Initially, most migrants only seek to work abroad temporarily, mainly to accumulate money unavailable at home or to finance a small business or consumer purchase. As a result, U.S. policies that have aimed to make the American labor market less attractive to migrants, have been futile. Migration decisions are more likely to be affected by programs designed to improve the performance and accessibility of a sending country’s credit and insurance markets (Durand and Massey 2001, 29). In other words, if the United States wants to reduce Mexican immigrant inflows, it needs to take on an active role in reducing the internal pressures that cause migrants to leave their home countries in the first place, such as lack of economic development.

With respect to changing current immigration policy towards Mexico, the most important recommendation is to make legal visas more widely available, as well as to make it easier for Mexican migrants to leave and return. According to the Carnegie Endowment for International Peace,

Making legal visas more readily available for Mexican immigrants would also lessen the exploitation experienced by many undocumented Mexicans in the U.S. labor market. Employers frequently take advantage of the illegal or unauthorized work status of immigrants by depressing their wages and often subjecting them to poor working conditions. The effects of these harmful actions are not only felt by the immigrant, but also by other domestic native workers because an employer will not want to hire a U.S. national who he is required to pay at least minimum wage, if he can hire an undocumented immigrant who will accept a below minimum wage and can perform comparable types of work. For that reason, it is beneficial that the status of the undocumented is changed from one that provides them with little rights, voice, opportunity for economic advancement, makes them into a subclass type of citizen, and more susceptible to exploitation to one that legitimizes and recognizes them as significant contributors to the U.S. economy.

Past policy initiatives making crossing the border more difficult, dangerous, and expensive have only had the effect of keeping immigrants longer in the country and permanently settling in increasing numbers. Although many want to return back to their home countries and to not move to the U.S. permanently, they are pushed to seek permanent-resident visas because that is the only option available to them. The best alternative for these immigrants is a temporary-worker program, which would work in response to measurable labor market needs. The U.S. government should increase admissions when the economy is strong and decrease entries when the economy is weak in order to reduce the competitive pressures of immigrants that is sometimes felt in low-growth environments (Fix and Passel 1994b, 160). Temporary-work visas will allow them to enter, leave, live, and work in the United States for a period of about two years. A binational agency managed by both country governments could be in charge of distributing the temporary-worker visas in order to avoid the corruption-prone business of labor recruitment by employers and the like. It is important that these visas are not tied to specific employers, but issued directly to the migrants themselves in order to guarantee labor rights. As demonstrated by the guest-worker program, when a work visa is tied to a specific job, the migrant is left vulnerable to exploitation. Granting migrants the right to freely change jobs will allow them to freely participate in unions, report labor right violations, and would make it more difficult for employers to use immigrants to lower wages, or to lower health and safety standards. This type of program will not require the need for employer sanctions, which in practice has done nothing to reduce the hiring of unauthorized workers and much to lower wages and reduce healthy working conditions for immigrants and natives (Durand and Massey 2001, 30; Carnegie Endowment for International Peace 2001).

The money derived from the visa fee, the federal taxes withheld from the paychecks of temporary workers, and the reduction of resources and personnel devoted to border enforcement will be a substantial amount. Most of the funds can go to states with large immigrant populations, since immigration does have more pronounced effects on these areas. The remainder of the funds should then be used to facilitate the improvement of markets and social welfare in Mexico. By providing its neighbor with more political stability and economic growth, undocumented immigration will be reduced dramatically to the United States from Mexico (Durand and Massey 2001, 31).

In terms of the native low-skilled workers that have experienced a small adverse impact from immigration--they should not be protected from job competition with the foreign born. Instead, the best alternative is for the government to make a larger effort to help these lower-skilled workers improve their labor market skills, so that they can move up into more rewarding positions of employment.

It is important to mention the tragic events of September 11^th, which have not only transformed the United States and the world in ways never imagined, but have especially effected immigration in the U.S. Prior to the attacks, the vast majority of American citizens began to recognize that the immigrant’s role as a worker and contributor to American culture is at the heart of what makes the country one of the most prosperous in the world. Unfortunately, the tragedy has reversed this optimist sentiment to one of dislike and distrust towards those who are one of the most hard-working groups in the U.S., which will ultimately hurt rather than protect the country’s well-being. Therefore, it is crucial that people do not allow this tragedy to blur the facts of what the true economic impact of immigration is on the country. The main purpose of this paper is to serve as a tool to accomplish the aforementioned and to inform Americans more on the issue, so that they can understand that the net contribution of immigration exceeds the costs, even though the benefits and costs associated with immigration are not equally distributed among all socioeconomic groups and geographic regions in the country. It is clear that the vast majority of scholars or authorities on the labor market impact of immigration are in agreement regarding the small national-level impact on the wage and employment levels of U.S. domestic workers. Even in areas receiving large immigrant inflows and among groups seemingly at special risk from immigration (low-skilled and minorities), the impact is small. The authorities agree that ultimately, the largest adverse impact of immigration is on immigrants from earlier waves, for whom the recent immigrants are close substitutes. As a result, these conclusions refute the widely held argument that immigrants significantly harm the employment opportunities and wage levels of U.S. nationals. On the contrary, evidence actually suggests that there exists multiple venues through which immigrants positively influence the domestic labor market and economy. Therefore, Mexican immigrants have decisively proven to be assets in the successful economic performance of the United States over the recent past decades, rather than liabilities to the economic welfare of the country.

Anderson, Stuart. 1998. "The Effect of Immigrant Scientists and Engineers on Wages

and Employment in High Technology." In The Debate in the United States over

Immigration, ed. Peter Duignan and L.H. Gann. Stanford, CA: Hoover

Institution Press. Pp. 224-239.

Borjas, George J. 1994. "The Economic Benefits from Immigration."

McCarthy, Kevin F. and Georges Vernez. 1998. "Benefits and Costs of Immigration:

The California Experience." In The Debate in the United States over

Immigration, ed. Peter Duignan and L.H. Gann. Stanford, CA: Hoover Institution

Press. Pp. 55-78.

U.S. Department of Labor, Bureau of Labor Statistics. 1999-2000. "Occupational

Outlook Quarterly." Accessed: 5 April 2002.

http://www.bls.gov/opub/ooq/1999/winter/art04.pdf

U.S. Department of Labor, Bureau of Labor Statistics. 2000. "Industry at a Glance"

Accessed: 6 January 2001. http://www.bls.gov/iag/iaghome.htm