Immigration suppresses wages for native-born workers

The claim

Immigration, the argument goes, operates like any other labor supply shock: more workers competing for the same jobs bids down wages. When large numbers of low-skilled immigrants enter the labor market, they displace or underprice native-born workers at the bottom of the wage distribution. This is basic supply and demand, and the workers who suffer most are those least able to absorb wage losses — native-born high school dropouts, recent labor market entrants, and prior waves of immigrants. Controlling immigration is therefore a pro-worker policy.

The mechanism

The core economic mechanism is straightforward: if immigrants and native workers are perfect substitutes — identical in skills, language, and job-task profile — then an increase in immigrant labor supply will reduce wages for workers in that category, all else equal. This is the Borjas framework, drawing on a standard factor demand model. The effect should be largest where the substitutability is highest — generally among workers competing for the same low-skill task.

The mechanism breaks down, or becomes substantially weaker, when immigrant and native labor are complements rather than substitutes. Giovanni Peri and colleagues have documented a systematic pattern of task specialization: native-born workers tend to specialize in communication-intensive and supervisory tasks, while immigrants with equivalent education levels concentrate in manual and physical task clusters. This task reallocation can increase native wages by shifting them toward higher-value tasks — a productivity effect that partially or fully offsets the supply-side wage compression.

The mechanism also breaks down at the macroeconomic level. Immigrants are not only workers; they are consumers. An increase in the immigrant population increases aggregate demand for goods and services, creating employment. Immigrants also start businesses at higher rates than native-born workers, generating job creation. The net labor market effect depends on whether the supply effect or the demand and productivity effect dominates — and that empirical question does not have a single answer across all worker types and regions.

The evidence

The Mariel Boatlift natural experiment and its contested reanalysis

David Card’s 1990 paper exploited the Mariel Boatlift — the arrival of approximately 125,000 Cuban immigrants in Miami over a few months in 1980, a 7% sudden labor supply increase — as a natural experiment. Comparing Miami to a control group of similar cities, Card found no significant effect on wages or unemployment rates for Miami workers, including lower-skilled workers. This became one of the most cited findings in labor economics, widely used to argue that labor markets absorb immigration shocks more fluidly than simple supply-demand models predict.

George Borjas published a high-profile reanalysis in 2017. His key methodological departure: Card used all non-Cuban workers as the comparison group. Borjas restricted the analysis to male workers without a high school diploma — the group most directly competing with the Marielitos. In this restricted sample, Borjas found large negative wage effects of -10% to -25%. The paper triggered an extended methodological dispute. Peri and Yasenov (2019) responded that Borjas’s restriction produced a very small, anomalous sample subject to composition effects unrelated to the Boatlift. Ben Zipperer and other researchers showed that different, equally defensible sample choices eliminated the negative effect. The state of the literature: the Boatlift did not demonstrably harm the average Miami worker; whether it harmed male high school dropouts specifically remains methodologically unresolved, with credible researchers on both sides.

The NAS 2016 comprehensive assessment

The most rigorous comprehensive review is the 2016 National Academies of Sciences report, The Economic and Fiscal Consequences of Immigration, synthesizing decades of labor market research. Its key findings on wages: the long-run effect of immigration on native-born workers overall is close to zero or slightly positive. The group experiencing the clearest wage competition from immigration is prior waves of immigrants — immigrant workers are most substitutable with other immigrant workers. Among native-born workers, the most negative estimated effects are concentrated in the high school dropout category: estimates range from -2% to -8% over long time horizons. Workers with more education — including those with only a high school diploma but no college — generally show zero or positive wage effects.

The NAS report also documented significant fiscal effects that vary by education level of the immigrant. First-generation low-education immigrants have a net fiscal cost (they use more in services than they contribute in taxes); second-generation immigrants — their children — are among the strongest fiscal contributors of any demographic group in the US, exceeding native-born workers of equivalent education in earnings and tax contributions. The relevant policy unit is the immigrant plus their descendants, not the first generation alone.

Complementarity, task specialization, and productivity

Giovanni Peri has published extensively on the complementarity channel. His 2012 paper in the American Economic Review with Chad Sparber documented the task reallocation mechanism: immigration of low-skilled workers shifts native workers toward communication-intensive tasks, where they have comparative advantage due to language fluency. This shift is associated with wage increases for native workers, not decreases. Peri’s 2010 Journal of Economic Literature survey synthesized findings suggesting that immigration increases total factor productivity by enabling better task matching across workers.

The innovation contribution provides further counterevidence to the simple substitution story. Immigrants are overrepresented among patent holders (25.6% of US patents with 13.6% of the population), Nobel laureates, and technology founders. A 2022 National Foundation for American Policy analysis found that immigrants or their children founded 45 of the top 91 US venture-backed companies and more than 200 of the Fortune 500. These productivity effects raise native wages by raising the overall technological frontier — a channel entirely absent from simple labor supply models.

Guest worker programs and sectoral disruption

The European guest worker experience offers cross-national evidence. Germany’s Gastarbeiter program (1955–1973) imported large numbers of Turkish and Southern European workers for manufacturing. Wages in affected sectors did show modest compression during peak inflows, but the workers and industries did not return to pre-immigration wage levels after the program ended — suggesting labor market adjustments had occurred through capital investment and task reallocation rather than simple wage competition. Australia and Canada’s points-based systems, which select for skills matching domestic labor needs, consistently produce near-zero wage effects on native workers in comparable skill categories — because the selection mechanism minimizes direct substitutability.

The DACA program provides a quasi-experiment in the removal direction. When DACA was announced in 2012, it gave approximately 800,000 undocumented young adults work authorization. Studies (Pope, 2016, American Economic Review) found that DACA recipients’ wages increased after authorization — they moved from informal, below-market arrangements into competitive labor markets — with no detectable negative effect on native workers in the same occupational categories. This is consistent with the complementarity model: authorized immigrants and native workers do not compete head-to-head.

Who benefits

The wage-suppression narrative has institutional beneficiaries beyond those who simply believe it is true. NumbersUSA, the Federation for American Immigration Reform (FAIR), and the Center for Immigration Studies (CIS) — all sharing funding from the Pioneer Fund and wealthy nativist donors — have built research and advocacy operations around the Borjas findings specifically, while suppressing or ignoring the broader consensus literature. Their policy agenda (lower immigration ceilings, immigration enforcement) benefits from a simplified wage-competition frame.

There is also a corporate beneficiary on the other side of the same coin: agricultural employers, meatpacking firms, and construction contractors who rely heavily on undocumented immigrant labor. These industries lobby against immigration enforcement not because they dispute the wage effects but because undocumented workers have limited labor market recourse, which does depress wages in those specific sectors. The wage-suppression effect that the nativist right deplores is, in some industries, deliberately maintained by the business interests that fund the moderate right. Both sides of this debate have interested parties.

The counter

The wage-suppression argument is not fabricated — it has legitimate empirical grounding in specific cases. George Borjas is a credentialed Harvard economist whose models are grounded in standard factor demand theory. The finding that high school dropouts face wage competition from low-skilled immigration is replicated across multiple studies and is consistent with the NAS report’s range estimates. Workers in this category are already among the most economically vulnerable in the US, and a 2–8% wage reduction has real consequences for families operating near the poverty line.

The complementarity and productivity arguments — while better supported in the average case — do not eliminate the distributional concern. Even if immigration raises average native wages, the distributional effects could concentrate losses among the least-educated workers while distributing gains among college-educated workers (who benefit from cheaper services and increased business activity). A policy that is net positive on average while being locally harmful to the bottom decile is not obviously good. The workers experiencing wage competition from immigration are not wrong about their experience; the economic literature is wrong to flatten their experience into an aggregate average.

The meaningful policy question is not “does immigration suppress wages” (sometimes yes, in narrow circumstances) but “what immigration and labor policy combination minimizes wage competition effects while capturing the productivity and fiscal benefits?” The answer involves skills-based selection, labor standard enforcement (preventing undocumented status from depressing wages), and wage floor policies (minimum wage, unionization) that reduce the substitutability between immigrant and native labor by maintaining a wage floor below which neither can be hired.

References

Borjas, G. J. (2017). The wage impact of the Marielitos: A reanalysis. ILR Review, 70(5), 1077–1110. https://doi.org/10.1177/0019793917692945

Card, D. (1990). The impact of the Mariel boatlift on the Miami labor market. ILR Review, 43(2), 245–257. https://doi.org/10.1177/001979399004300205

National Academies of Sciences, Engineering, and Medicine. (2016). The economic and fiscal consequences of immigration. National Academies Press. https://doi.org/10.17226/23550

Peri, G., & Sparber, C. (2009). Task specialization, immigration, and wages. American Economic Journal: Applied Economics, 1(3), 135–169. https://doi.org/10.1257/app.1.3.135

Peri, G. (2012). The effect of immigration on productivity: Evidence from US states. Review of Economics and Statistics, 94(1), 348–358. https://doi.org/10.1162/REST_a_00137

Peri, G., & Yasenov, V. (2019). The labor market effects of a refugee wave: Applying the synthetic control method to the Mariel boatlift. Journal of Human Resources, 54(2), 267–309. https://doi.org/10.3368/jhr.54.2.0217.8561R1

Pope, N. G. (2016). The effects of DACAmentation: The impact of Deferred Action for Childhood Arrivals on unauthorized immigrants. Journal of Public Economics, 143, 98–114. https://doi.org/10.1016/j.jpubeco.2016.08.014

Anderson, S. (2022). Immigrants and billion-dollar companies (Policy Brief). National Foundation for American Policy.

Ottaviano, G. I. P., & Peri, G. (2012). Rethinking the effect of immigration on wages. Journal of the European Economic Association, 10(1), 152–197. https://doi.org/10.1111/j.1542-4774.2011.01052.x