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The Wages of Immigration

Feb 17, 2014, Vol. 19, No. 22 • By JAY COST
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Last month, the House Republican leadership released its guiding principles on immigration reform. While mostly boilerplate, the document suggests that the House GOP envisions a bill similar to last year’s Senate compromise spearheaded by Marco Rubio: enhanced border security in exchange for legalization of the illegal immigrant population; more visas for the highly skilled and permits for temporary guest workers; and a rationalization of the immigration process. The main difference is that the Senate bill offers a special path to citizenship for the entire illegal population, while the House principles offer it only to immigrants brought here illegally as children.

Newscom

Newscom

This difference is intended to mollify conservatives who warn that the Senate bill would pad the voting rolls with millions of new Latino Democrats. But that fear is overblown. Of the 11 million or so people in the country illegally, Pew reports that only 9 million are Latino, and not all of them would become citizens. The Latino turnout rate, moreover, was only 48 percent in 2012, and the bloc broke for Democrats 71-27. So the best case for Democrats is that they would net about 2 million more new voters than Republicans starting in 2028. 

Instead, conservative critics should focus on two other problems. First, the border and visa enforcement provisions are only as effective as the follow-through by local and federal authorities, and the political calculations of Democratic pols will incline them toward lax enforcement, making these provisions of dubious value. Second, the Senate bill and House principles offer no protection for the wages and employment status of existing workers. This fact, often overlooked by critics of comprehensive reform, is its greatest weakness. 

According to the Congressional Budget Office, the Senate bill would decrease average wages by 0.1 percent by 2023 (although over the following decade wages would rise with increases in productivity). What’s more, this effect would not be evenly distributed:

The legislation would particularly increase the number of workers with lower or higher skills but would scarcely affect the number of workers with average skills. As a result, the wages of lower- and higher-skilled workers would tend to be depressed slightly (by less than 0.5 percent) relative to the wages of workers with average skills. 

Furthermore, the CBO projects that the bill would increase the unemployment rate, in part because of “imbalance[s] between the types of workers needed to produce the goods and services demanded in the economy and the skills and occupations of available workers.” Again, the burden would fall particularly on the low end of the socioeconomic scale.

Conservative proponents of the House principles and the Rubio plan offer political and philosophical arguments in favor of passing a program along these lines. Absent an explicit commitment to protect wage and employment levels, however, they are not persuasive.

The economic case is that reform will increase economic growth, and indeed it will. CBO estimates that the Rubio bill would boost gross domestic product by 3.3 percent between 2013 and 2023. The GOP, however, should not support growth for its own sake, but rather as the best way to generate broad-based prosperity. That is an important distinction, for there are policies that can increase growth without broadening the middle class—and if the CBO’s analysis is correct, the Rubio bill is one of them. Wages would fall, unemployment would rise, and according to the CBO, per capita gross national product would fall by 0.7 percent in 2023. Thus, even as the aggregate economy would be larger, the average American’s share of that prosperity would be less than without the Rubio reform. 

This points to the tensions in the strategic alliance between the right and business. Conservatives are pro-business because they believe that, in general, business is good for everybody. If business presents a plan that hurts a significant swath of the country for its own advantage—such as the Senate bill—conservatives should oppose it. Indeed, they should do so loudly and forthrightly, for their biggest electoral liability is the widespread conviction that the GOP stands with big business instead of with the average person.

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