The answer may lie in politics.
One of the big questions that rich countries face today is what to do about immigration. And one of the most controversial questions is whether to admit large numbers of migrants who are less skilled than average. Will a bigger supply of workers push down wages, as in the classic model of supply and demand? Will the new migrants vote for policies that weaken the very prosperity that they came to enjoy? Or instead will Adam Smith’s invisible hand somehow make it all work out for the best?
From a purely economic perspective, there’s little evidence that current migration levels in the U.S. are pushing down most workers’ wages.
From a purely economic perspective, there’s little evidence that current migration levels in the U.S. are pushing down most workers’ wages. Economists have long investigated what less-skilled immigration does to the wages of “native” home-country workers. For the rich countries, especially for the well-studied United States, the answer is clear: less-skilled immigration doesn’t do much to the wages of most longtime residents. The most pessimistic peer-reviewed estimate comes from Harvard economists George Borjas and Larry Katz, who reported that less-skilled immigration may have pushed down the wages of American high school dropouts by 8 percent. That’s a real loss—I would be upset if I had to take an 8 percent wage cut—but it’s the most pessimistic of the widely cited estimates.