As President George W. Bush pointed out on Monday, welcoming immigrants is a sign of a confident and successful nation. Unfortunately, workers at the low end of the labour market have had little reason to feel confident in the current jobless recovery. That helps explain, if by no means justify, political pressures for a crackdown on illegal immigrants.
From a pure economic perspective, letting in foreigners tends to boost output and can even increase per-capita income. But while society at large is likely to gain, those natives who compete directly with immigrants will tend to be worse off.
Most of the evidence suggests that both effects are fairly small. In particular, immigration has only been a minor contributor to the growing inequality in today’s US labour market. It has, however, undoubtedly contributed to the plight of high-school drop-outs and other unskilled workers. A guest worker programme would probably make things worse, by creating a permanent underclass.
Instead a sensible policy would try to shift the mix of immigrants towards areas where the US faces shortages. That has historically been one of America’s strengths, but current arrangements tend to achieve the opposite. Immigration controls have proved all too effective in deterring students and highly skilled workers. Meanwhile, the vast sums spent to tighten security on the Mexican border have done little to deter unskilled workers from trying to get in. Instead the crackdown makes it more likely they would stay, rather than face the hazardous trip twice.
Building a fence would send a terrible signal to America’s southern neighbours. It would also do little to improve the lot of unskilled natives. If Congress is serious about helping the worse-paid Americans, it should consider wage subsidies to boost the economics of legal employment.