How Immigrants (Even Unskilled Immigrants) Raise Wages For Everyone

August 29, 2013

A recent Danish study concluded that native workers across the income spectrum benefited from increased immigration of non-EU low-skilled workers into Denmark :

“We find that the increased supply of non-EU low skilled immigrants pushed native workers to pursue more complex occupations. This reallocation happened mainly through movement across firms. Immigration increased mobility of natives across firms and across municipalities but it did not increase their probability of unemployment. We also observe a significant shift in the native labor force towards complex service industries in locations receiving more immigrants. Those mechanisms protected individual wages from immigrants competition and enhanced their wage outcomes. While the highly educated experienced wage gains already in the short-run, the gains of the less educated built up over time as they moved towards jobs that were complementary to those held by the non-EU immigrants.”

In other words, while increased immigration may have created more competition for the lowest-skilled jobs, the Danes who held those jobs were not forced out of the workforce. Instead, they were able to move into higher-skilled jobs, jobs that owed their existence in part to the need to service the growing population brought about by immigration.

As pointed out by economics blogger Matthew Yglesias, (who has had some interesting ideas about immigration in the past) this is a non-controversial conclusion when thought about in the context of in-country migration. Detroit’s struggles are directly related to its population loss. As people leave the city, businesses have fewer potential customers every year, so existing businesses close and new businesses don’t open. Meanwhile cities like Austin, TX, that have net positive migration, see their economies improve. And whether the people moving to Austin come from Detroit, from Denmark, or from Mexico, they increase demand for goods and services in Austin. Local firms expand to meet that increased demand, which results in new employment opportunities. Immigration creates a virtuous economic cycle from which everyone benefits.


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