Whether immigration reduces wages is highly debated in economics. In an economy where waiters wait on waiters (i.e., where the economy serves the economy on average), the addition of another waiter has little if any effect on wages. Under those circumstances supply creates its own demand.
To the extent there are waiters and dishwashers, if unassimilated immigrants are forced to become dishwashers, then a dishwasher is freed to be a waiter and both are better off.
However, if resources other than lesser-skilled labor constrains growth—e.g., capital, properly trained talent, ideas, other investment opportunities, or the economy’s capacity and willingness to bear risk—then an increase in an unconstrained resources, such as lower-skilled labor, will reduce its price unless it contributes proportionally to the constrained resources. In the case of unskilled workers, that seems unlikely.
So if waiting on a limited number of higher paid more highly skilled workers, raises waiter pay when the supply of lesser-skilled labor is restricted, then more waiters divides the spoils among a greater number of waiters and pushes their pay downward toward waiters-waiting-on-waiters wages.
The debate rages on between David Card, Giovanni Peri and Vasil Yasenov on the minimal-effect-on-wages side of the immigration debate and Harvard’s George Borjas’s and Lawrence Katz on the significant-effect-on-wages side of the debate. Borjas questions Card’s original work on the effect of the Mariel boat lift on Miami wages. Peri, and Yasenov questioned Borjas’ criticism of Card. Now Borjas questions Peri, and Yasenov’s criticism of his work.
Borjas is surprisingly harsh in his assessment of Peri, and Yasenov’s work. He says “PY are simply wrong; their analysis is plagued by questionable assumptions, dubious data manipulations, and one fundamental error in data construction….”
Read George Borja’s full report here.