Tuesday, April 04, 2006

Hassett on Immigration

Economist Kevin Hassett gives his thoughts on the immigration debate. An excerpt:

Immigration has been extensively studied by economists, and the literature suggests there are two main effects. First, immigrants have relatively low skills on average, so they drive down the wages of domestically born low-skilled workers. Second, immigrants tend to have different skill sets, so they increase the beneficial diversity of the workforce, making firms that hire immigrants and the overall economy more productive.

New Orleans is an example that illustrates the latter. A friend recently returned and mentioned how quickly the city is snapping back to life. He saw construction under way throughout the city, performed by swarms of workers who appeared to be predominantly Spanish-speaking. Without those construction workers, restaurants, hotels and other businesses might still be closed.

In the aggregate, cheaper construction makes it easier for firms to invest, grow and compete in the global marketplace. And there are many other areas where immigrant skills complement those of native-born Americans.

How big are these beneficial effects? A recent National Bureau of Economic Research paper by economists Gianmarco Ottaviano and Giovanni Peri was the first to attempt to quantify the benefits of labor force diversity. Their striking conclusion was that the benefits of immigration to U.S workers are positive and quite significant. They say that "immigration, as we have known it during the nineties, had a sizeable beneficial effect on the wages of U.S.-born workers."

You can find the study Hassett mentions here.