Immigration Crowds Out Native Workers
A round-up of new evidence
By Jason Richwine on January 10, 2023
Why don’t Americans who live in poorer regions of the country simply move to the richer regions? It’s a fair question. Economic theory predicts that wage differentials between geographic areas should compel workers to relocate. When a boomtown is in need of more workers, the wage will rise there until enough workers from lower-wage areas are enticed to move in, eventually bringing wages back into equilibrium nationwide.
Of course, the real world is not so simple. Moving can be both financially and psychologically costly. Workers may have close ties to their communities and feel reluctant to relocate to a whole new environment. Convincing those workers to move requires the promise of a wage increase that is both substantial and enduring.
That’s where immigration enters the story. New immigrants tend to settle in areas with high demand for labor, reducing the potential rewards for natives who were thinking about moving there. This “crowd-out” effect is observed by the economist Michael Amior in his 2022 working paper, “The Contribution of Immigration to Local Labor Market Adjustment”. He finds that the long-term decline in internal mobility (movement within the U.S.) can be ascribed to migrants from abroad who move directly to where the jobs are, limiting opportunities for Americans who live in economically depressed places.
While immigration discourages natives from moving to high-employment areas, it can actually encourage movement away from places with abrupt increases in the labor supply. For example, a 2021 study in the Journal of Human Capital revisited the famous “Mariel boatlift”, which brought a sudden influx of immigrants to Miami. Wages initially declined in Miami due to the increase in available workers, but the labor market soon returned to equilibrium, leading some analysts to conclude that any wage impact of immigration is short-lived. However, this study found that about half of the adaptation was due to low-skill workers moving away from (or declining to move to) Miami. Similarly, an NBER working paper and a study in the Journal of Economic Geography, both published in 2022, showed that immigration in France encouraged natives to move away from high-immigration areas or leave the labor force entirely.
https://cis.org/Richwine/Immigration-Crowds-Out-Native-Workers
