Chinese economics professor: Immigrants do not take away your job

The belief that immigrants would ruin the employment market is unfounded, says economics professor Li Jingkui. With bold and ambitious entrepreneurial spirits, immigrants are more likely to be “job creators”, rather than “job takers”, while the resulting increase in demand for goods and services even supports economic growth.
A man cheers to people marching through the streets of Miami, Florida, to commemorate last year's historic protests in Cuba on 11 July 2022. (Chandan Khanna/AFP)
A man cheers to people marching through the streets of Miami, Florida, to commemorate last year's historic protests in Cuba on 11 July 2022. (Chandan Khanna/AFP)

Over the years, the US and other Western countries have been plagued by immigration issues, especially illegal immigration. Former US President Donald Trump even wanted to build a US-Mexico border wall to curb illegal immigration from Mexico. 

The common folks are worried about immigrants mainly because they think that immigrants will either snatch their jobs or lower wages. If the demand for workers in the labour market remains unchanged but the supply of workers increases, labour costs will decrease. This basic supply-demand theory is widely known because it fits everyone’s understanding of a commodity market.

Basics of supply and demand

Take the watermelon market for example. When I was little, only the townspeople could sell their watermelons in the town market of my hometown. Villagers from neighbouring villages were chased away and scared off by gangsters if they came to town to sell the fruit because an increase in the supply of watermelons would naturally reduce prices and hurt the sales of the townspeople. As a result, the townspeople could continue to sell their watermelons at high prices. 

This theory can be applied to the labour market as well. Isn’t labour a commodity too? Also, wages are basically the price of labour. However, economists who do empirical research believe otherwise.

The primary and secondary border walls between the United States and Mexico are shown along the San Diego sector with Tijuana, Mexico in the background looking southwest from San Diego, Californian, US, 9 June 2022. (Mike Blake/Reuters)
The primary and secondary border walls between the United States and Mexico are shown along the San Diego sector with Tijuana, Mexico in the background looking southwest from San Diego, Californian, US, 9 June 2022. (Mike Blake/Reuters)

In 2016, before Trump took office, there were 43.7 million immigrants living in the US. According to statistics from the Pew Research Center, this number represents a more than fourfold increase since the enactment of the Immigration and Naturalization Act of 1965, which abolished the national origins quota system. Immigrants now make up around 13.5% of the country’s population, triple the share (4.8%) in 1970. However, the number of immigrants living in the US today is still below the record 14.8% in 1890. Among these immigrants, around a quarter are unauthorised.

Roughly half of these 43.7 million immigrants live in the states of California (10.6 million), Texas (4 million) and New York (4 million). In terms of cities, 64% of the country’s total immigrant population live in the 20 major metropolitan cities, with the largest populations in New York, Los Angeles and Miami. These metro areas are also home to most of the country’s unauthorised immigrants.

These cities where immigrants live are some of the most developed regions because there are more jobs and economic opportunities. Hence, many believe that immigrants do not reduce employment opportunities in these areas but instead drive economic growth.    

Among the Fortune 500 companies, over 200 are founded by immigrants or the child of an immigrant; for example, Amazon founder Jeff Bezos, Tesla CEO Elon Musk and countless other renowned American entrepreneurs. 

Job creators rather than job takers

I recently participated in a seminar conducted by Richard Freeman, the Herbert Ascherman chair in Economics at Harvard University. Academic Daniel Kim presented a paper titled “Immigration and Entrepreneurship in the United States”. It acknowledges that while immigrants can expand labour supply and compete for jobs with native-born workers, they may also start new firms, thus expanding labour demand.

The paper studied the role of immigrants in entrepreneurship using a variety of data sources and discovered that “immigrants act more as ‘job creators’ than ‘job takers’ and play outsized roles in US high growth entrepreneurship”. 

People walk through midtown Manhattan on 3 August 2022 in New York City, US. (Spencer Platt/Getty Images)
People walk through midtown Manhattan on 3 August 2022 in New York City, US. (Spencer Platt/Getty Images)

The paper is supported by reliable data and has a sound logical framework and reasonable findings. It is also logical that people who are willing to leave their countries and come to the US to chase the “American dream” are usually bolder and more ambitious than their peers, whether they are unauthorised or legal immigrants. So this conclusion was unsurprising. 

Among the Fortune 500 companies, over 200 are founded by immigrants or the child of an immigrant; for example, Amazon founder Jeff Bezos, Tesla CEO Elon Musk and countless other renowned American entrepreneurs. 

To an extent, this explains why the labour market is different from the watermelon market in my hometown. Firstly, while the arrival of immigrants in the US increases labour supply, they also increase the demand for goods. This demand will expand local production, which creates the first part of labour demand.

A FWC law enforcement officer helps people on a sailboat containing approximately 150 migrants on 21 July 2022 in Islandia, Florida, US. (Joe Raedle/Getty Images/AFP)
A FWC law enforcement officer helps people on a sailboat containing approximately 150 migrants on 21 July 2022 in Islandia, Florida, US. (Joe Raedle/Getty Images/AFP)

Secondly, their entrepreneurial spirit makes up the second part of labour demand. For better survival, immigrants would make use of their strengths in innovation and outperform when starting a business, which would in turn create labour demand. When combined, both parts of the labour demand added together are likely to surpass the labour supply that they themselves took up.       

Cuban refugees case study

If you are still unconvinced, labour economists have yet another interesting and insightful study about the role of immigrants in the economic development and job creation of an area — the study of the Mariel boatlift.

After the Cuban Revolution succeeded in 1959, the US imposed sanctions on Cuba in an attempt to overthrow its regime and establish a pro-US regime. At the same time, the US would entice Cubans to leave the country, and granted political asylum to Cuban dissidents. As a result, a large number of Cubans fled to the neighbouring US state of Florida following the Cuban Revolution. In 1966, the US government passed the Cuban Adjustment Act that granted permanent residency (a green card) to any Cuban native who had settled in the US for at least one year since 1959.   

People shout slogans as they march through the streets of Miami, Florida, to commemorate last year's historic protests in Cuba, on 11 July 2022. (Chandan Khanna/AFP)
People shout slogans as they march through the streets of Miami, Florida, to commemorate last year's historic protests in Cuba, on 11 July 2022. (Chandan Khanna/AFP)

On 1 April 1980, six Cubans stormed the Peruvian embassy in Havana seeking political asylum. When the Peruvian embassy refused to turn them over to Cuba, Cuban leader Fidel Castro angrily removed the security post from the embassy’s entrance. Large crowds of Cuban asylum seekers were able to freely enter the embassy, and it even became difficult to provide everyone with food and water. 

Peru sought help from the US and other Western countries, and the US, Spain, Belgium and Costa Rica released statements agreeing to accept Cuban asylum-seekers in the Peruvian embassy. On 20 April 1980, Castro suddenly declared that Cuba would open the port of Mariel to those who wanted to leave, and even chased prisoners, mental health patients and prostitutes out of Cuba. As a result, between April and October that year, 125,000 Cubans — mostly uneducated or with little education — left Cuba via the port of Mariel and flocked to Miami in the US. The majority of these refugees became permanent residents in Miami, increasing the city’s labour force by 7% within months.   

...whether in the years shortly after the arrival of Cuban refugees or several years later, the comparisons did not reveal any differences — the influx of Cuban refugees did not affect the wages of native Miami workers. 

No impact on wages

So then, what happened to the wages of native workers in Miami?  

It would be an oversimplification if we only looked at the change in the wages before and after the Mariel boatlift, as there may be other factors that have increased labour demand during those months.  

People enjoy the Wynwood neighbourhood on 15 July 2022 in Miami, Florida, US. (Joe Raedle/Getty Images/AFP)
People enjoy the Wynwood neighbourhood on 15 July 2022 in Miami, Florida, US. (Joe Raedle/Getty Images/AFP)

To overcome the issues of causal inference, renowned labour economist David Card used the “difference-in-difference” technique by comparing the wages and employment rates of native workers in Miami before and after the Mariel boatlift with the data of four similar US cities (Atlanta, Los Angeles, Houston and Tampa). He found that whether in the years shortly after the arrival of Cuban refugees or several years later, the comparisons did not reveal any differences — the influx of Cuban refugees did not affect the wages of native Miami workers.    

The Mariel boatlift provides a real-world case study on the impact of immigration on the employment and wages of native residents. While this study has been controversial, its general conclusions have largely withstood academic scrutiny.  

Undoubtedly, while the study of immigration in economics provides only one perspective, it has revealed certain truths. At the very least, if politicians were to talk about immigration issues again, the watermelon market theory is no longer sound — the empirical research of economics has debunked their fallacies.

This article was first published in Chinese by Caixin Global as “移民问题与西瓜市场”. Caixin Global is one of the most respected sources for macroeconomic, financial and business news and information about China.

Related: Chinese economics professor: The New York I saw was not the New York I read about in books | Plight of China's new generation of young migrant workers highlights pitfalls of labour reforms | How being a good Samaritan can ‘spoil the market’ | Chinese economics professor: If you like salty and spicy food, your ancestors might have been poorer folk