Our answer is that a closed economy ultimately would make America a less competitive and hence poorer country--because we'd have less human capital, and because we'd be using the human resources we did have less efficiently. Among higher-skilled and -educated workers, pulling away the U.S. welcome mat means all of that talent would go to work creating wealth and jobs in other countries.
But keeping out foreign laborers for the alleged benefit of low-skilled U.S. workers is equally short-sighted. Yes, immigrants compete for these entry-level jobs most directly with Americans who lack a high-school diploma. But the percentage of Americans between 18 and 64 without a high-school degree has been dropping relentlessly for decades, which is a good thing. Even without immigration, poorly educated Americans would still have to compete in a global economy that increasingly places a premium on skills.
In any case, most economic studies have found only a very small negative immigration impact on the wages of even the lowest-skilled American workers. Restrictionists advertise the study by Harvard's George Borjas, who found the widest impact across all income levels. But Diana Furchtgott-Roth of the Hudson Institute points out that his study assumes that immigrants and native-born workers are perfect substitutes. In the real labor world, immigrants often fill niche markets and bring varied skills.
Immigrants also increase the demand for labor, not just the supply. That is, they are also consumers who create jobs by buying goods and housing here. Former Federal Reserve Chairman Alan Greenspan often pointed out how immigration has been driving housing demand. And if immigrants really were "stealing" American jobs, we wouldn't have had the remarkable job growth of recent years.
Perhaps the biggest fallacy is that the same jobs that foreign workers now fill would exist in their absence. That's not likely to be the case. Seal the border, and what you'd see is not the same number of jobs at higher wages but, rather, fewer of these types of jobs overall in the U.S. This is certainly the case in parts of Europe, where some services (such as dry cleaning) are rare and cost a fortune.
"The biggest disruption probably would come in light manufacturing," says Dan Griswold, who follows immigration at the Cato Institute. "Our textile industry has managed to hang on to the extent that it has because North Carolina textile mills have be able to hire immigrants. The domestic carpet industry based in Georgia has managed to survive and thrive due to immigrant labor. The same holds true for meat-packing plants in the Midwest."
Eliminate the immigrant labor force and these jobs don't--presto!--start paying more to attract Americans. In a global economy, they're much more likely to disappear or move overseas as domestic employers find themselves less able to compete with foreign producers. And many of the same politicians who complained about "cheap" immigrant labor would then want to block the import of products that were once made here.
Businesses can't raise wages or prices willy-nilly without respect to the ability and willingness of consumers to pay for a good or service. The agriculture industry certainly would attract more Americans if it paid $50,000 a year to pick lettuce in the noonday sun, but not without raising the cost of food and other things. It would be more expensive to eat out, for example, and fewer people would do so as a result, affecting the restaurant industry, among others.
Unlike some of his critics, Mr. Bush appreciates the absurdity of closing off our markets to foreign labor but not to, say, foreign capital and foreign technology and foreign goods. If a company needs financing for a second plant, we don't limit its options to American sources of capital.
Immigration, legal or otherwise (I agree with Coyote Blog, that so-called illegal immigration is not illegal), is a net positive for the United States. Not only that, but I don't think, with very few exceptions, anyone is harmed by immigration. As Cafe Hayek puts it:
Would Native Americans (not native-born Americans, but American Indians) be wealthier if they had the American continent to themselves?
Would New York City (or any other city) be richer today if it had held its population to what it was in 1850? 1900? 1950? 1980? Does the inflow of people into New York lower the wages of the people already there? Does it make them poorer? Does it matter whether rich or poor people, high-skilled or low-skilled people are the ones moving into New York?
Has rural America gotten richer as fewer people have chosen to live there? Does the smaller supply of workers increase the wages and standard of living of those people still living there?
Do population increases lower America's standard of living? Would our wages be higher if we had had zero population growth over the last century? Has the population growth of the last century reduced wages or the standard of living in America? Does population growth lower our standard of living if poor people have a disproportionate share of the new births?
Has the tripling of women in the workforce over the last 50 years reduced wages or the standard of living in the United States? Would our wages or standard of living be even higher if women weren't crowding into the work force and allegedly lowering wages?
If there were a plague that killed half of the American people, would those who were left find their standard of living rise or fall? Would it depend on whether the people who lived or died were rich or poor or high-skilled or low-skilled?
My answer to all of these questions is "no." More people means more resources for the people already here. It means more trade. More specialization. More economies of scale. It doesn't matter whether they are native born or imported. (I also recognize it means potentially more congestion and more pollution depending on our public policy choices. But those aren't necessary consequences of the increase in population. The direct impact on our wages and productivity and standard of living is positive.)
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