Do More Immigrants Mean Lower Wages?

In an interview with Ezra Klein, Bernie Sanders says,

What right-wing people in this country would love is an open-border policy. Bring in all kinds of people, work for $2 or $3 an hour, that would be great for them. I don’t believe in that. I think we have to raise wages in this country, I think we have to do everything we can to create millions of jobs.

It’s true that we’re usually taught that if you increase the supply of labor, wages will go down. But, remember, that’s if we assume all else is equal. Famous left-wing economist Paul Krugman might disagree with that assumption.

In his famous work on trade theory — what won him the Nobel prize —, Krugman argues that a larger population implies a greater demand for goods, and therefore labor, because…you know…there’s more people. So what does this imply with regards to wages? If industries, or the economy as a whole through the division of labor, can benefit from economies of scales, it means lower prices and higher real wages.

So, if Bernie Sanders were really interested in raising incomes, he’d be an open borders advocate.

2 thoughts on “Do More Immigrants Mean Lower Wages?

  1. John S

    Glad to see you back in the Bat Cave, even if only for a brief visit.

    I’m not really familiar at all with the literature on immigration economics, but Harvard Kennedy’s George Borjas–considered to be the leading expert on the subject–advocates a position between full open borders and complete restriction:

    (From Amazon’s review of “Heaven’s Door,” a summary of his work for laymen)

    “Borjas believes the current level and composition of immigration to the United States does not advance–and arguably harms–American economic and national interests… Borjas, himself an immigrant from Cuba, would cut admissions by about one-third and radically redesign the way in which people gain entry, changing the present system from emphasizing family ties to favoring skills.”

    In other words, a points-based system (which I believe is what Canada and Australia use). Sounds reasonable. Any thoughts? It seems to me like full open borders would wreak havoc on the incomes of the lowest skilled American workers.

    Reply
    1. Jonathan Finegold Post author

      If I’m reading that synopsis right, Borjas wants to reduce the number of immigrants admitted legally into the U.S. by a third?

      It’s true that the right policy is probably in between open borders and what we have now, but that’s a pretty big spectrum. I’d say that the right position, if there is a correct position, is pretty close to open borders.

      Reply

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