President Donald Trump has thrown his support to the Cotton-Perdue bill to restrict legal immigration of low-skilled workers into the U.S. by as much as 50 percent on the grounds it would raise the wages of American working families.
That’s not what the economic evidence is showing, however.
The only academically solid study of the impact of reducing legal immigration on the wages of unskilled farm workers was published by the National Bureau of Economic Research in February of this year. It found no effect on wages despite half a million Mexican seasonal farm workers leaving the U.S. after the Bracero program was terminated in 1964.
One possible explanation is that demand for Mexican labor refused to decline despite the designs of U.S. policymakers. Closing the door to legal migrant workers simply created a new incentive for foreign workers to cross the border, and that incentive was stronger than being on the wrong side of U.S. law.
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Demand for temporary work visas also seems to increase during immigration crackdowns. Indeed Trump’s push may be responsible for the reported surge of temporary visas into this country, including at his properties. This is no masterstroke of policy reform; it’s more like moving numbers from one column to another.
The Bracero experience should serve as a warning to both the president and Congress. Not only will American working families not benefit from the legal cutbacks, but illegal migrants and temporary workers can surge to replace the legal ones that are kept out.
U.S. history has told the same economic story over and over. When gin mills were banned during prohibition, speakeasies sprang up. They didn’t disappear until after prohibition was ended. Criminalizing drugs in this country has sparked massive illegal drug imports from abroad by those willing to take the legal risk. Markets work to thwart the politicians, but often at a cost to law and order.
Of course, if illegal workers don’t fill the void as expected, Cotton-Perdue could end up hurting working families in a different way. Without enough labor to pull in harvests, U.S. agricultural output would shrink, forcing consumers to import the goods at higher prices. And those prices can rise higher still if Trump turns his protectionist threats into reality. It could create a perfect economic storm, triggered by totally independent Trump policies.
The slashing of low-skilled legal migrants also makes it harder for the Cotton-Perdue bill to accomplish its main goal: attracting high-skilled workers.
The two types of labor – high-skilled and low-skilled – are complementary, not competitive. High-skilled and high value-added workers are not only swayed by compensation; they also want to work and raise their families in service-rich areas. That means services from house cleaning and childcare to restaurants and hospitals – all industries that depend on low-skilled laborers. Amid so many calls to stop people from coming to the U.S., it may be easy to forget that really talented workers have other options. Europe and Asia would love to become destinations for the world’s best and brightest, and high-tech companies like Amazon and Google are hedging their bets by opening campuses there.
Silicon Valley, one of the most expensive places on planet Earth, is facing that very problem right now. Service industries of all sorts can’t find workers and the shortages are growing as illegal migrants self-deport amid the uncertainty created by Trump’s immigration policies. Add to this cutbacks in legal immigration if Cotton-Perdue passes, and what you’ve got is a real crisis that unquestionably will put a severe dent in the economic center’s ability to attract top high-tech talent. Already, higher-skilled better-paying jobs remain stagnant in the area.
President Trump often says that his policies will put America first. He also says he’s not against globalization, just bad deals. The best way for him to put America first in the global economy would be to boost quality of life by alleviating shortages of low- and unskilled labor. The country would be more competitive internationally as a result, and more prosperous at home. Curtailing low-skilled immigration would have the opposite effect.
Krauss is a senior fellow at the Hoover Institution at Stanford University and an emeritus professor of economics at New York University.