Immigration from abroad has increased dramatically since the 1960s, as workers from less developed countries have moved to the U.S. in search of higher wages. The new wave of immigration has reignited the debate about the impact of immigration on the economy. One way immigration affects the economy is through the labor market. At the national level, immigration is widely believed to harm native workers with similar skills by reducing their wages or their probability of obtaining a job. But immigration can also alter the allocation of workers across markets—either for better or for worse. If immigrants gravitate to markets with unusually strong labor demand, they will reduce differences in wages and unemployment between strong and weak markets, making it unnecessary for as many native workers to move. On the other hand, if immigrants move to markets with average or below-average labor demand, they may create an excess supply of workers with similar skills in these markets. Some natives may move out of these markets to avoid a cut in wages, and other natives may avoid these markets even if they would be well suited to living there on other grounds. Keeton and Newton shed new light on the impact of immigration on the allocation of workers across markets by examining migration flows during the second half of the 1990s. They conclude that the impact of immigration on the geographic allocation of labor is neither as harmful as immigration opponents sometimes suggest, nor as beneficial as immigration supporters sometimes claim.
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Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.