Richard M Hackett  /  AP file
In a raid on a Swift and Co. meatpacking plant in Greeley, Colo. last month, an Immigration and Customs Enforcement agent searched an unidentified worker as part of an identity theft investigation.
By Tom Curry National affairs writer
updated 1/10/2007 9:31:59 AM ET 2007-01-10T14:31:59

As the House votes Wednesday to raise the federal minimum wage by $2.10 per hour, economists are considering the effect of that increase on low-income workers.

Will the benefits to such workers of raising the minimum wage be offset by wage-depressing effects of illegal immigration?

And if so, will Congress fall short of its goal of helping low-income workers until it takes steps to stop the flow of illegal immigrants?

In its assessment last May of the Senate immigration bill, which would have created a new guest worker program and allowed thousands of illegal immigrants living in the United States to become legal residents, the Congressional Budget Office said it was likely that the addition of additional immigrants “would slow the growth of the wages of workers already present in the United States with whom they most closely compete."

'Downward pressure' on wages
The CBO said, "the large influx of foreign-born workers with less than a high school education during the past few decades probably put downward wage pressure on workers (both native and foreign-born) who also lacked a high school diploma.”

Harvard economist George Borjas, in a 2004 study, said, “The 10 million native-born workers without a high school degree face the most competition from immigrants, as do the eight million younger natives with only a high school education and 12 million younger college graduates.”

But other economists, such as David Card at the University of California at Berkeley, dissent from the view that immigrant workers have a dire effect on the incomes of less educated native-born ones.

“It's quite possible that unskilled immigration is having some negative effect on unskilled natives. The question is: How big is the effect? Has it reduced native wages by 20 percent, or has it reduced their wages a couple of percent?” Card asked in an interview published by the journal of the Federal Reserve Bank of Minneapolis last month.

“The best available evidence is the effect is on the order of a couple of percents nationwide over 25 years, and possibly a little bigger in certain local labor markets,” Card said.

He added that research suggests that “there are positive benefits for other workers, for consumers and for the economy as a whole.”

Some Democrats agnostic
Last week as House Democratic Leader Steny Hoyer sketched Democrats’ plans for the first days of the new Congress, he was asked whether he agreed with those who say that illegal immigration most hurts low-income Americans.

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“I’d want to think about that more to assess the impact that it (raising the minimum wage) will have,” Hoyer replied. He said whatever impact an increase in the minimum wage has on immigration, “it’s the right thing to do for workers in the United States of America.”

Democratic congressional leaders have not yet announced their timing for putting immigration legislation to a vote.

When Congress does get to debating an immigration reform bill, Rep. Zoe Lofgren, D- Calif., the new head of the immigration subcommittee of the Judiciary Committee, will have a big hand in the final outcome.

Lofgren, like Hoyer, is something of an agnostic on the question of whether illegal immigrants undermine native-born workers’ wages.

“It’s hard to know the answer to that question,” she said Tuesday. “Economists are on both sides of that question. But it’s worth noting that minimum wage laws apply to people who are here legally and also apply to people who are here illegally. To the extent that the minimum wage is raised — which I support — it would include everybody who is working here. If you don’t pay the minimum wage either to an American, to a legal resident, or to an illegal visitor you’re violating the law and you ought to be prosecuted.”

For employers, the cost of workers is not only the wages that must be paid to them, but other costs such as health insurance, paid sick days, and workers’ compensation insurance in case of injury on the job. In each case, unscrupulous employers can use illegal immigrants to escape and minimize all these costs.

An incentive to legalize
Jared Bernstein, a former Clinton administration official who is now at the Economic Policy Institute, a think tank that supports an increase in the minimum wage, said the worry about illegal immigrants undermining wages of lower-skilled Americans is “not an unreasonable concern.”

And, he added, “It’s one of the reasons why for many of us, immigration reform seems like a pretty important problem, added to the idea of a minimum wage change. The more you bring undocumented workers out of the shadows and into the legal labor market, the more you preclude exactly that kind of incentive. Whether it’s the minimum wage or not, employers exploiting undocumented workers by not paying them the minimum — either today’s rate or a higher rate.”

Lofgren said, “To the extent that some economists worry that the underground economy impacts adversely American workers, it’s important that workers who are here temporarily not be exploited. Because that’s not only unfair to them, it’s not fair to Americans. So a comprehensive immigration approach is important to American workers, but so is the minimum wage.”

For most Democrats the phrase “comprehensive immigration reform” means deterring illegal immigrants and those who hire them, but also legalizing the illegal immigrants who are already living in the United States.

“There has to be enforcement at the border, there has to be enforcement at the workplace, but there also has to be an immigration system that meets the needs of families who want to be unified, and the needs of the American economy, to the extent that we are unable to meet the needs of our workforce with our own population,” Lofgren said. “We need to be realistic about how we move people in to become new Americans to help us meet those needs.”

On the other side of the aisle, a key legislator will be Sen. John Cornyn, R-Texas, who said last week that immigration reform is “the single most important domestic priority. It was a mistake that we in the (Republican) majority last year failed to deal with it, and I think we paid a price for that” in last November’s elections.

Dealing with those already here
“The hardest issue still is going to be how to deal with the 12 million (illegal immigrants living in the United States),” Cornyn said. “My position is we don’t repeat the mistake we made in 1986, where we traded an amnesty for enforcement and we got an amnesty and no enforcement.”

Cornyn said a trade-off is possible: If Congress enacts stringent border and worksite enforcement, then, he said, “The American people would be far more generous about how we deal with the 12 million (illegal immigrant) people.”

In any event, Wednesday’s House vote on the minimum wage is only the beginning chapter of an economic story that unfolds over the next year as Congress tries to solve the immigration dilemma.

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