The Economist wonders: Has Trump's get-tough immigration policy created a working-class wage boom?

Their short answer is probably — in the short run, anyway. The Economist notes that, far from Democrats’ claims that the Trump economy only works for the wealthy, that it’s working-class Americans who have made the biggest wage gains in the last three years. It’s no coincidence, they argue, that this comes at a time when legal and illegal immigration of primarily low-skilled workers has gone into “sustained decline” for the first time in decades.

However, the Economist also warns that this has its own risks for future growth and economic expansion. Its argument offers both sides of the immigration debate ammunition over policy, but misses one important point (via Instapundit):

In both 2018 and 2019 nominal wages rose by more than 3%, the fastest growth since before the recession a decade ago. Americans at the bottom of the labour market are doing especially well. In the past year the wages of those without a high-school diploma have risen by nearly 10%. Intriguingly, this has come as America has turned considerably less friendly to immigrants, who are assumed by many to steal jobs from natives and lower the wages of less-educated folk. The two phenomena may be connected—but only for a while. …

It appears instead that the overall decline in the foreign-born population is a result of falling numbers of low-skilled migrants. Those numbers slumped a decade ago because of the recession that began in 2007, changing demographics in Mexico and tougher border policing. More recently the number of low-skilled migrants appears to be in decline again. That is probably a consequence of policies implemented by President Donald Trump, as well as the off-putting effects of his rhetoric on foreigners.

So far, this sounds a bit like correlation rather than causation, and the analysis acknowledges that wage growth is also attributable to other factors. First, the economy has recently achieved a higher sustained growth. Wages are also rising in other countries where immigration rates are rising rather than falling. In the US, although the Economist doesn’t mention it, the discouraged-worker overhang from the Great Recession has finally begun to exhaust itself, meaning that there is greater competition for labor in the market.

That competition, however, also stems from a lack of workers in key areas. The Economist digs further into the numbers to support its hypothesis.

Gordon Hanson of Harvard University suggests that if the impact of reduced low-skill migration is showing up anywhere, it will be in three particular occupations: housekeepers, building-and-grounds maintenance workers, and drywall installers. These occupations rely heavily on immigrant labour and the services they provide cannot be traded internationally. Average wages in those occupations are rising considerably faster than wages in other low-paid jobs, according to calculations by The Economist.

Intriguing evidence also shows up geographically. According to research by William Frey of the Brookings Institution, a think-tank, five big metro areas saw absolute declines in their foreign-born populations in 2010-18. Wages in those areas are now rising by 5% a year, according to our calculations.

So far so good for immigration hardliners, from Trump on down. They have argued all along that unchecked immigration had hammered low-income workers the hardest, and the Economist has all but verified that their solution works. They won the political battle — but will they win the war?

They shouldn’t pop the bubbly quite yet, the Economist warns, because this will only work in the short run. America has adopted restrictionist policies on immigration in the past with very mixed results, even expelling foreign workers in an attempt to raise wages. Unfortunately, fair use limits restrict me from excerpting those arguments based on contemporary and more modern studies, but they do score points. Those efforts during the Great Depression didn’t work, and arguably contributed to a lack of dynamism that the economy sorely needed at that time. Earlier efforts to exclude Chinese and eastern European laborers also had little to no impact on wages at other times of economic stress. More people means more creativity, and more labor means easier innovation and start-up potential.

Furthermore, thanks to the end cycle of the Baby Boom and the fashion of having fewer children, America is beginning to age out. We will have a larger percentage of non-working older Americans in retirement who will need more and more care. That means we need “a lot more people willing to work in health care,” among other areas, if we are to maintain our standard of living. Who will fill those jobs if we are not producing native population growth at the levels necessary? This is the larger point that the Economist wants us to learn from these numbers — that the wage impact will only be short-term and in the end counterproductive as it lifts people to an economic status where they no longer choose to do low-skill work. What starts off as a recognition of short-term success for the hardliners ends as an argument for their opponents.

That is where the Economist itself gets short-sighted, however. For one thing, those were responses during economic turndowns, but even that’s a smaller issue. The point of controlling for illegal immigration is that it allows us to more rationally plan for legal immigration. We cannot strike a balance on the latter without eliminating the former. Once we put an end to illegal immigration (or get as close statistically to that goal as possible), we can then begin planning for low-skill labor needs the same way we do for higher-skill foreign labor needs. If these levels of legal immigration are too low, then we can raise them, confident that the increase won’t do undue damage to lower-skilled native labor.

That change would, I daresay, raise the dignity of everyone involved. The hardliners are guilty of rhetorically treating illegal immigrants as a pestilence; the open-borders crowd are guilty of treating native workers as bigots for their completely legitimate concerns over unfair economic competition through lawbreaking. Imagine a system in which we welcome foreign workers to work legally at these same jobs, in which they contribute in the open and engage in public, living securely and without fear of expulsion, while the rest of us can count on our own economic and national security while planning rationally for economic growth. Once that system is in place, the specific numbers of immigrants will matter much less than getting to the most effective level for sustained economic growth.

That’s what we should strive to create. So far, we are on the way to at least setting the correct conditions for such an outcome.

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