Increased immigration explains low wage growth in US

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Increased immigration of low-skilled workers from Mexico and Central America helps to explain the pattern of low average wage growth in the US in recent years, the Congressional Budget Office said in a report released on 10 Nov.

Latin American workers, with less education than US natives and who earn less, have cut overall average earnings in the US. But given the growth of immigrants, the increase in the earnings gap between US workers with more and less education may be less than is often suggested.

"Commonly cited statistics on earnings growth can be misleading if used as indicators of progress during a period in which an increasing share of the workforce is foreign born," the CBO said in a study of immigration and the US labour market commissioned by the Senate finance committee.

Immigrants account for one in seven workers in the US and half the growth of the workforce since 1990. As the number of foreign born workers has increased from 13 million to 21 million over the past decade, people from Mexico and Central America accounted for about 40 percent of the increase.

On average, the earnings of men from Mexico and Latin America were about 50 percent of those of native-born Americans. These workers account for about half the workers in the US who lack a high school diploma. Employment is concentrated in construction, restaurants, food manufacturing, janitorial and maintenance work, and the textiles sector.

The CBO report comes as Congress debates whether illegal immigrants should be able to achieve permanent residency status without having to return to their home countries. About one third of immigrants in the US are estimated to be illegal.

From 1994-2004, the average earnings of male high school dropouts rose 2 percent, adjusted for inflation, while the average earnings of college university graduates rose 12 percent.

But the gaps between earnings of US-born workers with different levels of education was less than the earnings gap for the whole population. The real average wages of US-born school dropouts rose 5.4 per cent in the period, the CBO said.

Immigrants with limited education compete for jobs with US unskilled workers, potentially driving wages down.

But there are also likely to be secondary effects, the CBO said, including US natives making a greater effort to graduate from high school, or new investment in areas where immigrants are concentrated. It concluded there was no clear evidence of a sustained negative impact of immigration on US workers.

While the lifetime earnings of first-generation immigrants is lower than for US natives, there is much less of a gap for their children, largely because of their increased school attendance in the US.