Question

Analyze the impact of increased illegal immigration on both skilled and unskilled U.S. labor markets assuming that these immigrants are only unskilled workers, and that unskilled and skilled workers are gross complements. Explain your reasoning carefully and show your results in a supply-demand graph for both skilled and unskilled labor markets.

Answer 1

Illegal Immigration continues to be the key issue of debate in the among US policymakers. There is a rise in the demand of the immigrant labour and the desire to work in Americans market. Immigrant workers increase the opportunities and incomes of Americans. They compete against Americans for jobs.

Immigrants and workers generally do not compete for the same jobs instead, many immigrants complement the work of U.S. employees and increase their productivity. The unskilled immigrant labour allow US farmers and contractors to expand agricultural production and employment possibilities and increase in income for US labours.

An increase in immigration flows will lead to higher incomes for productive factors that are complementary with immigrants, but lower incomes for factors that compete with immigrants. Immigration reduces the labour supply increases the income of workers an lowers the factors of production.

An increase in the number of immigrants will generally decreases the income of US unskilled workers.An increase in the number of immigrants, then, will raise the wages of those domestic workers who are their complements.

Immigration yields a positive net gain to domestic workers, that gain is not spread equally: it harms workers who are substitutes for immigrants while benefiting workers who are complements to immigrants. Most economists believe that unskilled domestic workers are the substitutes, so their wages will fall, and skilled domestic workers are complements, so their wages will rise.

SUPPLY AND DEMAND GRAPH FOR BOTH SKILLED AND UNSKILLED LABOUR

EXPLANATION OF THE GRAPH

S₀ explains the original supply curve of labour

D₀ explains the original demand curve of labour

E₀ the equilibrium

W₀ is the original price

Q₀ is the original quantity

The  wave of new information technologies, like computer has affected low-skill and high-skill workers in the U.S. economy. the same new technologies are a complement to high-skill workers like managers, who benefit from the technological advances by being able to monitor more information,.

Does the new technology affect the supply of labor from households or the demand for labor from firms? The technology change described here affects demand for labor by firms that hire workers.

The substitute for unskilled labor becomes available, demand for unskilled labor will shift to the left, from D₀ to D_1.

Demand for high-skill labor will shift to the right, from D₀ to D_1.

New equilibrium for unskilled labor, shown as point E₁ with price W₁ and quantity Q₁, has a lower wage and quantity hired than the original equilibrium, E₀. The new equilibrium for high-skill labor, shown as point E₁ with price W₁ and quantity Q₁ has a higher wage and quantity hired than the original equilibrium (E₀).

So, the demand and supply model predicts that will raise the pay of high-skill workers but reduce the pay of low-skill workers.

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