Question

Are immigrants complements or substitutes for most native workers in the United States? Explain.

Answer 1

One of the most important distinctions between workers is their skill level: Some workers are more skilled than others. This is true of both native-born and immigrant workers. But in addition to having skills that differentiate immigrant workers from each other, the skills of immigrant workers also differ from those of the native-born labor force. Immigrant workers are overrepresented at the extremes of the skills spectrum—there are many at the low-skilled end of the spectrum and many at the high-skilled end. On the low-skilled end, 27 percent of foreign-born workers in 2013 had less than a high school diploma compared with 7 percent of the native-born population. At the high-skilled end, about 40 percent of U.S. PhDs and engineers are foreign born.

Immigrant workers can either be substitutes for native-born workers or complements to them. When immigrant workers are substitutes for native-born workers, they compete for similar jobs. Using a simple supply and demand model, an influx of substitutable workers constitutes an increase in the supply of labor, causing wages to fall for workers with similar skills. .

However, when workers are complementary, an increase in immigrant labor can increase job opportunities and wages for native-born workers. So, the low-skilled immigrant labor reduces the cost of production and increases the output of those goods; this greater output increases the demand for other, higher-skilled workers. For example, consider that immigrant workers account for 22 percent of the construction workforce. They tend to pursue jobs in the construction industry that require less training and education but are areas where the industry has its largest labor shortages—such as painters, drywall installers, and construction laborers.This supply of immigrant labor has decreased the cost and presumably increased the number of homes produced and sold over time. The increase in housing construction has increased the demand for higher-skilled construction workers such as contractors, electricians, and plumbers and increased the demand for manufactured goods such as air conditioners and appliances. In some cases, immigrant labor has complemented native-born laborers by allowing them to move into the labor force. For example, immigration has provided families with access to low-cost child care. This has allowed more native-born women to enter the workforce.