Labor-Supply: How Foreign-Born Workers Can Hold Down Pay in Competing U.S. Jobs
A straightforward labor-market claim runs through American wage debates: when large numbers of foreign-born workers—legal and unauthorized—enter the country, they expand the supply of labor in the jobs they take. Many arrive from poorer economies and will accept pay and conditions below what many U.S.-born workers in the same occupations will take. That extra supply, the argument goes, is one reason wages stay low in those parts of the economy.
The mechanism is basic supply and demand. Harvard economist George Borjas has long argued that the labor-demand curve slopes downward: more workers with a given skill set reduce the wage of workers who look like them on paper. In national skill-cell studies, he estimated that a 10 percent increase in the size of a skill group lowers that group’s wage by about 3 to 4 percent. In simulations of the 1980–2000 immigrant influx, he reported that immigration reduced wages of native high-school dropouts by about 8 percent in the short run and about 5 percent even after employers added capital. For a dropout earning $25,000 in 2000, that was roughly $1,200 a year. Mexican immigration, which is heavily low-skilled, accounted for nearly all of the estimated hit to the least-educated natives in that work.
Borjas later re-examined the 1980 Mariel boatlift, when a sudden Cuban inflow raised Miami’s low-skill workforce by nearly 20 percent. Matching the newcomers’ education—most were high-school dropouts—he estimated that dropout wages in Miami fell 10 to 30 percent relative to comparison cities. That finding remains disputed; other economists using different samples find little effect. The underlying point of the reappraisal is narrower: effects show up when the comparison is workers who actually compete with the arrivals, not the citywide average wage.
Where the extra workers landUnauthorized immigrants are a small share of the total U.S. labor force and a much larger share of specific jobs. Pew Research estimated they were 5.6 percent of the workforce in 2023, a record, and far more concentrated in farming, construction, and service work. In earlier Pew occupation data they were about a quarter of farming workers and a large share of drywall installers, roofers, construction painters, and agricultural laborers. Those are the same occupations where employers report difficulty recruiting U.S.-born workers at prevailing pay.
The Center for Immigration Studies has reported that in many lower-skilled occupations, full-time immigrant workers have lower median weekly earnings than U.S.-born workers in the same category—a pattern CIS treats as evidence that immigrants work for less and bid down pay. CIS also noted that when immigration growth slowed in the late 2010s, real weekly earnings for less-educated U.S.-born full-time workers rose, after a period of little or no gain. That is a correlation, not a controlled experiment, but it is the pattern restrictionist researchers emphasize.
“Lifestyle” as reservation wages and bargaining power
The claim that newcomers “bring their economic lifestyle with them” is a plain-language way of describing reservation wages and outside options. A worker whose reference wage is set in a much poorer country, who remits money home, or who cannot easily complain or change jobs because of legal status will often accept a U.S. wage that looks low by native standards and still be better off than before. Unauthorized status adds a second channel: weaker bargaining power. The National Academies’ 2017 review noted that lower wages in markets with many low-skilled Hispanic workers—especially those with limited English or without legal authorization—have been linked to cheaper local services such as child care, cleaning, landscaping, and food. Lower prices for those services are the flip side of lower pay for the people who produce them.
Legal immigrants are not identical to unauthorized workers. Many have work permits, higher education, and stronger rights. The supply-side logic still applies whenever their skills overlap with incumbents. The group hit first, in most studies that find negative effects, is not college-educated natives. It is earlier immigrants and U.S.-born workers without a high-school diploma.
Official short-run estimates after the recent surgeThe Congressional Budget Office estimated that net immigration from 2021 to 2026 ran far above pre-2020 trends and that adults in the extra inflow were less educated than the public overall. CBO said that added supply of workers with 12 years of schooling or less would slow wage growth for that group in 2024–2026. CBO also projected higher GDP and, later, some offset from productivity and demand for more-educated workers. The near-term piece is the one that matches the labor-supply argument: more less-skilled workers, slower wage growth for people already in those jobs.
What other researchers emphasize
A large part of the academic literature, including the National Academies panel and several meta-analyses, reports that the effect on average native wages, over a decade or more, is small. Giovanni Peri and coauthors argue that natives and immigrants with the same education are not perfect substitutes, that natives move into different tasks, and that immigration can raise less-educated natives’ wages once those adjustments are counted. Those papers are the main counterweight to Borjas. They do not erase occupational crowding in construction, agriculture, and food service; they argue the economy-wide average is not dominated by that crowding.
Wages also depend on productivity, technology, trade, unions, and how tight the labor market is. The labor-supply case does not require immigration to be the only cause of low pay. It requires that, in the jobs where foreign-born workers are heavily concentrated and willing to work for less, extra supply is one of the reasons those jobs stay cheap.
Sources
George Borjas, “For a Few Dollars Less” (Harvard): https://gborjas.scholars.harvard.edu/_publications/for-a-few-dollars-less
Borjas, “The Wage Impact of the Marielitos: A Reappraisal”: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2666356
Borjas Senate testimony (simulations): https://www.judiciary.senate.gov/download/03-16-16-borjas-testimony
National Academies news release (2017): https://web.archive.org/web/20170404130354/http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=23550
Pew Research, unauthorized immigrant workers and occupations: https://www.pewresearch.org/race-and-ethnicity/2025/08/21/u-s-unauthorized-immigrant-population-reached-a-record-14-million-in-2023/
Pew, occupation shares (earlier detailed tables): https://www.pewresearch.org/hispanic/2015/03/26/share-of-unauthorized-immigrant-workers-in-production-construction-jobs-falls-since-2007/
Center for Immigration Studies, earnings trends: https://cis.org/sites/default/files/2023-05/camarota-earnings-trends_0.pdf
CIS, “The Wages of Immigration”: https://cis.org/Report/Wages-Immigration
Wall Street Journal on CBO wage-growth estimates: https://www.wsj.com/livecoverage/stock-market-today-earnings-dow-sp500-nasdaq-07-23-2024/card/immigration-surge-expected-to-drag-on-wages-for-low-skilled-workers-cbo-says-KzZGW3cBhYZbFKlR6igu
Lant Pritchett summary of the wage debate: https://lantpritchett.substack.com/p/the-impact-of-immigration-on-wages
How Extra Foreign Labor Can Hold Down Pay in Competing U.S. Jobs
Economists who emphasize labor supply say added immigrant workers, especially in low-skill and unauthorized-heavy occupations, reduce wages for close substitutes. Borjas, CBO, Pew occupation data, and CIS earnings research are the core sources for that case.
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