The migrant crisis, inflation and labor shortages have been the focus of media attention for the majority of 2021. There has been a lot of discussion about how these issues can be resolved. The focus has been lately on how rising inflation might affect the actual earnings of average Americans. That hasn’t stopped some people from sounding off alarms on immigrants—whether BorderOr on employment-based visas—for fear that increased labor competition will depress the wages of America’s existing low-skilled workers.
These concerns are real for America’s most vulnerable citizens. Do they have to worry about increased inflation, increasing immigration or both?
Rising prices can cause inflation to act as a tax on the poor and those in lower bargaining situations. When inflation was growing at about 2 percent per year pre-pandemic, a person making $15 an hour, or $30,000 annually, would lose about $600 a year without a pay increase—not a trivial amount for someone living paycheck to paycheck.
We are no longer living with 2 percent inflation. The prices are rising 6.8 Percent compared to last yearThis is the largest increase in pay for 39 years. The real earnings of a $15-per hour worker could drop by up to $2,040 if he doesn’t get a salary increase in the past year.
A few workers experienced a slight increase in their pay, but not enough for inflation. According to the Bureau of Labor Statistics, average workers had a 2% increase in earnings after taking into account inflation. 1.9The inflation has resulted in a reduction of 5% in the pay rate over the previous year. According to this, a $15-per hour worker could see $570 disappear from their wallet.
However, averages are often misleading. Prices for gas have increased by 58.1% in the past year. Low-income Americans spend more. Average price of gas. A Federal Reserve Bank of New York is indeed available. StudyIt was found that rural and poor households were particularly affected by rising gasoline prices, which is a major contributor to inflation inequality.
We should also acknowledge an additional factor, that may mask the usual impact of inflation upon wages. This is the singular labor shortage, partially due to the fact that there was a significant increase in unemployment. By retaining unemployment benefitsThis has resulted in higher-than-usual pay increases for many workers. The rising inflation would make low-income workers significantly less secure without it.
Notably, some inflation is not always concerning—especially if it’s steady, or temporary, or accompanied by simultaneously raising wages. We can confidently say today that the adjustment for low-income people is not easy.
In contrast, The majority of researchThis shows that in short term, immigration can have little effect on wages.
For a better understanding, here are the highest-end negative estimateOne of the most common arguments against immigration is that U.S.-born workers’ relative earnings fall by 4 percent when immigrants increase the skill level of the workers. Even this estimate at the high end is sometimes misinterpreted or misquoted. becauseIt does not measure the impact of immigration on the wages in absolute terms. This means that it only measures the relative effect of immigration on wages for one skill set and not the overall impact of immigration.
The number of immigrants who have only earned a high school diploma has gone up over the last decade. On average, 0.14 Percent per annum. Even taking out the issues of using the high-end estimation, it would lead to a drop in the income of U.S. workers who have the same education of 0.06 per year. The $15/hour wage for this worker would be $18 less due to the low-skilled immigrant. It’s not even close to what the actual impact of inflation will be on the same worker.
We don’t even need to make the comparison. It has been a great experience for the United States. Net outflowSince 2010, there have been fewer immigrants who do not hold a high school diploma. This means that U.S.-born workers would earn more if they dropped out of highschool. The immigration patterns have changedOver the last 20 years, more immigrants with high skills have moved in. These are the Convergence researchThe fact that immigrants with high skills are more productive and have better employment opportunities for all Americans is a major reason why there has been long-term growth in innovation and economic growth.
Bottom line: Immigration fears are exaggerated when they are measured in real numbers. However, high inflation may cause short-term harm to many low-income earners. Americans need to be more worried about the impact of inflation on their income than they are about immigration.