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.
What are the implications of these worries for Americans most at risk? 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. Now prices are up 6.8 percent compared with 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.
Some workers experienced a slight increase in their pay, but not enough for inflation. The Bureau of Labor Statistics estimates that workers saw an average increase in their paychecks after accounting for nominal increases. 1.9The inflation has resulted in a reduction of 1% in the pay rate over the previous year. A $15-per-hour worker will likely see $570 go missing from his pocket.
But averages may be misleading. The gas prices rose by 58.1% in the past year. Low-income Americans spend more. Average price of gas. In fact, the Federal Reserve Bank of New York 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 another factor, that obscures inflation’s typical effect on wages. This is the singular labor shortage we experienced last year. It was partly caused by Continued unemployment benefitsIt has allowed for higher than usual increases in wages for many workers. Inflation would have a significant impact on low-income workers.
Notably, some inflation is not always concerning—especially if it’s steady, or temporary, or accompanied by simultaneously raising wages. Today, however, it is possible to say that lower-income workers will need some adjustment.
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. It measures how immigration affects the wage of one skilled group in relation to the other.
In the last ten years, immigrants have increased the numbers of people who only hold a high-school diploma. On average, 0.14 Percent per annum. This would mean that U.S.-born workers of the same educational level will see a decrease in their income by 0.06 percent each year, even if the problem of using the high end estimate is not considered. 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 true impact of inflation will be on the same worker.
The comparison is not necessary. America has had 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 changedIn the past few decades, there have been more skilled immigrants. These are the Research consensusIt is believed that immigration with high levels of skilled workers improves wages and job prospects for Americans. This leads to long-term improvements in economic growth and innovation.
When we compare immigration concerns to real numbers, it seems that they seem exaggerated. Inflation can also cause harm for many low-income people in the near term. Americans today should worry more about how inflation will impact their earnings than immigration.