I have long maintained that the flood of unskilled immigrants (whether documented or not) into the United States has had the effect of depressing the wage rates for unskilled American workers. It’s a matter of simple supply and demand: More competition for the same number of jobs drives down the compensation that unskilled laborers can demand.

But a new study of European labor markets suggests the analysis should be more nuanced, especially when viewed over a decade-long time horizon. I hate as much as the next guy to admit that I might be wrong, but I also try to remain open to new evidence and new logic. This study, “Immigration, Jobs and Employment Protection: Evidence from Europe,” compels me to question my earlier position.

By way of background, Western Europe saw a surge of immigration in the decade preceding the Global Financial Crisis that pushed the foreign-born population from 8% to 12% — very comparable to the impact of immigration in the U.S., where the percentage rose from 10.6% to 13.6% over the same period.

The authors, Francesco D’Amuri and Giovanni Peri, scrutinized the employment data to see whether the inflow of immigrants to 14 Western European countries decreased employment rates and/or if it altered the occupational distribution of natives with similar education and age. They found no impact upon native employment rates but significant evidence of a shift in occupations. Immigrants took “simple” (manual-routine) occupations and natives moved toward more “complex” (abstract-communication) jobs. Overall, the authors write, “immigration stimulated job creation, and the complexity of jobs offered to new native hires was higher relative to the complexity of destructed native jobs.”

They added one important addendum: The reallocation of natives to new, more complex occupations was significantly larger in countries with
more flexible labor laws. The tendency was particularly pronounced among less educated workers.

The question then arises: Could the same trend have held true in the United States? Did the flood of immigrants into unskilled and semi-skilled jobs act as an impetus for native-born Americans to raise their levels of educational achievement, engage in more training, and/or move up the occupational ladder? If the European pattern prevailed here, then immigration could have goaded native-born Americans to improve themselves. From a metaphysical standpoint, the implication is even more startling: It could mean that I was… wrong.

In support of the idea that immigration had the a similar impact here as in Europe, the U.S. has very flexible labor markets, making easier here than in some European countries for workers to move from one job sector to another. On the other hand, there are important unknowns. Does the uneven quality of the U.S. education system mean that some Americans are equipped to make the occupational transition while other Americans, the product of under-performing schools, lack the requisite skills to migrate to more “complex” jobs?

For the moment, we have to leave the question unanswered.  The study did not analyze the U.S. data. So, I am not yet prepared to concede that my previous analysis was wrong. However, I must confess, D’Amuri and Peri identified a critical variable that I had overlooked.