Immigration and the Crisis of Low Wages

New report ignores a major driver of the problem it decries

By John Wahala on March 28, 2022

A recent report published by the non-profit group OxFam — a self-described “global organization that fights inequality to end poverty and injustice” — finds that nearly 32 percent of the U.S. labor force, or 52 million workers, makes less than $15 an hour.

The report, which is derived from Census Bureau data, finds that more than 46 million of these 52 million low-wage workers are adults. Approximately 40 percent of women, 42 percent of “people of color”, and 58 percent of single parents fall into this low-wage category.

The author, Kaitlyn Henderson, points out that wealth inequality in the United States has grown astronomically over the past 50 years. While the incomes of top earners have soared, those at the bottom have actually seen their purchasing power decline. For example, adjusted for inflation, the current minimum wage of $7.25 was worth 21 percent more when it was passed in 2009.

Henderson goes on to highlight regional variations in the data that include stark wage disparities along the lines of race and gender. For example, her analysis finds that women are typically paid 83 cents on the dollar for every white non-Hispanic man in the same role. Black women are paid 64 cents on the dollar and Hispanic women are paid 57 cents. Henderson attributes these differences to longstanding “imbalanced power structures” that have been “built to specifically benefit white men to the harm of all others”. She advocates significant increases in the minimum wage, along with federal and local subsidies, to mitigate these inequalities.

One does not have to be an intersectionalist to acknowledge the existence of workplace discrimination. Nor does acknowledging it means attributing all wage inequality to malevolent prejudice, which is what Henderson appears to do. Such rhetoric encourages the type of discrimination that it condemns. But whatever her motive, Henderson makes a powerful and compelling point about the responsibility a society has to its most vulnerable:

At their heart, living wages are about working families being able to afford a basic but decent lifestyle in the context of their local communities. ... The concept is central to the social contract and the American Dream — it is the essential promise upon which our economy functions: that workers can survive on the wages they earn from their labor. Where the promise is broken, we see a path of unsustainability, poverty, and precarity with wide-reaching impacts.

It is not only morally right to help the vulnerable but critical to the health of the nation as a whole. This is especially true when as much as a third of the workforce finds itself struggling to secure basic necessities, as the lifestyle of a small fraction of the population grows more and more extravagant. Polarization of this magnitude is a recipe for alienation and instability. But in trying to address this problem, Henderson misses one of the biggest impediments to establishing a living wage — continued mass immigration.

In her report, Henderson notes that the real value of the minimum wage reached its peak in 1968 when it was $11.12, adjusted for inflation. Economists also point to that period as a time of record low income inequality. Not coincidentally, there were fewer than 10 million immigrants living in the United States in the late 1960s, making up less than 5 percent of the population, which was the lowest foreign-born share in American history.

Any economist will affirm that when there are fewer people competing for jobs, employers are forced to offer better wages and working conditions. But they are forced to do so through market mechanisms instead of government coercion, which has been shown to create unintended consequences like rising unemployment. And even if one does prefer to push for government-mandated increases in the minimum wage, there is more justification and political leverage to do so in a tight labor market.

The rapid acceleration of wealth inequality over the last 50 years has coincided with the modern era of mass immigration. While immigration is not the only factor driving this trend, it is a central one. And our current immigration policies, ironically a byproduct of the civil rights era, have disproportionately hurt American minorities.

In his recent book, Back of the Hiring Line: A 200-year history of immigration surges, employers bias, and depression of Black wealth, Roy Beck chronicles the adverse impact mass immigration has had on wages. For example, he cites economic research that shows that from 1940 to 1980, real incomes for black men expanded four-fold, rapidly closing the gap between races. In that time, the black middle-class grew from 22 percent of African Americans to 71 percent. Beck notes that the period between 1940 and the 1970s is known as the “Great Leveling” because of the shrinking of racial and economic inequality during a time of lower immigration and tight labor conditions.

As my colleague Steven Camarota points out, today there are nearly 61 million immigrants and U.S.-born residents, ages 16-64, who are unemployed or not in the labor force. Of this number, 69 percent are adults without a bachelor’s degree. This is an enormous supply of potential workers for employers to draw upon if they were paid properly and treated fairly. But employers have chosen to use newly arrived immigrants instead. These arrangements, lacking adequate wages and benefits, act as a corporate subsidy while exacerbating societal polarization.

Limiting immigration is a far more practical and effective policy to address the growing crisis of low wages than artificial wage hikes or coercive attempts to change whatever prejudice exists in the human heart. It is a morally appropriate and prudent action for a sovereign nation to take to protect its own. Doing so gets to the crux of what Henderson passionately articulates: “At their heart, living wages are about working families being able to afford a basic but decent lifestyle in the context of their local communities.” (Emphasis added.) It is right to care for those among you before trying to address the needs of humanity.