White House senior adviser Stephen Miller caused a stir on Wednesday with a contentious press briefing where he made the case that new legislation to cut legal immigration would reduce “wealth inequality.”
But while scholars debate the effects of immigration on workers’ wages, there is no evidence that immigration levels have played a significant role in the soaring levels of income and wealth inequality in the U.S. in recent decades.
“I don’t think any serious economic analyst believes immigration is a major cause of rising inequality,” said Jacob Hacker, an inequality expert at Yale University. “The bottom line is, you wouldn’t get to immigration until page 4 in a list” of inequality’s causes.
The RAISE Act, a bill that Sens. Tom Cotton (R-Ark.) and David Perdue (R-Ga.) introduced on Tuesday with the support of President Donald Trump, would halve legal immigration to the United States and put in place a more merit-based admission system, rather than one based on familial ties.
In advocating for the legislation, Miller claimed the bill would stem the rise in “wealth inequality” and address a “shift in wealth” from workers to those at the top ― a shift that he attributed to loose immigration policies.
But based on the context of Miller’s remarks, he appeared to be talking about the rising gap in pay between earners at the top and everyone else, rather than the gap in wealth, which reflects the total value of a person’s financial assets. He argued that by reducing low-skill immigration, the bill would put “upward pressure on wages instead of downward pressure.”
Miller is right about one thing: There is abundant evidence that in the past 30 to 40 years, incomes at the very top have skyrocketed, even as pay growth has slowed to a crawl, or stopped altogether, for just about everyone else.
The top 1 percent of American earners made 81 times more than the bottom half of earners in 2016, up from 27 times more in 1980, according to research by economists Thomas Piketty, Emannuel Saez and Gabriel Zucman. From 1980 to 2016, the incomes of the bottom 50 percent of earners remained at about $16,000 a year, the economists concluded.
But the main causes are not immigration. The growing gap is driven by the increasing share of income that goes toward owners of capital, and by the explosion in executive pay even as worker pay stays flat. From 1978 to 2016, average, non-managerial worker pay at firms with 1,000 employees or more rose just 11.2 percent, compared with 937 percent growth in CEO pay, according to a July study by the progressive Economic Policy Institute. In 2016, CEOs of those firms made 271 times what their non-managerial workers made, on average, EPI found.
The rise in lucrative pay packages can be attributed to, among other things, financial deregulation policies that encourage companies to engage in practices like share buybacks that disproportionately benefit their executives and top shareholders, according to Hacker, a co-author of Winner-Take-All Politics: How Washington Made the Rich Richer ― and Turned Its Back on the Middle Class. Reductions in the top marginal income tax and capital gains rates have further incentivized higher compensation, Hacker said.
The simultaneous stagnation of worker pay is mainly the result of a frozen minimum wage and the dramatic decline of labor unions, which ordinarily ensure workers get a larger piece of the pie, Hacker said.
“For 40 years, we’ve had an overall policy of reducing worker pay that’s not related to immigration,” said Matt Stoller, a fellow at the New America Foundation’s Open Markets program. “If Miller were more than just a racist, then he would address the overall policy.”
The current federal minimum wage of $7.25 an hour is 25 percent lower, in inflation-adjusted dollars, than it was at its peak of $10.10 in 1968. There has not been an increase in the federal minimum wage since 2009.
Meanwhile, in the 1950s, about 1 private sector worker in 3 belonged to a union, compared to about 1 in 20 today, according to EPI, which receives some of its funding from labor unions.
A 2012 chart created by EPI shows that the rise in the share of income going to the top 10 percent tracks almost perfectly with the decline of union membership.
There is evidence that unions also constrain executive pay, since unionized workers tend to make it an issue during collective bargaining.
In addition, thanks to the mega-mergers of recent decades, a drastic uptick in corporate consolidation has padded corporate profits while depriving workers of the kind of workplace choice that normally boosts pay, according to Stoller.
Non-financial corporations have increased their profits by about $14,000 per worker in the past 30 years, according to Simcha Barkai, a University of Chicago doctoral candidate in economics who authored a 2016 study on the effects of consolidation.
“Big business screws workers,” said Stoller, whose research focuses on antitrust policy. “The bigger the business, the more powerful it becomes, the more workers get screwed.”
The dwindling of union membership and power, the stagnation of the minimum wage, the rise in executive pay and the ballooning of contemporary monopolies can all be traced back to specific public policies over the years.
Unions, for example, have been crushed by state-level right-to-work laws, employer-friendly appointments to the National Labor Relations Board and decades of increasingly brazen employer intimidation, inspired by President Ronald Reagan’s decision to fire striking federal air traffic controllers in 1981.
It is ironic, then, that Trump has shown little interest in helping workers unionize, taming executive pay or raising the minimum wage, according to Sylvia Allegretto, a labor economist at the University of California, Berkeley.
“If one were serious about this, you would undo massive imbalances that have developed in the economy that make it so hard for workers and their families to make ends meet,” Allegretto said.
By contrast, the evidence that immigration depresses the pay of native-born American workers and more recent immigrants is murky at best.
Intuitively, it seems like immigrants would diminish the cost of labor by increasing the number of workers available to employers. But there are invariably confounding factors, such as the difficulty employers have in substituting native-born workers with immigrants who have comparable skills, due to issues like language barriers ― and the possibility that immigrant workers may simply take jobs that employers would otherwise have a hard time filling.
One of the most deeply researched case studies of the effects of immigration on wages is the 1980 Mariel boatlift. Cuban President Fidel Castro temporarily allowed Cubans to leave the country from Mariel Bay, prompting the exodus of more than 125,000 people to the United States, the vast majority settling in Miami. The group consisted mainly of less educated immigrants, so in theory, this situation provides a unique microcosm of the effects of immigration on the less educated workers with whom the new arrivals were competing.
At the press briefing on Wednesday, Stephen Miller cited the work of Harvard economist George Borjas, who authored a 2015 study of the Mariel boatlift’s effects on the Miami labor market. The boatlift increased the number of high school dropouts in Miami by some 20 percent, prompting a 10 to 30 percent decline in existing high school dropouts’ wages in the years immediately after the migration, according to Borjas.
But Borjas’ findings conflict with previous and subsequent studies, and are heavily disputed by others in the field. Borjas only looked at the change in pay for non-Hispanic, male high school dropouts ages 25 to 59, limiting his universe to a statistically negligible group of workers in Miami, Michael Clemens of the Center for Global Development noted in a lengthy critique at Vox.
Even scholars who believe immigration contributes to inequality do not consider it a major driver of the phenomenon.
“The most recent estimates I’ve seen suggest income inequality in the United States is 0.6 percent higher than it would be without immigrants,” said Cullen Hendrix, a political scientist at the University of Denver.
The most significant effect of immigration on inequality might actually be the role it plays in politics, according to Hacker: It gives conservative elites a chance to pit workers of different races against one another, eroding the “social solidarity” needed to challenge policies that favor the wealthy.
“The most plausible way in which immigration can contribute to inequality is precisely the kind of behavior the Trump administration is engaging in,” Hacker said. “I find that to be richly ironic, and almost humorous if it weren’t so tragic.”