The question of how immigration affects the wages and employment of natives is a frequent topic of research in the U.S. With respect to wages, a simple model of course suggests an increase in supply will decrease prices, thus more immigrants bring down native wages. Some research, notably the work of George Borjas, supports this. Another model is one where immigrant labor is complimentary to native labor, and thus more immigration increases native wages. Other research supports this model, which was described recently by Tyler Cowen in the New York Times. Similar stories are told for employment. Unsurprisingly, a similar question of immigrant and native complementarity exists in other countries. A new paper sheds some light on this issue with respect to China:
Hundreds of millions of rural migrants have moved into Chinese cities since the early 1990s contributing greatly to economic growth, yet, they are often blamed for reducing urban ‘native’ workers’ employment opportunities, suppressing their wages and increasing pressure on infrastructure and other public facilities. This paper examines the causal relationship between rural-urban migration and urban native workers’ labour market outcomes in Chinese cities. After controlling for the endogeneity problem our results show that rural migrants in urban China have modest positive or zero effects on the average employment and insignificant impact on earnings of urban workers. When examine the impact on unskilled labours we once again find it to be positive and insignificant. We conjecture that the reason for the lack of adverse effects is due partially to the labour market segregation between the migrants and urban natives, and partially due to the complementarities between the two groups of workers. Further investigation reveals that the increase in migrant inflow is related to the demand expansion and that if the economic growth continues, elimination of labour market segregation may not necessarily lead to an adverse impact of migration on urban native labour market outcomes.
As I’ve said before, I think people who are sympathetic to more restrictive immigration regime in the U.S. should ask themselves, especially in the face of such contrary evidence, whether they think China should restrict immigration to possibly preserve the wages for the relatively well-off at the definite expense of poorer immigrants from rural China or from immigrants from other countries.