Immigration can generate a small overall economic gain for native-born workers while producing much larger changes in wages across different occupations, according to new research using a model calibrated to the US labor market.
The research, titled The Immigration Surplus Revisited, was conducted by Michael Amior of King’s Business School and Alan Manning of the London School of Economics. King’s College London says the paper has been accepted for publication in The Economic Journal.
Its central finding is not that every native-born worker benefits from immigration. Instead, the researchers find that a positive overall gain can coexist with falling wages for some groups and rising wages for others.
The overall gain was small in the US calibration
To illustrate the model, the researchers simulated an increase in the migrant workforce equivalent to 1% of total employment in the United States while keeping the migrants’ skill mix unchanged.
Under one of the study’s benchmark settings, that change produced an aggregate gain for native-born workers equal to about 0.01% of earnings. The estimated overall benefit was therefore much smaller than the increase in employment itself.
That average, however, concealed larger changes within the labor market. The researchers found that wages tended to fall in lower-paid occupations where migrant workers were more heavily represented and rise in other occupations.
The distributional effects appeared smaller when workers were grouped more broadly by education rather than by occupation. That distinction matters because a national average can make the overall effect look modest even when particular groups experience more noticeable wage changes.
Why the skill mix of migrants matters
The study revisits the economic concept of an “immigration surplus,” in which immigration can increase the total real income of the existing population even when the benefits are not shared evenly.
Amior and Manning extend that framework to an economy with multiple types of workers and capital, allowing different groups to interact differently within production and consumption.
In their model, the size of the overall gain depends partly on how different the skills of migrants are from those of native-born workers. When the two groups have the same skill mix, the model predicts no immigration surplus arising from those differences and no corresponding redistribution among native workers.
As the skill mixes become more different, the potential aggregate gain can become larger. At the same time, the differences in wage effects between occupations can also become larger.
This means that an economy-wide average can miss an important part of the story: who gains, who loses and how large those changes are for different types of workers.
Higher wages do not always mean larger welfare gains
The research also shows why wage changes alone may not fully capture how workers are affected.
Native-born workers may respond to changing relative wages by moving into different occupations. Some can shift into jobs that pay more, but those jobs may require additional training or involve less attractive working conditions.
That means a wage increase alone may overstate how much a worker has actually benefited if the new occupation also requires costly training or comes with other disadvantages.
What the findings do and do not show
The results should not be read as a universal estimate of what any specific immigration policy will do to wages. Much of the paper is theoretical, and its numerical results come from a model calibrated to US labor-market data under particular assumptions.
The study therefore does not establish that every 1% increase in immigration will produce precisely a 0.01% gain in native earnings in every country or period. Outcomes can depend on factors including migrant skills, labor-market structure, occupational mobility and the response of capital.
Phys.org, reporting on the research on August 24, also highlighted the contrast between the modest aggregate benefit and the larger wage shifts that can occur across occupations.
The practical implication is narrower but important: an average wage or income figure alone may not reveal who gains and who loses from immigration. For policymakers, the distribution of those effects can matter as much as the headline economic average.
King’s research database currently lists the paper as accepted for publication in The Economic Journal, while the findings provide a framework for separating aggregate economic gains from the potentially larger changes experienced by individual groups of workers.