President Bush and some members of Congress have proposed legalizing illegal aliens and substantially increasing legal immigration. Economic theory predicts that increasing the supply of labor in this way will reduce earnings for natives in competition with immigrants. This study examines the economic impact of increases in the number of immigrant workers by their education level and experience in the work force, using Census data from 1960 through 2000. Statistical analysis shows that when immigration increases the supply of workers in a skill category, the earnings of native-born workers in that same category fall. The negative effect will occur regardless of whether the immigrant workers are legal or illegal, temporary or permanent. Any sizable increase in the number of immigrants will inevitably lower wages for some American workers. Conversely, reducing the supply of labor by strict immigration enforcement and reduced legal immigration would increase the earnings of native workers.

Among this Backgrounder’s findings:

• By increasing the supply of labor between 1980 and 2000, immigration reduced the average annual earnings of native-born men by an estimated $1,700 or roughly 4 percent.

• Among natives without a high school education, who roughly correspond to the poorest tenth of the workforce, the estimated impact was even larger, reducing their wages by 7.4 percent.

• The 10 million native-born workers without a high school degree face the most competition from immigrants, as do the eight million younger natives with only a high school education and 12 million younger college graduates.

• The negative effect on native-born black and Hispanic workers is significantly larger than on whites because a much larger share of minorities are in direct competition with immigrants.

• The reduction in earnings occurs regardless of whether the immigrants are legal or illegal, permanent or temporary. It is the presence of additional workers that reduces wages, not their legal status.