Immigrants Up Wages for Natives

KSG study finds migrant workers increase pay and reduce inequalities

Immigrants working household jobs, rather than shrinking the job market for native laborers, actually do them a favor by increasing wages and reducing inequalities in pay, a recent Kennedy School of Government study found.

The working paper, entitled “The Globalization of Household Production,” was co-authored by Gates Professor of Developing Societies Michael R. Kremer and Stanley Watt, who recently received his PhD in economics at Harvard.

Employment of certain types of immigrants—namely, women who serve as household laborers—can free up native skilled workers to contribute positively in the economy as part of the workforce, the researchers found.

According to a press release, the study “challenges many existing theories about the economic impacts of immigration.”

In contrast to traditional views that immigrant labor drives down wages and negatively impacts the local economy, the study concluded that it, in effect, increases the wages of native workers by freeing them from traditional household tasks that they would normally perform.

“Kremer and Watt argue that as more immigrant women serve in household positions, more high-skilled native women are therefore available to join the labor market, driving down relative wages among high-skilled workers and reducing the disparity in wages between low- and high-skilled workers,” according to a press release.

In societies where seven percent of the labor force is comprised of immigrant household workers, foreign labor may increase the ratio of native low-skilled workers by 3.9 percent and increase native welfare by 1.2 percent of income, the authors wrote.

In an interview with The Crimson, Watt said he found the results of his research particularly satisfying because of the potential in immigrant worker programs instituted by the governments of Singapore and Hong Kong, where seven percent of each population is comprised of migrant workers.

Less regulation of work-related immigration can energize the economies of both the developed and developing nations on both ends of the migration, Watt explained.

Immigrant work forces may also contribute to alleviating gender disparities in the host nation, the study found.

“By allowing women to work more flexible hours, foreign private household workers may also reduce gender disparities among high-skilled natives and help eliminate the glass ceiling,” the authors wrote.