Why immigrants increase wages
It seems neither Californians nor the Court understood a fundamental principle of economics: the division of labor. Too bad they hadn't read Adam Smith's "Inquiry Into the Nature and Causes of the Wealth of Nations." Published in 1776, it explains how prosperity results from more workers and better specialization.
Suppose that 10 workers produce 20 chairs per week with each worker building a complete chair. Those same workers can produce many more chairs every week if they specialize.
When one worker saws the wood, another carves it into shape, and a third fastens the pieces, the total output rises dramatically. Greater specialization leads to greater production and greater prosperity. Adding another five workers to the original 10 multiplies the benefits.
It's true that immigrants can temporarily reduce wages for Americans whose skills closely match theirs. But falling wages raise profits. And higher profits are the soil from which better wages grow.
Seeking those superior returns, investors bring more capital – more machines, expertise, stores, and new firms – while entrepreneurs learn to enhance employee output.
Specialization deepens. Workers' productivity soars, forcing employers to compete for their time by offering higher pay. Immigrants actually increase wages in the long run.
For proof, look around. The US work-force has more than doubled since World War II, yet workers' real total compensation (wages plus benefits) is higher now than ever. Notice that Manhattan's employees make more money than Mississippi's. If hordes of workers depressed wages, New York City's crowds would earn far less than Mississippi's few. But paychecks in Manhattan – even for unskilled workers – trump those of workers in sparsely populated Mississippi.
Given the talk about point systems, guest-worker programs, and fenced borders, you'd think immigration endangers America's cultural and economic wealth. But just as the unhampered flow of goods and services – free trade – blesses participants, the easy flow of workers – free labor markets – also brings unprecedented prosperity.