NCPA - National Center for Policy Analysis

Are Illegal Immigrants Suppressing Inflation?

April 14, 2000

Many experts fear that labor shortages and demands for higher wages could ignite inflation unless economic growth is reined in. But economists at Credit Suisse First Boston think their colleagues are paying insufficient attention to the impact of immigrant workers -- particularly illegal immigrants -- on the equation.

  • With U.S. job creation currently running about three million a year, Credit Suisse figures that close to half of the new workers have come from indigenous labor-force growth and another 350,000 or so from a decline in the ranks of the unemployed -- the rest being supplied by immigrants.
  • Official estimates put total immigration at about 700,000 legals and 275,000 illegals.
  • But Credit Suisse believes the real number of illegals last year was closer to 600,000.
  • The federal government uses two measures -- the household survey and the payroll survey -- to estimate the number of private sector wage earners, and since 1995 these estimates have diverged by some 3.5 million people.

The economists think that much of the gap reflects illegal immigration, since the payroll survey is based on company records and the household survey is based on interviews of workers. Workers who are here illegally often refuse to cooperate in interviews, and it is that calculation which has the lower numbers.

So immigrants -- both legal and illegal -- may be playing a role in holding down wage rates and inflation.

Source: Gene Koretz, "America's Secret Labor Force," Business Week, April 17, 2000.


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