Immigration wage debate rages

Pay stagnates in sectors full of foreign-born workers

James Paton, Rocky Mountain News

Published August 26, 2006 at midnight

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Walter Marshall knows he's competing with immigrants, both legal and illegal, in his job hunt.

He cites a basic economic principle: An influx of Mexicans and Central Americans willing to toil for less money surely depresses wages for working-class citizens.

"Of course it makes it tougher," said Marshall, 54, who recently applied for an $8.25-an-hour job at a downtown Denver Hyatt hotel. "It's supply and demand."

It is easy to find anecdotes and statistics to support the idea that competition from immigrants hurts some U.S.-born workers.

But immigration's full effects on the economy are complicated, and the story unfolds differently depending on who's telling it.

Colorado's wage statistics tell one tale.

Pay in construction and hospitality, sectors known for relying heavily on immigrant labor, have not grown as quickly as pay in other areas, state Department of Labor and Employment figures show.

Average construction wages rose 1.2 percent from 2001 to 2005, after adjusting for Denver-area inflation. Hotel, motel and restaurant pay increased 4.2 percent. Contrast that with the finance and health care industries, which saw inflation-adjusted gains of 6.3 percent and 8.9 percent.

Although there is no consensus, many economists agree that if anyone is harmed, it is the low-skilled, poorly educated native. George Borjas and Lawrence Katz of Harvard University looked at 20 years of immigration starting in 1980 and found that a high school dropout who made $25,000 in 2000 would have seen his inflation-adjusted wages reduced by about $1,200, or 4.8 percent. Others see a negligible dip and an actual wage gain for the more educated.

Immigration also is seen as one of the culprits in widening the gulf between the wages of workers with skills and those without.

But an array of other factors - the decline of unions, advances in technology, globalization and a recession that brought big job losses in 2002 and 2003 - may have contributed to lackluster wages.

Without immigration, companies likely would replace employees with automation and manufacturers would move more work offshore. Businesses say they might boost wages if the cheap labor force dried up, but they also would raise prices for consumers and probably open fewer new restaurants or factories. And that means fewer jobs.

"If we didn't have all these workers from Mexico, the wages would be higher," said Sam Fox, owner of the restaurant NoRTH in Cherry Creek and other eateries.

However, patrons would have to pay up.

Illegal immigrants - estimated by the Pew Hispanic Center at 225,000 to 275,000 in Colorado - also pay taxes. One Colorado study suggests that those taxes aren't enough to offset the total cost of services, such as K-12 education, emergency medical care and jail time.

Others argue that immigrants do not compete with natives. Rather, they perform work Americans avoid, playing a complementary role that spurs the economy.

Any way the issue is examined, immigration is probably not the biggest problem facing America's least fortunate workers. And some observers believe the enforcement of immigration laws is a more important matter than the economic impact.

Bogus papers prevalent

Employers will never admit it publicly, but everyone knows construction companies and restaurants are full of people with bogus papers. Veterans of the construction industry guessed that three of every 10 workers are illegal immigrants.

"Who do you think built the Pepsi Center and Invesco Field?" asked Rob McReynolds of D&D Roofing in Colorado. A big chunk of the workers probably were illegal, he said.

McReynolds heads to Mexico to pick up at least a couple dozen workers every year - legally - taking advantage of the H2B visa program, he said. The temporary laborers, he added, are paid $11 an hour to start.

But illegal laborers are common in construction, and they earn less.

Don Hanneman of Castle Rock Construction is concerned about younger generations' lack of interest in construction and other kinds of back-breaking jobs.

"Not a lot of guys want to be doing what we're doing," said Hanneman, whose company does highway work, including paving. "For many years, we've been preaching 'Go to college.' This adds up to a lack of a labor force in construction. And we're dependent on our cousins to the south to take care of that."

The flip side of the argument is Americans would do the tough jobs if they came with respectable pay.

Hanneman doesn't buy it.

"Rome conquered countries because they needed labor," he said. "Romans didn't want to get their togas dirty.

"Let's face reality," he added, "neither do we."

Hanneman said a labor shortage and the flurry of activity in construction - from Stapleton to the Fitzsimons redevelopment in Aurora to the massive face lift under way in Vail - actually keep wages up.

He said the typical raise for his workers was 4 percent to 4.5 percent last year. That's not bad, considering prices in the Denver, Boulder and Greeley area rose 2.1 percent.

The documented Mexican workers may settle for less, but Hanneman says he's obligated by law to pay the going rate. The average laborer now makes about $14 an hour, he said. By contrast, the minimum hourly wage in Colorado is $5.15.

Union perspective

Jim Gleason, of the United Brotherhood of Carpenters and Joiners in Colorado, estimated 60 percent of people in carpentry, drywall and concrete framing are immigrants, and a large percentage of them - possibly half - are in the state illegally.

Wages in his industry, he said, have suffered as employers face pressure to keep costs low and turn to cheaper nonunion labor and illegal immigrants. And wages, he said, do not tell the whole story because an increase in pay may come at the expense of benefits.

"It's greed on the part of developers," he said, "especially in housing, where there are billions of dollars in profits to be made and they want to sell a house cheap."

Unions have declined sharply. Unionized workers in his sector have gone from nearly 70 percent of the employee base at the peak to 10 percent today, he figures.

The carpenters union, Gleason said, has shifted its strategy. It now aims to recruit immigrants, though he added that persuading them to sign up has been difficult because many are afraid of being caught.

Bruce Miller, head of Denver Drywall, said wages for his workers have climbed by at least 3 percent annually in recent years, but he acknowledged that continuing to boost pay is a challenge. Competitors exploiting inexpensive Mexican labor are able to submit lower bids, he said, putting pressure on everyone else.

"We know what the cost of materials is," he said. "They are paying the same for that. They may even have to pay more because we are bigger. So when they start beating me by too much, what does that tell you?"

No one disputes the idea that the immigrant stream can lower wages.

"It defies reason to think that it wouldn't," said Mike McGarry, director of the Colorado Alliance for Immigration Reform, a group that has supported tougher enforcement of immigration laws.

Bart Conway, a carpenter by training who visited an employment center recently in pursuit of work, has had a bunch of jobs, including a furniture repair gig, and has seen the negative effect of immigration.

Still, he said other trends have played equal roles in squeezing the average worker. Conway lost a job driving a forklift at a warehouse once when the employer turned to automation to save money.

"At least none of my jobs have gone to India," he said. "I know a lot of people who had that problem."

A high-low split

Some say the wage drop due to immigration is barely perceptible. Giovanni Peri at the University of California, Davis, analyzed immigration from 1990 to 2004 and concluded high-school dropouts' wages were only 1 percent to 2 percent lower than what they would have been otherwise.

Educated workers see their earnings climb modestly because of immigration, he said.

"Some workers gain and others lose," he wrote in a recent report. "However, the aggregate effect of immigration on wages is positive."

He suggested that the skills immigrants possess and the occupations they seek complement those of the native-born. Less-educated workers from Mexico and Central America often take agriculture jobs or become gardeners, nannies and janitors, he said, while natives wind up in areas such as manufacturing and mining.

Within an industry, an immigrant is more likely to have a low salary and a menial job, and a U.S. worker often is a manager with a higher salary, he said. So the average wage in sectors such as construction or farming may not reflect the rosier reality for some native employees.

Transfer of wealth

Fox, the restaurant owner who is based in Scottsdale, Ariz., noted at some point the burden of higher expenses is passed on to patrons. For instance, plastic "to-go" containers that used to cost 22 cents each are now 35 cents. It may seem slight, but it adds up and eventually may hit customers.

The same is true of labor. Without the Mexicans in his kitchens - here legally, he said - wages would rise, and so would the price of his pasta.

The lack of cheap help also might make it less appealing to grow. Fox has 19 restaurants and hinted he is exploring a couple of new places in Colorado, which would mean demand for more workers.

Not everyone can stomach the concept that immigration sparks the economy and that higher returns generate expansion.

McGarry of the immigration reform group sees it as "a transfer of wealth out of the hands of workers into the hands of employers."

The economist Borjas said in a recent commentary that lower wages do not mean a "net loss" for the economy. There are clear benefits. Wage decreases translate into higher profits and lower prices as part of a "redistribution" of wealth, he said.

"Whether or not such transfers are desirable is one of the central questions in the immigration debate," he said.

Higher wages in the short run might sound nice, but think about the economy without millions of immigrants, said Lee Driscoll, CEO of Wynkoop Holdings. The company runs the restaurants that are partly owned by Denver Mayor John Hickenlooper and held in a blind trust.

"If we double the wages, then you gotta double the cost of food," he said. "Then people don't go out to eat, and restaurants fail, and you end up with less jobs."

And then paychecks shrink again, Driscoll said.

Wynkoop is living an economic scenario that differs from almost every other player in the industry.

A former dishwasher at one of Hickenlooper's restaurants, the Cherry Cricket, is accused of killing a Denver police officer last year. Facing criticism, Wynkoop changed its hiring practices and started verifying the Social Security numbers of applicants before hiring them, going above and beyond what is required, he said.

However, his rivals still lure lots of illegal workers, he said, because it's so easy to get away with it while doing what the law demands. The fact that employers can "blissfully go along" relying on illegal immigrants is a "sham," he said.

Driscoll said now he cannot find enough reliable workers, and overtime costs for existing employees have risen by $1,000 a week.

Need for training

While immigration has been debated fiercely, the issue is not the most important one in talking about the economy and wages.

Ledy Garcia-Eckstein, senior policy analyst with the Denver Office of Economic Development, said she believes "the economy is bifurcating into high-skill, highly paid jobs and low-skill, low wage jobs."

Most of the fastest-growing occupations in the coming years will require training and education beyond high school, she noted.

Low graduation rates could mean fewer people will be equipped to get the good jobs, leaving more to compete for the bad ones.

Marshall, the job seeker in Denver, harbors no bitterness about illegal immigrants. He said the focus should be less on Mexicans and more on teaching skills.

"The major problem in this country is we don't have the training," Marshall said.

The economic impact

• An increase in cheaper immigrant labor translates into higher profits for businesses and lower prices for consumers, economists note.

• But it can drive down wages for poorly educated and low-skilled U.S.-born workers. Immigrants are willing to work for less.

• Other factors can hurt the least fortunate, including manufacturing jobs moving offshore, a decline of unions and a host of new technologies - leading businesses to put a premium on higher skills and education.

• A shrinking immigrant work force could lead to more employers scaling back, closing or moving somewhere else, observers say.

• The people who suffer the most from the influx of new illegal immigrants? Probably the group of immigrants already here, says economist Giovanni Peri.

• Illegal immigrants have contributed and drained resources, paying taxes and spending on goods and services while benefiting from taxpayer-funded services.

Congressional hearing

• What: U.S. Sen. Wayne Allard, R-Colo., will hold a Senate field hearing on the potential economic impacts of national immigration legislation on state and local governments.

• When: 2:30 p.m. Wednesday

• Where: Aurora City Council Chambers, 1515 E. Alameda Parkway, Aurora

Coming next week

• Monday: The costs of health care for illegal immigrants

• Tuesday: The debate over children of illegal immigrants, known as "anchor babies"

• Wednesday: The options for immigration reform in Congress

By the numbers

30% of construction workers are illegal immigrants, industry veterans estimate.

$12.29 an hour : The state's median wage in 2005 for a construction laborer, according to the Colorado Department of Labor and Employment

$34.06 The median hourly wage for a construction manager

225,000 to 275,000 : The estimated number of illegal immigrants in Colorado, close to the numbers for Virginia, Maryland and Washington state, according to the Pew Hispanic Center.

No. 8 Colorado's rank in the country in adding to its foreign-born population, according to an analysis by the Piton Foundation in Denver

patonj@RockyMountainNews.com or 303-954-2544

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