Does immigration lower engineering wages?

Dec. 8, 2005
You've seen the argument: Foreign engineering students come to the U.S. and don't go home.

They are willing to work for much less than U.S.-born engineers., and so they bring down the wages for the rest of us.

Is there any truth to this idea or is it just a lot of sour grapes? Researchers writing for the National Bureau of Economic Research (NBER) may have recently shed some light on things by studying the wages of science and engineering Ph.D.s.

First the facts. In the past 25 years, the share of doctoral degrees awarded in the U.S. to foreign students rose considerably. Many of these students did indeed stay in the U.S. after earning degrees. To figure out whether this trend impacted wages, NBER researchers analyzed data from the Survey of Earned Doctorates and the Survey of Doctoral Recipients across a range of disciplines.

They found that highly skilled immigrants, namely Ph.D.s, did indeed reduce the wages of other Ph.D.s working here, but not because immigrants were willing to work for less. Instead, the real force behind lower wages is the greater absolute number of doctorates. The more foreign Ph.D.s, the less upward pressure on wages.

NBER even puts a number on the effect. The report says a 10% rise in alien Ph.D.s cuts the wages of those native born by 3%. But the wages of immigrant Ph.D.s experience the same decrease. The implication is that native and foreign workers are interchangeable. Backing up this idea is the finding that foreigners and natives who got degrees in the same field at the same time are paid nearly the same wages.

The impact of foreign-born Ph.D.s recently came into sharper focus with the release of a study by the National Academy of Sciences (NAS). This widely publicized report warned of an erosion in U.S. science and technology. It called for decisive action to prevent further loss of U.S. competitiveness.

A lot of the report's recommendations are what you might expect: more research grants and scholarships, improvements to the abysmal state of K-to-12 science and math, and more federal funding for basic research. But one suggestion in particular caught my eye. The NAS committee recommended a oneyear automatic visa extension for international students who have received Ph.D.s, so they can stay in the U.S. and seek employment.

Perhaps people at the NAS don't read reports coming out the NBER. If they did, they would understand that the latter recommendation would discourage, rather than encourage, promising students from becoming researchers because it would depress wages.

So I think I can help out the NAS committee by offering them a suggestion: If you want more world-class researchers in science and technology, let them earn the same princely amounts as plastic surgeons in Beverly Hills. People will come out of the woodwork to apply for Ph.D. programs, with or without grants and scholarships, and without having to look for talent overseas. Moreover, there's a good chance that problems in K-to-12 education would self-correct under this scenario.

Don't hold your breath for any of this to happen. Industry may want worldclass research, but it doesn't want to pay for world-class researchers.

-Leland Teschler, Editor

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