complex salaries

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Gustavo Volmar

Based on the concept of supply and demand, one of the most revered by economists, immigration should cause a decline in the level of wages in the receiving country. The reasoning leading to that conclusion is quite simple and straightforward. If the supply of workers increases as a result of the arrival of immigrants, it is to be expected that the wage, which is the price that employers pay for the worked that hire, decrease. An opposite effect is presumed to occur if instead of people entering the country, they left as emigrants abroad.

But not all markets are equally simple, and the labor market is particularly complex.

We must begin by recognizing that the product, in this case the worked, is not homogeneous. Depending on the qualification of the immigrants arriving in the country, only some categories of labor services will see the supply of workers increase, which confines the direct effects to those segments of the market.

Even more interesting are the indirect effects, especially when immigrants are low-skilled. Studies carried out in various markets reveal that the presence of immigrants reduces investment in capital goods, such as machinery and equipment, if said presence is considered permanent or recurring. That is, employers in sectors that require low-skill labor find it cheaper to use the worked of immigrants to allocate resources to modernize their operations. The consequence is that the demand for capital goods is less, and the demand for capital goods is greater. worked, than they would have been in the absence of immigration. This effect means that the expected decrease in the wages does not occur or is less intense.

However, another indirect effect has been found. Due to the lower investment in capital, the increase in productivity in the medium term of this labor segment tends to be lower due to immigration.

PhD in Economics from Columbia University specialized in companies, markets, forecasts and risk.

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