Latino Immigration

Douglas P. Woodward and Paulo Guimarães

The number of Latino immigrants in South Carolina, like the rest of the Southeast, is growing rapidly. What does this mean for wages and jobs in the state?.

This article draws on "The Economic and Social Implications of Latino Immigration in South Carolina," a study for the South Carolina Commission for Minority Affairs, July 2007. Thanks to Dr. Sandra J. Teel, Associate Director of the Division of Research, for the Tables and Figures accompanying this article.

Because South Carolina is a relatively low-income state, it is important to understand the effects that a rising, largely immigrant Latino population may have on employment, wages, and poverty.

In 1924, South Carolina Senator Ellison DuRant Smith ("Cotton Ed") argued before the U.S. Congress, "I think that we have sufficient stock in America now for us to shut the door, Americanize what we have, and save the resources of America for the natural increase of our population. . . . We ought to Americanize our factories and our vast material resources, so that we can make each contribute to the other and have an abundance for us under the form of the government laid down by our fathers. . . ."¹

The United States is again engaged in an often emotional debate about immigration, but this time about Latinos, not Europeans flooding across our borders. Over the past decade, the influx of Latino² immigrants has been driven by economic forces both in the United States and in Latin America.

For many immigrants, jobs seem to be plentiful in the United States, with wages far above the norm for Latin America, and the immigrants are willing to accept wages and benefits below that expected by U.S. workers. In addition, Latin American immigrant workers are known to be highly motivated and extremely productive, which is often the case for immigrants. At the same time, as a competitive business strategy some firms seek immigrant workers because they are vastly less expensive relative to native U.S. workers.

The southeastern United States has seen an especially large increase in immigration. Along with neighboring states, the Latino population in South Carolina is growing rapidly as we reported earlier in the Business & Economic Review (Volume 52, Number 4, July-August-September 2006). According to the U.S. Bureau of the Census, South Carolina led the nation in the growth of its foreign-born population between 2000 and 2005 (with a 47 percent increase), and Hispanics/Latinos comprise a sizeable portion of the foreign-born in the state. In South Carolina, Latino numbers increased by 350 percent during that same period, or from roughly 30,000 to 135,000, while growing by only 87 percent in the nation as a whole (from 22,354,059 to 41,870,703). Given the rapid rise of undocumented workers, the actual number of Latinos in South Carolina is much higher than reported by the Census Bureau.

Until the late 1990s, there was only a minimal presence of Latinos in the workforce in the state. Since then, Latino immigrant labor has spread across a variety of industries and occupations in South Carolina. A few industries dominate, however. Like many states, Latino immigrant labor first appeared in agriculture. Since 2000, much of the increase in immigration can be traced to the demand for labor in construction, landscaping, and food processing. It is not surprising that some firms in these industries seek cheap Latino labor. After all, while industries like apparel can relocate offshore and export from developing countries, a construction or landscaping firm cannot move its activities to foreign locations to lower its costs.

Beyond lower wages, some firms hire immigrant Latino workers because native U.S. citizens do not desire jobs that might be dangerous or otherwise risky. Indeed, this may be the case in construction (roofing under the hot sun in South Carolina is an example) or animal slaughtering (meat and poultry processing is often dangerous and messy work). These occupations experience high worker turnover among native workers. Yet Latino immigrants may be eager to take and keep these jobs, given the lack of opportunity at home and relatively high wages in the United States compared with the home country.

The flood of workers (and subsequently their families) to the United States has caused the overall issue of immigration to take center stage in the political debate of South Carolina, as it has around the country. However, the impact of importing labor from Latin America on the native U.S. labor force is not well understood.

In this article, we analyze changes in the South Carolina labor market, given the rise of the Latino population in South Carolina. Because South Carolina is a relatively low-income state, it is important to understand the effects that a rising, largely immigrant Latino population may have on employment, wages, and poverty. We begin by giving a summary of what economists say about the economic implications of immigration in the United States. What effect does the increase in labor supply have on wages—the price of labor—in the United States? We then turn to specific trends in the South Carolina industries that employ Latino labor.

After we account for inflation, the median wage [between 2000 and 2005] exhibits positive growth only for White South Carolina workers.

According to the simple economics of supply and demand, an influx of low-skilled immigrants into the labor market could cause a decrease in the wages for the existing low-skilled workers. Some low-skilled native workers may even choose to leave the labor force if the wage would leave them impoverished or working conditions become less desirable, at least by U.S. standards.

Prominent economists have examined this issue. Notably, Harvard economist George Borjas has studied the labor market effects of immigration extensively. Generally, he has found negative effects on wages from increased immigration, especially for low-skilled workers in the United States.³ Not all economists concur with his conclusions, however. Sharp differences have emerged about the size of the wage impact from immigration.⁴

Beyond the effects on the labor market, many economic studies conclude that immigration does not adversely affect the U.S. economy as a whole; rather it provides many benefits. The output of products and services may be greater than would be possible without immigrant labor. Direct benefits include higher profits for firms and an increased standard of living for skilled, educated labor.

No doubt Latino immigration has a varied effect on the South Carolina economy—both positive and negative. However, the impact on wages and employment in low-skill occupations is particularly crucial to understand, for there is a relatively large segment of the population with low skills and low wages. The actions of firms that seek to lower costs by importing low-wage labor from Latin America would seem contrary to the often-stated goal of raising the state’s per capita income. What are the potential labor market effects of the growing Latino workforce in South Carolina?

Let’s look at the industries and workers most affected by immigration. The data are drawn from the U.S. Census, the American Community Survey (ACS), and a University of South Carolina (USC) survey of documented and undocumented Latinos in South Carolina conducted during 2006-07. For 2005 U.S. Census numbers, the tabulations are compiled from the public-use microdata sample (PUMS), based on a subset of the 2005 American Community Survey sample. The analysis will examine economic differences among Latinos, Blacks, and Whites (following the U.S. Census definitions).

We examine employment and earnings trends from 2000 through 2005, a time of rapid growth in the Latino labor force in South Carolina. The period began with the U.S. and South Carolina economies entering a recession (bottoming out in 2001-02), followed by an economic expansion from 2003-05. Employment growth was at first sluggish, but picked up substantially during 2004 and 2005. A major contributor to the expansion was the construction sector in South Carolina, as was the case around the country. Our analysis concentrates on full-time workers.

From 2000 through 2005, the full-time labor force in South Carolina grew 0.7 percent, according to U.S. Census records. Overall, White full-time employment actually declined by 2 percent, while Black full-time employment grew 5.9 percent.

Meanwhile, Hispanic full-time employment swelled by 70.8 percent in South Carolina. The highest growth came from foreign-born, Mexican full-time workers: 104.5 percent.

Besides employment, the U.S. Census and ACS data provide details on earnings trends for South Carolina. Normally, we would expect earnings to rise as the economy prospers and there is greater demand for labor. Was this true during the recent growth cycle in South Carolina? Table 1 reveals an astounding feature of the South Carolina economy during 2000-2005: real (or inflation-adjusted) median earnings for many full-time workers actually fell. Taken as a whole, real wages in South Carolina declined 3.1 percent. Note that the negative trend only emerges once inflation is factored into the reported nominal earnings for South Carolina full-time workers.

After we account for inflation, the median wage exhibits positive growth only for White South Carolina workers. Even then, the 1.4 percent real earnings growth from 2000-2005 is surprisingly low. For Blacks, the inflation-adjusted earnings of full-time workers eroded by 1.2 percent. For Hispanics, real earnings plummeted by 9.6 percent. As the table shows, Hispanic workers made approximately $10,000 less than the median for all full-time workers in South Carolina during 2005. Also, observe in Table 1 that nominal Black earnings are much closer to Hispanic earnings than White earnings. This may reflect skill levels, education, and long-standing discrimination in the labor market.

A different perspective on earnings for full-time workers in South Carolina is shown in Figures 1 and 2. For Hispanics, Blacks, Whites, and Asians (2005 only), the charts give the average annual hourly wages for males (Figure 1) and females (Figure 2) from 2000-2005. Again it is surprising how little progress Black workers made during the economic expansion, at least in contrast with White workers. Hispanic workers fare even worse, with significant declines in real hourly wages for both males and females.

Thus, it appears that Hispanic workers were willing to work for lower wages in 2005 than in 2000 and so the median wage fell. It is not possible to determine precisely what effect this growth in low-wage Hispanic labor had on Black earnings, for there are undoubtedly many causes for the observed wage stagnation among African Americans. At the same time, White full-time workers, both male and female, have continued to enjoy increases in real earnings.

A 2006-2007 USC survey of Latinos can help us better understand the labor market impact. In all, 503 Latinos living in 23 South Carolina counties responded to the detailed survey. As Table 2 indicates, most Latinos are young (average 32.9 years), relatively new to the state (less than five years), and have relatively low educational attainment—less than 10 years of education.

Table 3 gives the average annual earnings, along with savings and remittances (money sent back to the home country) based on the USC survey. Note there is a large standard deviation, which means some workers make considerably more than others. It is for this reason that we focus much of our analysis on median, not average, wages. Table 3 also shows that the average savings is surprisingly high, with a large standard deviation, as is the amount of money sent back to the home country.

To have a better sense of Latino earnings and compare the USC survey results with the Census data, we calculated the median earnings across the sample. For 440 respondents reporting annual earnings, the median is $20,400. This figure falls below the $21,199 earnings of full-time workers (in 2005) reported in the U.S. Census. Note that the USC survey sampled many undocumented workers and may include those not working full-time.

. . . for a variety of reasons, including the growth of low-skilled immigrant workers and low levels of educational attainment for many native workers, wages are stagnating across the state. Is the solution, then, to cut off the supply of new labor?. . . There are reasons to believe that more immigrant workers will be needed in the future.

A clearer picture of South Carolina workforce trends can be seen in specific industries where the Latino labor force growth has been most pronounced. Particularly noteworthy is construction’s dominance, which accounts for 37.6 percent of Latino employment reported in the USC survey. Even restaurants and landscaping, often thought to be leading employers of Latinos, are eclipsed by construction, as Table 4 reveals. These results confirm that more than anything else, the 2000-2005 construction boom was a major pulling force, drawing new Latinos to South Carolina.

Given the strong representation of Latinos in South Carolina’s construction sector, it is worth examining the earnings trends in comparison with Black and White workers (see Table 5). According to ACS-U.S. Census data, real median earnings dropped 5.1 percent for full-time South Carolina workers. At the same time, Hispanic workers saw real wages drop 12.1 percent (as the number of construction workers expanded 181 percent). Black construction labor saw inflation-adjusted earnings fall 2.4 percent. It is also surprising to find that total Black employment sank 23.7 percent during the construction boom. Meanwhile, White construction employment grew 4.3 percent, but the corresponding median earnings fell by more than that of Black construction workers (See Table 5).

The USC survey found that the median annual wage for the Latinos identified as working in construction is $21,840, higher than that reported in the ACS-U.S. Census for 2005 ($18,549). In the survey, construction labor included painters, carpenters, roofers, electrical workers, and others who reported that they worked in construction trades.

After construction, the U.S. Census records the greatest numbers of Hispanics working in South Carolina’s animal slaughtering industry (Table 5). For this industry, which includes poultry processing, employment grew overall as real wages fell: Hispanic employment increased by 12.6 percent between 2000-2005, while real annual median earnings for full-time workers declined 18.9 percent. By 2005, meanwhile, Black workers in this industry saw jobs dramatically drop 43.4 percent when compared with 2000. In this case, however, the median earnings for the remaining Black workers retained in the animal slaughtering industry rose 14.6 percent. Thus, it could be said the lack of employment opportunities, not falling wages, has been the trend in the sector. One could speculate the Black workers remaining in animal slaughtering were more highly skilled, while low-skill work went to Latino labor.

In the USC survey, food processing workers (including poultry slaughtering, vegetable packing, and meat packing) workers had a median wage of $15,600. This is higher than the U.S. Census median wage ($14,269) for animal slaughtering.

The U.S. Census records that the third-largest sector of South Carolina’s economy employing Hispanics is landscaping services (see Table 5). From 2000-2005, employment in this industry surged. In this case, a different picture emerges once the data are broken into different groups. Many Hispanics found full-time jobs over the period in landscaping services (rising 66.7 percent), although again, real median earnings fell (14.2 percent). For Blacks, landscaping service employment grew substantially over the period (unlike the other two sectors). But real earnings fell 9.6 percent. For Whites working in landscaping services, employment and earnings declined by 1.5 percent and 5.5 percent, respectively.

The USC survey included 34 Latino workers in South Carolina employed in landscaping (including gardeners). In this case, the median wage is $17,750.

For each of the three sectors with the largest Hispanic workforce in South Carolina, Blacks either lost jobs, saw earnings decline, or both (as in construction). In contrast to the deterioration of employment and earnings in sectors with a large Hispanic presence, Blacks did make significant employment and wage gains from 2000-2005 in some industries. Especially pronounced were the improvements found in the job market for the motor vehicle and motor vehicle equipment industry (see Table 6). This important manufacturing backbone of the South Carolina economy supported a 63.1 percent increase in Black full-time employment—and the total number of workers is almost 10,500 (still smaller than construction, but far larger than animal slaughtering and landscape services). Blacks also witnessed a dramatic rise in real earnings: 36.8 percent. Whites also fared well, both in earnings and employment. But Hispanics have only a minor presence in motor vehicle and motor vehicle equipment. In fact, employment and median earnings both fell from 2000-2005.

Overall, our labor market analysis suggests that Blacks are losing ground in industries with a large, growing Hispanic workforce. Real earnings have declined, but they have been falling even in sectors with high labor demand during the survey period, like construction. Blacks have lost employment in construction, despite a record expansion in activity. The good news is that Blacks have made notable progress in the motor vehicle and motor vehicle equipment sector, which was also expanding during 2000-2005.

Given the influx of low-wage workers into the South Carolina economy, it is important to also examine changes in South Carolina poverty status. The U.S. Census Bureau data reported for the state is based on the federal government’s official poverty definition. To determine a person’s poverty status, one compares the person’s total family income with the poverty threshold appropriate for that person’s family size and composition. If the total income of that person’s family is less than the threshold appropriate for that family, then the person is considered poor, together with every member of his or her family. If a person is not living with anyone related by birth, marriage, or adoption, then the person’s own income is compared with his or her poverty threshold.

Consider the poverty differences among Hispanics, Blacks, and Whites. Trends are shown in Table 7. Since Hispanics have seen real earnings fall from 2000 to 2006, we would expect poverty status may have been adversely affected. In fact, for the Hispanic population as a whole, the poverty rate went down from 24.8 percent to 22.3 percent. At the same time, Black poverty in South Carolina rose from 26.2 percent in 2000 to 28.9 percent in 2006. Whites exhibit a much smaller poverty rate: 10.0 percent in 2006. Even so, the poverty rate has risen since 2000, despite a strong economy in 2006.

With a surging Latino population, South Carolina’s workforce in the first decade of the 21st century is changing. As elsewhere, the forces pulling Latino immigrants to South Carolina are straightforward: employment opportunities and much higher wages than remotely possible in the home country. Immigrants are pressed to travel thousands of miles because of limited employment prospects in many Latin American communities (especially in rural areas. For the immigrant-sending communities south of the border, employment in the United States is perceived as a solution to endemic poverty and economic instability.

This trend is likely to continue. For some U.S. businesses, the Latino labor force offers a strong work ethic combined with lower wages. The USC survey reveals that annual earnings for Latinos totaled $20,400. This falls in line with U.S. Census figures that show a median of $21,199 in earnings for full-time Latino workers. In either case, Latino earnings are about $10,000 below the norm for South Carolinians.

Construction has been the sector most responsible for enticing immigrants to work in South Carolina. The downturn in housing construction, however, may lead to less labor demand and a much slower growth of Latino immigration, at least in the short term. As for the recent past, this industry witnessed the largest increase in Latino workers, by far. At the same time, we have seen that Black construction employment fell even as residential and nonresidential building was booming across the state through 2005. Real wages also fell for Latino construction labor during this expansion.

Beyond construction, the entry of Latinos into the South Carolina economy has had varied effects. We have seen that median real wages have fallen for Black workers from 2000-2005, even as the economy expanded. In general, it appears that median wages for Latinos have, in fact, been the most negatively impacted as the Latino workforce has grown.

In sum, for a variety of reasons, including growth of low-skilled immigrant workers and low levels of educational attainment for many native workers, wages are stagnating across the state. Is the solution, then, to cut off the supply of new labor?

Echoes of Senator Ellison DuRant Smith’s appeal in the 1920s to "shut the door" to immigrant labor can be heard in today’s heated debate. The late South Carolina senator wanted to rely on a "natural increase" in the U.S. population to meet a growing demand for labor. Yet there are reasons to believe that more immigrant workers will be needed in the future. With an aging population and more children for the working population to sustain, immigrants will be required to help the country prosper. It is estimated that for every 100 people of working age, there will be 72 young and elderly to support by 2050. This compares with just 59 in 2005.⁵

It would be foolish, then, to "shut the door" at a time when the economy will demand more labor. With a sensible, comprehensive national immigration policy, this increased demand could be met. For native U.S. workers, enhanced skills and better educational attainment, along with a steadily growing economy, offer the best prospects for increasing living standards. ¨

Endnote

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1  Ellison DuRant Smith, Congressional Record, 68th Congress, 1st Session (Washington, D.C.: Government Printing Office) 65: 5961-5962.

2 We will use the terms Latino and Hispanic interchangeably in this article.

3 George Borjas, "Increasing the Supply of Labor through Immigration: Assessing the Impact on Native-Born Workers," Backgrounder, Washington, D.C.: Center for Immigration Studies (2004): 1-11.

4 For an alternative to Borjas’ research, see David Card, "Is Immigration Really So Bad?", Economic Journal (2005) 115: 300-323.

5 Jeffrey S. Passel and D’Vera Cohn, U.S. Population Projections: 2005-2050, Pew Research Center, (Feb. 11, 2008).