The Crippling Relationship Between Immigration and Income Disparity

By Joe Guzzardi
August 17, 2011

A friend returned this week from ten days at the beach resort of Ocean City, Maryland. He reported that every hotel, including his $400 a night Holiday Inn, was booked. He couldn’t get a restaurant table or bar stool without waiting for more than an hour. Since my friend is a Wall Street executive at a nationally respected firm, he knows all about the stock market’s wild fluctuations, the U.S. rating downgrade and the gloomy predictions of a looming crash brought on by trillions of debt. If my well informed friend isn’t cutting back, what does that mean for the rest of us?

Every time I leave my house I ask the same question: Where’s the Great Recession? I might find evidence of it if I went to places where unemployment and foreclosed property are the norm. But my friends—are many of yours, too, probably—have jobs, pay their mortgages and go to dinner when the mood strikes them. If they say they don’t have money, what they mean is that they’ll use credit cards instead of cash.

But when the 9 percent unemployed say they’re broke, they have to decide between gas and groceries. Despite the attention those 9 percent get from the media, they’re mostly invisible.

What’s happened between 1980 and today, known to monetary historians as the period of “Great Divergence,” the United States has become a nation where income distribution is more unequal than in Guyana, Nicaragua, and Venezuela and roughly on par with Uruguay, Argentina, and Ecuador. Incomes in the U.S. are also more disparate than in Germany, France, and the United Kingdom. From 1980 to 2005, more than 80 percent of the total increase in Americans’ income went to America’s wealthiest 1 percent.

Economically the United States, the richest country on earth, resembles a banana republic. The difference between the U.S. and the Third World is geographic. The U. S. is spread out enough to maintain substantial distances—and thus reduce the interaction— between the haves and the have nots.

Income disparity is one of America’s biggest problems. For the nation’s good, leaders must correct it. But except for policy wonks, no one (especially politicians) talks about income disparity. After all, if you have money you don’t want to give it up. And if you don’t have it, statistics indicate that you probably don’t vote and are therefore of little interest to politicians. As Michigan political analyst Jack Lessenberry wrote, “The unemployed are frequently too discouraged to vote.”

How the “Great Divergence” developed is easily understood. Since the term was coined, the U.S. has legally admitted roughly 25 million immigrants and perhaps nearly as many have entered illegally. The majorities come from Mexico, Central and Latin America, are undereducated and have limited skills. They immediately become part of America’s underclass and usually remain there permanently.

According to Harvard University Professor George Borjas wrote: “What past immigration has done. . .is to depress wages and increase the profits of the firms that employ the immigrants."

Interpreting Borjas, immigration benefits immigrants, the corporations and stock holders that profit from the cheap labor immigrants provide as well as the politicians who use the issue as a vehicle to keep them in office.

But for working Americans, especially the ones trying to climb toward the 1 percent of the “haves,” immigration has had a devastating effect. And as long as the current high levels of immigration continue, then income disparity will increase correspondingly.

Joe Guzzardi has written editorial columns, mostly about immigration and related social issues, since 1986. He is a Senior Writing Fellow for Californians for Population Stabilization (CAPS) and his columns are syndicated in various U.S. newspapers and websites. Contact him at [email protected].