US - Immigration

The century between 1820 and 1920 defined America as a nation of immigrants or a “melting pot.” During this century, more than 33 million people entered the ports of the United States. Immigrants from Europe came in massive waves until the era of open immigration ended with the passage of the 1921 Emergency Quota Act. By the end of the first three decades of immigration, the census of 1850 finds that almost 10% of Americans was foreign born. The share of the foreign-born population fluctuated around 13-15% between 1860 and 1920, but immigrants and their children represented 30-40% of the white population. With the passage of the Immigration Act of 1965, immigration rose steadily during the last three decades. However, this recent wave of immigration pales in comparison to that of the earlier waves in duration and in terms of the share of aggregate population. By significantly increasing the unskilled to skilled labor endowment ratio, immigration contributed to the growth and spread of factory production in the second industrial period in the U.S. between 1860 and 1920. The form of unskilled technology in manufacturing was embodied in the form of a factory system based on division of labor. Immigration had a significant impact on the shift in manufacturing from artisans to factories. Firms in counties with a significantly higher share of foreign-born population were much more likely to organize as factories than as artisans. The diversity of immigrants also seems to have contributed to the rise of a factory system based on division of labor. In the United States, the factory system of production arose in rural New England between 1820 and 1840 to take advantage of that region’s abundance in unskilled native women and children. However, because the supply of native unskilled workers was limited and too homogenous, the industrial revolution in the Unites States would have been much more muted without immigrants. Immigrants not only significantly increased the unskilled to skilled labor endowment, but they also increased the diversity of skills and worker attributes important for division of labor in factories. In addition, immigration and division of labor significantly contributed to urbanization. What lessons and insights emerge from history for understanding the impact of immigration on the American economy today? The experience of the era of mass immigration points to the great absorptive capacity of the American economy. While immigration may lower the wages of natives in the short run, the long-run impact of immigration is likely to have been much more positive as indicated by the secular rise in long-run real wages. The source of this great absorptive capacity of the American economy lies in its ability to develop and implement technologies which favor changing factor endowment conditions. In addition, history teaches that these induced technological changes have had a major impact on the geographic landscape of the American economy.
Thanks NBER WP 12900