Labor Economics Consensus: Skill-Group Effects and the NASEM Report

Labor Economics Consensus: Skill-Group Effects and the NASEM Report

To move beyond highly localized case studies like the Mariel Boatlift, labor economists utilize national "factor-supply" models to estimate how immigration affects native wages and employment. These models partition the workforce into distinct skill groups based on education and work experience, treating immigrants and natives within these groups as potential substitutes or complements. While the 2017 National Academies of Sciences, Engineering, and Medicine (NASEM) report established a broad consensus that immigration has small-to-negligible effects on average native wages, a major methodological update by Alessandro Caiumi and Giovanni Peri (2026) reveals that recent immigration flows have actually boosted the wages of less-educated American workers.

Updating the National Factor-Supply Approach (2000–2023)

The national factor-supply approach, originally developed in pioneering work by Borjas (2003) and Ottaviano and Peri (2012), has been updated by Caiumi and Peri (2026) to reflect the changing composition of U.S. immigration and modern econometric techniques.

Between 2000 and 2023, the nature of immigration to the United States shifted dramatically. The population of foreign-born adults without a high school degree stopped growing and began to shrink, while college-educated immigrants grew rapidly, becoming the largest group in the U.S. foreign-born adult population by 2015.

To model the impact of this skill-intensive inflow, Caiumi and Peri (2026) introduce three key methodological innovations:

1. A Push-Factor Instrument: They construct a new instrumental variable based on origin-country "push factors" and the persistent skill characteristics of immigrants by origin. This addresses the endogeneity of immigrant flows (which naturally respond to U.S. productivity growth) without correlating with the past evolution of U.S. wages.
2. Native Employment Adjustment: Rather than assuming native labor supply is fixed within each skill group, they explicitly model native employment responses to estimate whether natives are crowded out or drawn into the labor force.
3. Occupational Upgrading and Task Specialization: They model how natives adjust their tasks in response to immigration, moving away from manual-intensive roles and toward communication-intensive occupations.

Key Empirical Findings

• Wage Boost for Less-Educated Natives: Caiumi and Peri (2026) estimate that immigration raised the wages of less-educated native-born workers between 2000 and 2023 by 2.6% to 3.4%. This positive effect is a meaningful boost for a group whose real wage growth was otherwise close to zero over this period.
• Negligible Impact on College-Educated Natives: Despite absorbing the bulk of the recent high-skilled immigrant inflows, college-educated natives experienced small and statistically insignificant wage impacts. Strong productive complementarity within the college-educated group offset the direct competition effect.
• Positive Employment Effects (No Crowd-Out): The authors estimate a positive native employment rate response. Rather than being crowded out, native workers were drawn into the labor force by the improved marginal productivity of their labor and the opportunities created by economic expansion.
• Efficient Specialization: The primary mechanism driving these positive wage and employment effects is occupational upgrading. An influx of immigrants prompts native workers to specialize in communication-intensive roles, which carry higher wages and better job amenities, leaving manual-intensive roles to immigrants.¹

The Academic Divide

These findings represent a direct methodological clash with George Borjas's selection-bias and crowd-out models (see Selection Bias in Native Responses: Reconciling the Employment and Wage Impacts of Immigration). While Borjas (2026) argues that native labor force exit hides a large negative wage elasticity of -0.7 to -0.9, Caiumi and Peri (2026) demonstrate that once productive complementarity, occupational upgrading, and the high skill content of recent inflows are accounted for, the aggregate national impact of immigration is positive for low-income Americans and neutral for high-income Americans.

This ongoing debate underscores that while the average impact of immigration on native wages remains small, the distributional and skill-group effects are highly dynamic and heavily dependent on the composition of the immigrant inflow and the behavioral adjustments of native workers.

Representative Quotes

From Caiumi and Peri (2026)

"We find a significant degree of productive complementarity between immigrant and native workers that outweighs the wage-competition effect for most skill groups of natives. Additionally, we estimate a positive employment response among natives, consistent with their being attracted into the labour force by the improved marginal productivity of their labour. We calculate that immigration raised the wages of less-educated native workers between 2000 and 2023 by an estimated 2.6% to 3.4% – a meaningful boost during a period in which this group’s real wage growth was close to zero." — Alessandro Caiumi and Giovanni Peri, CEPR Discussion Paper 21756 (2026)

"For college-educated natives, whose skill group absorbed the bulk of the more recent immigrant inflow, the impact was small and not significant, more benign than a simple canonical model with perfect substitution would predict. This is because immigrant-native complementarity within the college-educated group is especially strong and large enough to offset the direct competition effect, leaving this group with negligible wage effects despite the scale of the inflow." — Alessandro Caiumi and Giovanni Peri, CEPR Discussion Paper 21756 (2026)