tors, capital and skilled labor taken as one input, and unskilled labor (high school dropout workers) taken as a second factor. Assume that unskilled labor makes up 20 percent of the U.S. workforce and that unskilled labor earns 10 percent of U.S. GDP—all reasonable order of magnitudes for high school dropout labor. Now let immigration increase the supply of unskilled labor by 33 percent. The gain to natives in terms of additional GDP from this flow of immigrants would be the triangle in Figure 4.1, which is one-half the change in labor supply times the change in the wage of unskilled labor. The change in the supply of labor that substitutes for immigrants is 0.33. If the elasticity of the wage of unskilled labor to this change was, say, 0.3, the wage loss to these workers would be about 10 percent. The triangle would be 1/2 (.33) (.10) for a group whose earnings represent 10 percent of GDP. Thus, relative to GDP, the gain to all natives would be about 0.2 percent or $14 billion in a $7 trillion economy. Immigration in this case has reduced the pay of a relatively modest number of U.S. workers by 10 percent while increasing the total GDP accruing to natives by 0.2 percent.

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