Allowing more immigration of unskilled workers will lower the real wages of skilled workers if

Question

Quizplus · Accepted Answer

If unskilled workers are substitutes for skilled workers, meaning they can perform similar tasks and employers can choose to hire more cheaply, then an increase in the supply of unskilled workers will push down the wages of skilled workers due to competition. This is called the substitution effect. The scale effect, which suggests that a larger labor force could increase demand for products and eventually raise wages, is unlikely to be strong enough to counteract the substitution effect in this scenario.

Allowing More Immigration of Unskilled Workers Will Lower the Real