Final answer:
Immigration can lead to a decrease in wages by increasing the labor supply, particularly affecting low-skill workers. However, this effect is often small and offset by factors such as minimum wage laws and the increased demand for goods and services generated by immigrants. The correct option is C. Increases the supply of labor.
Step-by-step explanation:
Immigration can result in a general decrease in wages primarily because it increases the supply of labor. Specifically, when there is an influx of immigrants, especially those with lower levels of educational attainment, the labor market experiences a rise in available workers. According to a study by Michael S. Clune, for every 10% increase in employed immigrants with no more than a high school diploma, the number of hours worked by high school-educated natives decreased by 3%. This increased supply of labor can apply downward pressure on wages, particularly for low-skill workers. However, the effect on wages is often small, possibly due to the existence of minimum wage laws that set a lower boundary for how much workers can be paid. Furthermore, immigrants contribute to the economy by increasing demand for goods and services, which may balance the wage effect by stimulating the low-skilled labor market and encouraging employers to adopt more labor-intensive production processes.
The correct option is C. Increases the supply of labor.