Supply and demand doesn't really dictate anything. If you had an airtight immigration control system, there wouldn't just be oodles of undone jobs. There's be some combination of higher wages, higher labor costs, less overall GDP growth, etc.He's right that there wouldn't ever be "oodles of undone jobs." As for the rest, though, it brings up the question: what happened during the 1920s when the United States, in a bout of xenophobia, cracked down on immigration? Proponents of immigration controls often cite this period as proof that restrictions "work." After all: during the "roaring twenties" productivity was high, unemployment was low, nifty new consumer goods were practically spilling off the shelves, and, on the progressive side, labor unions were able to expand, supposedly unburdened by ethnic and racial rifts. (Michael Lind, among others, has made this argument.) Well, let's take a look then.
[Jeffrey] Williamson and [Peter] Lindert guess that about half of the reduction in wage inequality was due to a shift in the character of technological progress after 1929. Before 1929, productivity growth had been concentrated in manufacturing industry and other sectors that required a relatively skilled workforce. As the economy's structure shifted toward these sectors where productivity was growing most rapidly, demand for and returns to skills and capital rose and demand for unskilled labor fell. After 1929, productivity growth was much more balanced: productivity in agriculture and in service sector jobs that relied on unskilled labor more than skilled labor also grew rapidly.Perhaps continued immigration restrictions helped here. Now much of this "levelling" started to deteriorate in the 1970s, incidentally after Lyndon Johnson had loosened immigration controls in 1965 and women continued to enter the labor market (although it's worth noting that "unskilled" and lower-income women have been working since time immemorial). How did this affect things? One could note that most of the influx of unskilled workers into the labor market in the 1970s came to the service industry, which, according to Robert Gordon, did experience a productivity slowdown during that time. On the other hand, William Nordhaus argues that the bulk of the productivity slowdown in the 1970s was concentrated in energy-intensive industries, so the oil shock, and not immigration, seems to be the greatest factor here.
The other half of the levelling comes from demographic factors: fewer children and more education per child both shifts the distribution of skills within the population—making more skilled and fewer unskilled workers—and diminishes the supply of unskilled workers. The levelling of the wage distribution was also encouraged by the growth in the number of jobs that were relatively low-skilled yet also paid high wages.