Feb 4, 2013

Immigration Legislation and Labor Market Outcomes

Wikimedia Commons 
From an interesting paper by Hotchkiss & Quispe-Agnoli (Journal of Policy Analysis and Management, Winter 2013):
First of all, there is no evidence from the analysis here that currently employed documented workers are displaced when their employers hire undocumented workers. The only ones who experience any higher rates of separation when their employers hire new undocumented workers are earlier arriving undocumented workers. This result suggests that there is less substitutability between documented workers and undocumented workers than legislators fear, and it is consistent with other results found in the literature (e.g., see Lalonde & Topel, 1991; Ottaviano & Peri, 2006). 
Second, although there is some variation across worker and firm characteristics, the overall difference in wages paid to documented and undocumented workers are more reflective of the differences in their productivity, rather than differences in their sensitivity to wages, also suggesting less substitutabilty between documented and undocumented workers than apparently presumed. In other words, undocumented workers are paid less than documented workers not because they are willing to take a lower wage, everything else held constant, but mostly because they are less productive. The implication of these two results is that the removal of undocumented workers from the labor market will not likely increase employment levels of documented workers, nor raise wages as much as expected. This does not mean there will be no effect on wages if the supply of undocumented labor in certain sectors, particularly sectors employing low-paid, low-skill workers, is removed. It simply means there is not as much wage difference to gain from the removal of employers’ ability to exploit a certain class of worker. P. 54 
The authors explain: 
One state stands out as an exception to the typical state-level approach to im- migration reform . . . from the Utah Compact:
Utah is best served by a free market philosophy that maximizes individual freedom and opportunity. We acknowledge the economic role immigrants play as workers and taxpayers. Utah’s immigration policies must reaffirm our global reputation as a welcoming and business friendly state. P. 54.

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