Immigration Reform and the Earnings of Latino Workers: Do Employer Sanctions Cause Discrimination?

Abstract

Using the Current Population Surveys, the authors investigate whether sanctions against employers for hiring undocumented workers, a provision of the 1986 Immigration Reform and Control Act (IRCA), adversely affected the hourly earnings of Latino workers in the southwestern United States. The analysis exploits the fact that agricultural employers were exempt from the sanctions and from employee-verification requirements for the first two years following IRCA's passage. The authors find substantial pre-post IRCA declines in the wages of Latino non-agricultural workers relative to Latinos in agriculture. They do not observe similar shifts in the relative wages among non-Latino white workers. When using non-Latino black and white non-agricultural workers as alternative control groups, they find that Latino wages declined relative to black wages but not relative to white wages. Finally, they find that the pre-post IRCA inter-sectoral and inter-ethnic relative wage declines for Latino non-agricultural workers do not reflect longerterm trends.