Native Wages Research Articles

Complements or Substitutes? Task Specialization by Gender and Nativity in Spain

Learning about the impact of immigration on the labor market outcomes of natives is a topic of major concern for immigrant-receiving countries. There exists an extensive literature evaluating the impact of immigration on the employment and wages of natives in the U.S. Yet, despite the significant degree of occupational segregation by gender regardless of workers' origin, the literature has traditionally treated male and female immigrants as a homogenous group when examining the impact of immigration on native workers. Instead, using data from Spain, where the immigrant population has risen from 4 percent to 10 percent of the population within a decade, we allow for male and female foreign-born workers to have distinct impacts on the employment patterns of native men and women. This proves to be important as foreign-born workers only seem to have a significant impact on the employment pattern of native workers of the same sex. Furthermore, foreign-born male (female) workers do not appear to be perfect substitutes of similarly skilled native male (female) workers, which may help explain the null or small impacts of immigration on native employment and wages. Instead, immigration appears to have affected the task specialization and occupational distribution of natives of the same gender.

Employment, Wages, and the Economic Cycle: Differences between Immigrants and Natives

In this paper, we analyse differences in the cyclical pattern of employment and wages of immigrants and natives for two large immigrant receiving countries, Germany and the UK. We show that, despite large differences in their immigrant populations, there are similar and significant differences in cyclical responses between immigrants and natives in both countries, even conditional on education, age, and location. We decompose changes in outcomes into a secular trend and a business cycle component. We find significantly larger unemployment responses to economic shocks for low-skilled workers relative to high-skilled workers and for immigrants relative to natives within the same skill group. There is little evidence for differential wage responses to economic shocks. We offer three explanations for these findings: An equilibrium search model, where immigrants experience higher job separation rates, a model of dual labour markets, and differences in the complementarity of immigrants and natives to capital.

Immigration and the Macroeconomy

We analyze the dynamics of labor migration and the insurance role of remittances in a two-country, real business cycle framework. Emigration increases with the expected stream of future wage gains but is dampened by the sunk cost reflecting border enforcement. During booms in the destination economy, the scarcity of established immigrants lessens capital accumulation, labor productivity, and the native wage. The welfare gain from the inflow of unskilled labor increases with the complementarity between skilled and unskilled labor and the share of the skilled among native labor. The model matches the cyclical dynamics of the unskilled immigration from Mexico.

Immigration and National Wages: Clarifying the Theory and the Empirics

This paper estimates the effects of immigration on wages of native workers at the national U.S. level. Following Borjas (2003) we focus on national labor markets for workers of different skills and we enrich his methodology and refine previous estimates. We emphasize that a production function framework is needed to combine workers of different skills in order to evaluate the competition as well as cross-skill complementary effects of immigrants on wages. We also emphasize the importance (and estimate the value) of the elasticity of substitution between workers with at most a high school degree and those without one. Since the two groups turn out to be close substitutes, this strongly dilutes the effects of competition between immigrants and workers with no degree. We then estimate the substitutability between natives and immigrants and we find a small but significant degree of imperfect substitution which further decreases the competitive effect of immigrants. Finally, we account for the short run and long run adjustment of capital in response to immigration. Using our estimates and Census data we find that immigration (1990-2006) had small negative effects in the short run on native workers with no high school degree (-0.7%) and on average wages (-0.4%) while it had small positive effects on native workers with no high school degree (0.3%) and on average native wages (0.6%) in the long run. These results are perfectly in line with the estimated aggregate elasticities in the labor literature since Katz and Murphy (1992). We also find a wage effect of new immigrants on previous immigrants in the order of negative 6%.

Effects of Low-Skilled Immigration on U.S. Natives: Evidence from Hurricane Mitch

In the 1980s the composition of immigrants to the U.S. shifted towards less-skilled workers. Around this time, real wages and employment of younger and less-educated U.S. workers fell. Some blame recent immigration shifts for the misfortunes of unskilled workers in the U.S. OLS estimates using Census data show instead that native wages are positively related to the recent influx of Latin Americans. However, these estimates are biased if demand shocks are positively related to immigration. An IV strategy, which deals with the endogeneity of immigration by exploiting a large influx of Central American immigrants towards U.S. Southern ports of entry after Hurricane Mitch, also generates positive wage effects but only for more educated native men. Yet, ignoring the flows of native and earlier immigrants in response to this exogeneous immigration is likely to generate upward biases in these estimates too. Native wage effects disappear and less-skilled employment of previous Latin American immigrants falls when controlling for out-migration. This highlights the importance of controlling for out-migration not only of natives but also of previous immigrants in regional studies of immigration.

Measuring immigration's effects on labor demand: A reexamination of the Mariel Boatlift

Why do immigration shocks tend to have benign effects on native wages? One reason is that immigrants as consumers contribute to the demand for their services. We model an economy where workers spend their wages on a locally produced good, then test it via a reexamination of the 1980 “Mariel Boatlift” using Wacziarg's Channel Transmission methodology. Current Population Survey data on workers in 9 different retail labor markets and Survey of Buying Power data on retail spending by consumers in Miami and four comparison cities are used. We find strong evidence that the Mariel Boatlift augmented labor demand.

The Labor Market Impact of Immigration in Western Germany in the 1990's

We adopt a general equilibrium approach in order to measure the effects of recent immigration on the Western German labor market, looking at both wage and employment effects. Using the Regional File of the IAB Employment Subsample for the period 1987-2001, we find that the substantial immigration of the 1990's had no adverse effects on native wages and employment levels. It had instead adverse employment and wage effects on previous waves of immigrants. This stems from the fact that, after controlling for education and experience levels, native and migrant workers appear to be imperfect substitutes whereas new and old immigrants exhibit perfect substitutability. Our analysis suggests that if the German labour market were as 'flexible' as the UK labour market, it would be more efficient in dealing with the effects of immigration.

The Labor Market Impact of Immigration in Western Germany in the 1990's

We adopt a general equilibrium approach in order to measure the effects of recent immigration on the Western German labour market, looking at both wage and employment effects. Using the Regional File of the IAB Employment Subsample for the period 1987-2001, we find that the substantial immigration of the 1990’s had no adverse effects on native wages and employment levels. It had instead adverse employment and wage effects on previous waves of immigrants. This stems from the fact that, after controlling for education and experience levels, native and migrant workers appear to be imperfect substitutes whereas new and old immigrants exhibit perfect substitutability. Our analysis suggests that if the German labour market were as ‘flexible’ as the UK labour market, it would be more efficient in dealing with the effects of immigration.

Dispersion or concentration for the 1.5 generation? Destination choices of the children of immigrants in the US

AbstractThis paper examines the determinants of intermetropolitan destination choice between 1995 and 2000 for foreign‐born and 1.5 generation adult children of immigrants in the US. In addition to distance and labour‐force variables, metro‐level measures of immigrant–native wage inequality and immigrant concentration are considered. A competing‐destinations accessibility parameter is included in order to assess the spatial structure of destination choice. Although assimilation theories, especially in their spatial assimilation variant, might suggest that intergenerational social mobility should be connected with spatial dispersion, these models reveal the continuing importance of metro‐ and regional‐scale immigrant concentration for the children of immigrants. When the destination concentration variable is added to reduced‐form models, the positive effect of employment growth declines significantly, indicating that ethnic concentration may continue to be more important for the children of immigrants than more simply framed economic conditions. A comparative origin–destination immigrant–native wage gap measure is also a strongly positive determinant of destination choice, indicating the importance of relative wages in destination choice. Furthermore, the increased model strength and parameter estimates associated with immigrant concentration and a concentration‐weighted accessibility measure suggest that the spatial structure of destination choice has much to do with immigrant concentration at multiple scales – from metro areas to immigrant states and regions. The paper thus suggests more attention to theorising the geographical contexts within which intergenerational immigrant incorporation occurs. Copyright © 2007 John Wiley & Sons, Ltd.

The Effects of Recent Immigration on Racial/Ethnic Labor Market Differentials

We analyze the impact of recent immigration on the employment and wages of less educated workers during the 1990s, a period of heightened geographic diffusion of immigrants across the nation. We focus on men residing in metropolitan areas, who are between the ages of 25 and 62 and are from the three major racial/ ethnic groups: white non-Hispanic, black nonHispanic, and Latino (hereafter referred to as race groups). Theory predicts that immigration will increase the wages of native workers who are complements to immigrants and decrease the wages of natives who are substitutes. Because immigrants have low education relative to natives, low-educated natives are likely to be substitutes, and high-educated natives are likely to be complements. We find negative effects of recent immigration on the employment, and especially the wages, of low-skilled workers. The wage effects are largest for Latinos, followed by blacks.

Measuring Immigration's Effects on Labor Demand: A Reexamination of the Mariel Boatlift

It is now well known that exogenous immigration shocks tend to have benign effects on native employment outcomes, thanks to various secondary adjustment processes made possible by flexible markets. One adjustment process that has received scant attention is that immigrants, as consumers of the goods they help produce, contribute to their own demand. We examine the effects of an immigration shock on labor demand by testing a general equilibrium model in which imperfectly substitutable native and immigrant workers spend their wages on a locally produced good. The shock induces three responses: (i) a substitution of immigrants for natives; (ii) out-migration; and (iii) stimulation of labor demand. According to (iii), native wages can fall, stay the same or rise, depending upon the strength of the shock and various product and factor market elasticities. As our test case, we reexamine the 1980 Mariel Boatlift, using Wacziarg's Channel Transmission methodology. Our data set includes approximately 6,600 observations for 1979-85 from the Current Population Survey on workers in 9 different retail labor markets and Survey of Buying Power data on retail spending by consumers in Miami and four comparison cities. Our results provide a more complete explanation for why the Boatlift's overall effects on native wages in Miami were benign: Lower wages due to greater labor supply were offset by higher wages due to greater labor demand. We conclude that the demand-augmenting effect of an immigration shock is a significant secondary adjustment process that must be considered when assessing the distributional effects of immigration.

Does immigration affect wages? A look at occupation-level evidence

Previous research has reached mixed conclusions about the effect of higher levels of immigration on the wages of natives. This paper reexamines this question using data from the Current Population Survey and the Immigration and Naturalization Service and focuses on differential effects by skill level. Using occupation as a proxy for skill, we find that an increase in the fraction of foreign-born workers tends to lower the wages of natives in blue collar occupations—particularly after controlling for endogeneity—but does not have a statistically significant negative effect among natives in skilled occupations. The results also indicate that immigrants adjusting their immigration status within the U.S., but not newly arriving immigrants, have a significant negative impact on the wages of low-skilled natives. This suggests that immigrants become closer substitutes for natives as they spend more time in the U.S.

Does Immigration Affect Wages? A Look at Occupation-Level Evidence

Previous research has reached mixed conclusions about the effect of higher levels of immigration on the wages of natives. This paper reexamines this question using data from the Current Population Survey and the Immigration and Naturalization Service and focuses on differential effects by skill level. Using occupation as a proxy for skill, we find that an increase in the fraction of foreign-born workers tends to lower the wages of natives in blue collar occupations - particularly after controlling for endogeneity - but does not have a statistically significant negative effect among natives in skilled occupations. The results also indicate that immigrants adjusting their immigration status within the U.S., but not newly arriving immigrants, have a significant negative impact on the wages of low-skilled natives. This suggests that immigrants become closer substitutes for natives as they spend more time in the U.S.

Labor Market Impact of Migration: Employment Structures and the Case of Greece

The impact of migration on the labor markets of host countries has fueled research and policy debates. While the impact of migration on the employment opportunities and wages of natives has come under extensive focus, another dimension of labor market impact of migration apparent in the case of Greece, the relations under which work is performed, has attracted less attention. The prevalence of family-based forms of production and the relatively limited extent of waged employment have long made Greece an outlier with respect to European employment structures. However, much of the work previously carried out within the framework of the family is now undertaken by migrants for wages. This substitution of unpaid family labor by migrant wage-labor is contributing to the convergence of Greek employment structures with those of other countries of the European Union.

Immigration, Labor Market Mobility, and the Earnings of Native‐Born Workers

Abstract. This article seeks to improve on previous estimates of the impact of immigration on native wages by using an occupational segmentation approach that directly controls for regional migration and other shifts in the native‐born U.S. labor supply. The U.S. labor market is segmented by occupation in order to determine which, if any, native workers tend to be vulnerable to increased immigrant competition for jobs. The results suggest that native‐born workers in the primary sector are the main beneficiaries of increased immigration, while native‐born Hispanic females in the secondary sector are the most susceptible to downward wage pressures.

The Effect of Low-Skilled Immigration on US Prices: Evidence from CPI Data

While an extensive literature examines the impact of low-skilled immigration on US native wages, there has been almost no research on the parallel question of how immigration affects the price of goods and services. A standard small open economy model suggests that low-skilled immigration should reduce the relative price of non-traded goods by decreasing the wages of low-skilled workers. Treating US cities as small open economies and using confidential price data on goods and services to estimate reduced-form price effects, I find that, at current immigration levels, a 10 percent increase in the share of low-skilled immigrants in the labor force decreases the price of immigrant-intensive services, such as housekeeping and gardening, by 1.3 percent and of other non-traded goods by 0.2 percent. Structural estimates suggest that lower wages are a likely channel through which these effects take place. However, wage effects are significantly larger for low-skilled immigrants than for low-skilled natives because the two are imperfect substitutes. Overall, the results imply that the low-skilled immigration wave of the 1990s increased the purchasing power of high-skilled natives living in the 25 largest cities by 0.65 percent but decreased the purchasing power of native high school dropouts by 2.66 percent.

Immigration and wage inequality in the 1990s: Panel evidence from the current population survey

In spite of record economic growth in the 1990s, income inequality continued to escalate in the United States. One popular explanation is that the proportion of unskilled immigrant inflows has increased due to policy reforms over the last four decades. This study evaluates the impact of immigrant skills on inequality using a panel data set of states derived from the March Current Population Survey (CPS). The data set provides unique insights into local impacts of immigration due to its ability to discern shorter-term annual adjustments versus the traditional longer-term focus of the Decennial Census. Using a basic theoretical model to develop testable hypotheses, the dynamic analyses reveal that increased relative inflows of unskilled immigrants indeed increase wage inequality. The impact on native wage inequality is especially pronounced, with an effect nearly twice as large as that on overall wage inequality.

On the Wage Growth of Immigrants: Israel, 1990–2000

This paper develops a descriptive methodology for the analysis of wage growth of immigrants that is, based on human capital theory. The sources of the wage growth are (1) the rise of the return to imported human capital, (2) the impact of accumulated experience in the host country, and (3) the mobility up the occupational ladder in the host country. The model implies a nonlinear wage function that includes interactions between imported skills and local wage growth. using data on native Israelis and immigrants from the former Soviet Union of Israel, we estimate wage equations jointly for the two groups. We find that, upon arrival, immigrants receive non return for imported skills. In the ten years following arrival, wages of highly skilled immigrants grow at 8 percent a year. Rising prices of skills, occupational transitions, accumulated experience in Israel, and an economy-wide rise in wages account for 3.4, 1.1, 1.5, and 1.5 percent each. In the long run, the return for schooling converges to 0.027, substantially below the 0.069 return for natives. We do not reject the hypothesis that the return for experience converges to that of natives and that immigrants receive a higher return for their unmeasured skills. We find that there is some downgrading in the occupational distribution of immigrants relative to that of natives. Moreover, the average wages of immigrants approach but do not converge to the wages of comparable natives. The main reason for this is the low return to their imported skills. (JEL: J24, J31, J60)

How Did the Miami Labor Market Absorb the Mariel Immigrants?

Card's (1990) well-known analysis of the Mariel boatlift concluded that this mass influx of mostly less-skilled Cubans to Miami had little impact on the labor market outcomes of the city's less-skilled workers. This paper evaluates two explanations for this. First, consistent with an open economy framework, it asks whether after the boatlift Miami increased its production of unskilled-intensive manufactured goods, allowing it to "export" the impact of the boatlift. Second, it asks whether Miami adapted to the boatlift by implementing new skill-complementary technologies more slowly than they otherwise would have. Using a confidential micro data version of the Annual Survey of Manufactures, I show that following the boatlift, Miami's relative output of different manufacturing industries trended similarly to other cities with similar pre-boatlift trends in manufacturing mix. The response of industry mix to the boatlift therefore appears to be small. Supporting the second type of adjustment, utilization of Cuban labor by Miami's industries rose proportionately to the supply increase generated by the boatlift. In addition, post-boatlift computer use at work was lower in Miami than other cities with similar levels of computerbased employment before the event, even among non-Hispanic workers in the same detailed cells defined by industry, occupation and education. This suggests the boatlift induced Miami's industries to employ more unskilled-intensive production technologies. The results suggest an explanation for why native wages are consistently found to be insensitive to local immigration shocks: markets adapt production technology to local factor supplies.

On the Wage Growth of Immigrants: Israel, 1990-2000

This paper develops a descriptive methodology for the analysis of wage growth of immigrants, based on human capital theory. The sources of the wage growth are: (i) the rise of the return to imported human capital; (ii) the impact of accumulated experience in the host country; and, (iii) the mobility up the occupational ladder in the host country. Using human capital theory, we derive a non-linear model that imposes restrictions across the earning equations of natives and immigrants. The two earning functions are estimated jointly, using repeated cross section data. Using data on immigrants from the former Soviet Union to Israel, we find: Upon arrival, immigrants receive no return for imported skills. In the ten years following arrival, wages of highly skilled immigrants grow at 8% a year. Rising prices of skills, occupational transitions, accumulated experience in Israel and economy-wide rise in wages account for 3.4, 1.1, 1.5 and 1.4 percent each. In the long run, the return for schooling converges to .028, substantially below the .069 for natives. We do not reject the hypothesis that the return for experience converges to that of natives, and immigrants receive higher return for their unmeasured skills. We find that there is some downgrading in occupational distribution of immigrants relative to that of natives. Moreover, the average wages of immigrants approach but do not converge to the wages of comparable natives. The main reason for that is the low return to their imported skills.