Order Code 95-408
Immigration: The Effects on Low-Skilled and
High-Skilled Native-Born Workers
Updated January 16, 2007
Linda Levine
Specialist in Labor Economics
Domestic Social Policy Division
Immigration: the Effects on Low-Skilled and
High-Skilled Native-Born Workers
Summary
The large influx of immigrants in recent decades has led to an equally long, still
unresolved debate over their effect on the labor market outcomes of native-born
workers. Economic theory posits that an increase in the supply of labor, such as from
immigration, will reduce the wages and employment of native-born workers.
Studies, utilizing two approaches to test the theory, have produced conflicting results
with differing implications for public policy.
The concentration of foreign-born workers in certain cities and skill groups led
some economists to posit that immigration’s greatest impact would be felt by
similarly skilled native-born workers living in those areas. Studies thus have
compared differences in labor market outcomes between native-born workers who
live in high- versus low-immigrant areas and who most often compete for jobs with
foreign-born workers; given the composition of the recent immigrant flow, these
would be low-skilled U.S. workers. Most inter-area analyses have found scant
evidence that foreign-born labor adversely affects the labor market prospects of U.S.
workers in general. A few inter-area studies have estimated a slight negative impact
on low-skilled natives — who represent a small share of total U.S. employment.
Other economists have argued that the inter-area approach underestimates
immigration’s consequences because it assumes that labor, capital, and goods do not
rapidly adjust to the immigration-induced increase in the supply of labor. If, for
example, native-born competitors quickly decide to leave high-immigrant areas, their
movements would spread any employment and wage effects due to immigration
across the nation, and thereby make it difficult for spatially based research to detect
any impact. Some analysts, therefore, have concluded that immigration’s labor
market effects can best be identified by examining data at the national level. The
economy-wide approach is not without its limitations, however. The relationship
between internal labor migration and immigration remains unsettled as well.
Many national studies have estimated that immigration, given its composition
in recent decades, especially hurts the labor market opportunities of low-skilled U.S.
workers. If a policy goal is to improve the prospects of U.S. workers who have fewer
than 12 years of schooling, then changing the skill composition of legal immigrants
and reducing the flow of unauthorized aliens might be fruitful courses of action,
according to this research. However, some of the analyses that have focused on high-
skilled workers in particular (e.g., those in computer science and engineering fields),
as well as an economy-wide study that has examined workers at various education-
experience levels, estimated that an increase in foreign labor adversely affects
comparably skilled native-born workers. Thus, shifting the immigrant supply toward
higher-skilled workers might not only harm this native-born skill group, but also
undercut the most often-recommended means of ameliorating immigration’s impact
on low-skilled U.S. workers, namely, pursuing additional education. But, unlike
these studies, a recent analysis that built upon the economy-wide approach estimated
that immigration has not reduced the wages of native-born workers with more
education and experience. This report will be updated as warranted.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Immigration and the Labor Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Distributional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Model’s Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
What Does the Empirical Literature Have to Say? . . . . . . . . . . . . . . . . . . . . . . . . 4
Overview of the Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Findings of Studies Using a Spatial Approach . . . . . . . . . . . . . . . . . . . . 8
The Findings of Studies Using a Nationwide Approach . . . . . . . . . . . . . . . 11
Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
List of Figures
Figure 1. The Effects on Native-Born Workers of an Increase
in the Supply of Foreign-Born Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Immigration: the Effects on Low-Skilled and
High-Skilled Native-Born Workers
Introduction
Immigration has been a contentious issue since the nation’s inception. During
periods of substantial immigration, it has not been unusual for the native-born
population to raise objections on many grounds — cultural, religious, ethnic, and
economic. The focus of the latest national debate over high levels of immigration is
largely on its economic effects, that is, whether immigration provides net economic
benefits to society.
The current debate has been concerned with the impact of immigration on the
public budget and the private economy. In terms of budgetary effects, the question
is whether immigrants receive more in public services than they pay in taxes.
Immigrants also affect the private economy in their capacity as workers: if the
admission of foreign-born workers lowers wages, which, in turn, results in more
goods being produced at lower prices, then U.S. consumers would benefit; if
immigration results in lower wages, then U.S. workers would be harmed. The debate
over immigration policy has been devoted more to the well-being of U.S. workers
than to consumer welfare. Regardless of which private economic effect is of interest,
the impact of immigration on natives’ labor market outcomes must be estimated to
ascertain whether foreign-born workers confer net economic benefits on society.
The report opens with a discussion of how to analyze the impact of immigrants
on the pay and job opportunities of native-born workers. It then uses this framework
to examine and interpret the empirical literature on the subject. The report concludes
with a discussion of policy implications.
Immigration and the Labor Market
Before the entrance of foreign-born workers to the U.S. labor market, the
amount of labor that workers are willing to supply to employers is represented by the
curve labeled S in Figure 1. The supply curve is upward sloping because workers
1
are willing to offer more labor (e.g., work more hours) in response to higher real
wages. Employers’ demand for labor is represented by the curve labeled D, which
slopes downward because each worker that is hired contributes less to the firm’s
revenues than the prior worker. A firm stops hiring workers when the last employee
added to the payroll contributes as much to revenues as the wage the employee is
willing to accept. This is represented by point A, with total pre-immigration
employment equal to E and natives’ real wage equal to W .
1
1
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Figure 1. The Effects on Native-Born Workers of an Increase
in the Supply of Foreign-Born Workers
The increase in the supply of labor due to the addition of foreign-born workers
is represented by S . At any given wage rate, more workers now are willing to offer
2
their services to employers. Because the contribution of the last worker hired (E ) to
1
the firm’s revenues is greater than his asking wage (W*, which is lower than the pre-
immigration wage, W ), the firm is willing to expand employment beyond E . The
1
1
firm once again continues to add workers to the payroll until the contribution of the
last employee hired is just equal to the wage the employee is willing to accept. This
is represented by point B, with total post-immigration employment equal to E and
2
the wage rate of native- and foreign-born workers equal to W .
2
In summary, supply-and-demand theory predicts that the real wage rate for all
workers will fall from W to W after the entrance of immigrants to the U.S. labor
1
2
market. In the process, total U.S. employment expands from E to E , native-born
1
2
employment contracts from E to E , and foreign-born employment increases from
1
3
zero to E minus E .
2
3
Distributional Issues
In this manner, immigration is expected to redistribute national employment.
Because the lower post-immigration wage (W ) makes work less rewarding, some
2
native-born workers will find other activities more attractive. As a consequence, they
leave the labor force and employment among the native-born population, as noted
above, declines (from E to E ). The initial employment of foreign-born workers (E
1
3
2
minus E ) expands as they assume a portion of the jobs formerly held by native-born
1
workers (E minus E ). The latter has been referred to as the “displacement effect.”
1
3
The actual size of the displacement as well as the wage effect will depend upon how
sensitive labor demand and domestic labor supply are to a change in the wage rate.1
1 This sensitivity is depicted graphically by the steepness of the supply or demand curve’s
slope. The steeper (more inelastic) the slope, the less the supply of or demand for labor
changes for a given change in the wage rate. The flatter (more elastic) the slope, the more
(continued...)
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In addition to reallocating national employment, immigration also is expected
to redistribute national income by reducing the amount that accrues to native-born
workers and increasing the amount that accrues to owners of capital and foreign-born
workers. The difference between the pre- and post-immigration wages of native-born
workers is not lost to the economy but is instead reallocated: part of the wages that
previously went to native-born workers (W ACW ) now go to capital holders and
1
2
part (E FCE ) to foreign-born workers.
3
1
In addition to its distributional effects, immigration is expected to expand
national output and income. The increase in total employment (from E to E ), which
1
2
results from the entrance of immigrants to the U.S. labor market, adds to national
income (by E ABE ). Part of the increase (E CBE ) goes to foreign-born workers in
1
2
1
2
the form of wages. The remainder of the increase in national income (the
“immigration surplus,” ABC) goes to nonlabor factors of production, such as owners
of capital.2 The total benefits that capital owners derive from increased immigration
is equal to the immigration surplus (ABC) and part of the wages transferred from
native-born workers (W ACW ).
1
2
The Model’s Assumptions
The simple neoclassical model just presented makes a variety of assumptions,
including that labor is homogenous and that immigrants are perfectly interchangeable
with all native-born workers. Depending upon the socioeconomic characteristics of
foreign-born workers, however, their effect on different groups of native-born
workers could vary.3 If immigrants are close substitutes for a subset of native-born
workers — the less skilled, for example — then only this group’s wages or
employment prospects might be depressed in the manner shown in Figure 1.
Alternatively, the demand for and returns to those production factors that
complement immigrants’ skills might rise as a result of the increase in immigrant
employment (e.g., capital and skilled native-born labor). Thus, the skill composition
of foreign-born vis-a-vis native-born workers is expected to influence which native-
born workers’ labor market outcomes might benefit from or be harmed by an
expansion of immigration.
The model also assumes that, in the short run,4 immigration affects labor supply
but not labor demand. However, by doing such things as investing financial capital
they might have brought with them, using their human capital (e.g., entrepreneurial
1 (...continued)
supply or demand changes for a given change in the wage rate.
2 George J. Borjas, “The Economic Benefits from Immigration” (working paper, no. 4955,
National Bureau of Economic Research, Cambridge, Massachusetts, December 1994).
3 Michael J. Greenwood and John M. McDowell, “The Factor Market Consequences of U.S.
Immigration,” Journal of Economic Literature, December 1986. (Hereafter cited as
Greenwood and McDowell, The Factor Market Consequences of U.S. Immigration.)
4 The short run is defined as that period in which at least one of the firm’s factors of
production is fixed (e.g., the state of technology and the quantity of physical capital or of
highly skilled labor).
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or innovative abilities), or purchasing U.S.-produced goods and services, immigrants
may well expand aggregate output and increase labor demand beyond their own
employment.5 If immigration were to raise the demand for labor in the U.S.
economy, which would be represented by a rightward shift of the demand curve in
Figure 1, it would mitigate its potentially adverse consequences for native-born
workers.
In addition, the model does not take into account long-run adjustments that
native-born workers might make in response to immigration. It assumes that the
quantity and quality of native-born workers do not change after an inflow of
immigrants. If some native-born workers perceive that their labor market prospects
have changed for the worse, however, they might invest in their own human capital
(i.e., undertake education and training).6 This could raise their productivity in their
current jobs or it could cause them to change occupations. The wage prospects of
native-born workers who increased their human capital investment would thus tend
to rise — thereby offsetting any initial adverse effects of immigration — and to
equalize the net gain for all native-born labor force participants.
Native-born workers also can make long-run adjustments to immigration by
moving across local economies. Factors of production — both labor and capital —
are geographically mobile and they, like goods, can flow between areas thereby
linking seemingly unconnected local markets. If, for example, some native-born
workers who are close substitutes for immigrants saw their wage or job prospects
being eroded, they might migrate to areas with fewer competitors and better
opportunities. Native-born substitutes who are residing elsewhere might avoid high-
immigrant communities, as well. Similarly, firms that rely heavily on less-skilled
workers might have an incentive to open plants in high-immigrant communities if
their labor costs would be lower and their profits higher than expanding in their
current locations, thereby suppressing job opportunities in the communities where
the existing plants are located.7 Over some period, then, these movements of labor,
capital, and goods could spread immigration’s labor market impacts from high-
immigrant areas to the rest of the country.
What Does the Empirical Literature Have to Say?
Does the theory sketched in Figure 1 translate into fact? The model suggests
that some native-born workers may be made worse off through lower wages or
diminished job prospects because immigration increases the supply of labor available
to the nation’s employers. But, theory also suggests that immigration would make
consumers (including the above-mentioned native-born workers) better off because
5 Greenwood and McDowell, The Factor Market Consequences of U.S. Immigration.
6 Carmel U. Chiswick, “The Impact of Immigration on the Human Capital of Natives,”
Journal of Labor Economics, v. 17, no. 4, 1989.
7 James P. Smith and Barry Edmonston (eds), The New Americans: Economic,
Demographic, and Fiscal Effects of Immigration, (Washington, DC, National Academy
Press, 1997). (Hereafter cited as Smith and Edmonston, The New Americans.)
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it holds down wages and thereby holds down prices of goods and services. The
empirical issue is how best to measure the existence and magnitude of the potential
wage and employment effects of immigration that the model describes.
Overview of the Literature
Despite the greatly increased presence of foreign-born workers since the 1970s,
the foreign-born make up just 14.5% of current U.S. labor force participants.8
Therefore, immigration is unlikely to have substantially affected the wage or job
prospects of the average native-born worker. But, if immigrants are concentrated in
particular geographic areas, then native-born workers who live in those communities
and possess characteristics similar to those of foreign-born workers might be
affected.
Such an impact might be detected by comparing the wage and employment
opportunities of selected groups of native-born workers in areas with high versus low
concentrations of immigrants. Consequently, the first group of analyses reviewed
below utilize data for a sample of cities or states disaggregated by immigrant share
to estimate the relationship between an increase in their immigrant population and
the labor market outcomes of U.S. workers thought to compete with foreign-born
workers. Most of the inter-area studies have found little if any statistically
significant and economically meaningful difference between the wage and
employment experiences of native-born workers — overall, or disaggregated by race,
gender, or skill level — in areas with high versus low concentrations of immigrants.
A few studies have estimated a slight negative impact on a small share of the U.S.
labor force — low-skilled natives (e.g., those with fewer than 12 years of schooling).
It has been suggested that inter-area research does not provide a complete
picture of immigration’s effects, however:
The spatially based studies correctly tell us that immigrants have no measurable
effect on particular labor markets, but they are not informative about the
economy-wide effects of immigrants.”9 (Emphasis added.)
As noted in the section of this report concerning the model’s assumptions, mobility
of production factors and goods could disperse the local effects of immigration across
the nation. Differences between areas in the supply of labor by skill category would
be minimized if, for example, many low-skilled U.S. workers in high-immigrant
cities whose wages had been depressed quickly overcame the monetary,
psychological, and information costs of moving, and relocated to cities with better
opportunities (i.e., low-immigrant communities). The mobility of labor, capital, and
8 U.S. Congressional Budget Office (CBO), The Role of Immigrants in the U.S. Labor
Market, (Washington, DC, November 2005). Hereafter referred to as CBO, The Role of
Immigrants in the U.S. Labor Market.
9 George J. Borjas and Richard B. Freeman, “Introduction and Summary,” p. 14 in George
J. Borjas and Richard B. Freeman, ed., Immigration and the Work Force: The Economic
Consequences for the United States and Source Areas, (Chicago, IL, University of Chicago
Press, 1992).
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goods between areas thus could make it difficult for spatially based studies to detect
the labor market consequences of immigration.10 This alleged deficiency of the inter-
area approach has prompted research into immigration’s effect on the aggregate (i.e.,
national) labor market.
The second group of studies discussed below utilize national data to assess the
impact of immigration on native-born workers by skill level. Various explanations
have been offered for the increase since the 1970s in wage inequality (i.e., workers
increased concentration at the lower end of the wage distribution). Although skill-
biased technological change is considered the leading contributor, others include
international trade, the level of the federal minimum wage, changes in corporate
wage-setting institutions, and immigration.11 National analyses typically have
estimated that, by immigration’s changing the nation’s skill composition toward
relatively more inexperienced workers who lack a high school degree than otherwise
would have been the case,12 immigrants have harmed the labor market prospects of
low-skilled native-born workers to a greater extent than those of other skill groups
with whom immigrants compete.
The economy-wide studies that have examined the relationship between
immigration and changes in the relative proportions of labor by skill category are not
without their own drawbacks, however. Initial studies that utilized the “factor-
proportions” methodology have been faulted because they did not directly estimate
the responsiveness of natives’ wages to the immigration-induced increase in the
relative supply of low-skilled workers, and for this reason, might overstate
immigrants’ wage effect on U.S. workers.13 (The more recent work of researchers
10 Randall K. Filer (“The Effect of Immigrant Arrivals on Migratory Patterns of Native
Workers,” in Borjas and Freeman, Immigration and the Work Force) estimated that an
increase in immigration to a particular locality prompts increased out-migration among
native-born residents and decreased in-migration among native-born nonresidents. William
H. Frey (“Immigration and the Internal Migration ‘Flight’ from U.S. Metropolitan Areas:
Toward a New Demographic Balkanisation.” Urban Studies, v. 32, nos. 4-5, 1995) found
that natives (e.g., non-Latino white high school dropouts) are apt to leave areas that
experience large immigrant inflows. Michael J. White and Lori M. Hunter (The Migratory
Response of Native-Born Workers to the Presence of Immigrants in the Labor Market,
Brown University, PSTC Working Paper Series 93-08, 1993) provided evidence that
workers in some less-skilled occupations are likely to move away from areas with high
immigrant concentrations.
11 Thomas Klitgaard and Adam Posen, “Morning Session: Summary of Discussion,” FRBNY
Economic Policy Review, January 1995.
12 Immigrants comprise a disproportionate share of workers who lack a high school diploma.
Foreign-born workers’ representation among all low-skilled workers in the United States has
increased over time, as well, “because of the influx of workers from Mexico and Central
America with little education and because of a decline in the number of native-born workers
who have not finished high school.” Accordingly, immigrants from Mexico and Central
America are concentrated in occupations characterized by low educational requirements
such as construction, building and grounds cleaning, and food preparation. CBO, The Role
of Immigrants in the U.S. Labor Market, p. 8.
13 Rachel M. Friedberg and Jennifer Hunt, “The Impact of Immigrants on Host Country
(continued...)
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who take a national approach has responded to this, among other, criticisms.)
Economy-wide analyses also might overstate the impact of immigration in the long
run if, for example, they do not take into account natives adjustment to the increased
presence of immigrants by completing more years of schooling or choosing different
fields of study which takes them out of competition with immigrants for jobs in
which foreign-born workers have made substantial inroads.
The assumption by proponents of the national approach — that native-born
“substitutes” for and “complements” of foreign-born workers quickly diffuse the
effect of immigration across the country — is suspect, as well, because other
economic shocks typically have been followed by longer adjustment periods.14 In
addition, the precise relationship between immigration and internal labor migration
remains unresolved: studies find a negative, a positive, or no connection between the
in- or out-migration of native-born workers and an area’s immigrant concentration;15
13 (...continued)
Wages, Employment, and Growth,” Journal of Economic Policy, v. 1, no. 2, spring 1995.
Note: The studies in question assumed that an increase in the supply of low-skilled workers
depresses the group’s relative wage to the same extent regardless of the source of the supply
hike (i.e., foreign-born or native-born labor).
14 John DiNardo, “Comments and Discussion,” of Borjas, Freeman, and Katz in Brookings
Papers on Economic Activity.
15 Kristin Butcher and David Card (“Immigration and Wages: Evidence from the 1980s,”
American Economic Review, v. 81, no. 2, May 1991) found that, with the exception of three
cities that received 51% of recent immigrants between 1980 and 1985 (New York, Los
Angeles, and Miami), native in-migration was positively correlated with inflows of
immigrants to the 21 other cities in their analysis. Michael J. White and Yoshie Imai (“The
Impact of U.S. Immigration Upon Internal Migration,” Population and Environment, v. 15,
no. 3, January 1994) estimated a slight but statistically insignificant decrease over time in
native in-migration to metropolitan areas as their immigrant concentration increased as well
as a virtually unchanged trend in out-migration in the face of heightened immigrant area
density. Mary M. Kritz and Douglas T. Gurak (“The Impact of Immigration on the Internal
Migration of Natives and Immigrants,” Demography, vol. 38, no. 1, February 2001) found
evidence of non-Hispanic native-born white men leaving states that experienced large
immigrant inflows during the 1980s, but only for inflows of Latin American and Carribean
immigrants; in addition, both native-born and foreign-born men were less likely to leave
states that experienced large immigrant inflows compared to other states. The research of
Michael J. Greenwood and Gary Hunt (“Economic Effects of Immigrants on Native and
Foreign-Born Workers: Complementarity, Substitutability, and Other Channels of
Influence,” Southern Economic Journal, v. 61, April 1995) suggested that these positive,
weak negative, or absent correlations might exist because the adverse wage or employment
effect on natives is completely offset by immigrants’ impact on local demand for products
and on area net exports demanded. Richard A. Wright, Mark Ellis, and Michael Reibel
(“The Linkage between Immigration and Internal Labor Migration in Large Metropolitan
Areas in the United States,” Economic Geography, vol. 73, no. 2, April 1997) concluded
that differences in the specifications that analysts have utilized to estimate the relationship
between immigration and internal migration account for their disparate results, including
failure to take into account the labor force size of a metropolitan area. See footnote 9 for
a description of studies that found evidence of a negative link between immigration and
internal labor migration.
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and they do not establish causality (i.e., that the observed migration patterns of
natives are due to immigration’s impact on the labor market).16
Based on its review of the inconsistent results provided by inter-area and
national studies through the mid-1990s, the National Research Council concluded
that
immigration has only a small adverse impact on the wage and employment
opportunities of competing native-born groups. This effect appears not to be
concentrated in the local areas where immigrants live; much of it is probably
dispersed across the United States as competing native workers migrate out of
the areas to which immigrants move. The migration of native labor and native
capital across cities (to take advantage of whatever differential economic
opportunities initially arise from immigration), as well as the beneficial effect
that immigrant groups have on other native groups, suggest the unlikelihood of
detecting any sizable negative effect on native workers.17
The Findings of Studies Using a Spatial Approach
Bean, Lowell and Taylor estimated the effect of authorized and unauthorized
Mexican workers on the earnings of native-born workers in metropolitan labor
markets in the southwestern United States in 1980. Regardless of the native-born
group in question (e.g., black males, non-Hispanic white males, native Mexican
males, and women), the numerical impact of Mexican male immigrants on natives’
annual earnings was small.18 Using an alternative estimation procedure, the
researchers found that legal Mexican immigrants slightly lowered the earnings of
native-born women and native-born non-Hispanic white men while not affecting the
earnings of native-born minorities. In contrast, they estimated that unauthorized
Mexican immigrants slightly raised the earnings of all groups studied except
Mexican-origin men. The authors explained these results by suggesting that
unauthorized Mexican immigrants do not compete with native-born workers as legal
immigrants appear to — unauthorized Mexican immigrants may take “secondary”
jobs, which are low-paying and unattractive to native-born workers, while legal
Mexican immigrants may possess characteristics needed to compete with native-born
workers for “primary” jobs. Nonetheless, regardless of the estimation procedure
used, the impact of authorized and unauthorized Mexican workers on the annual
earnings of native-born workers was small.
LaLonde and Topel found no evidence that immigrants reduce the annual
earnings of young native-born black and Hispanic males (i.e., the relationship is
16 Harriet Orcutt Duleep, The Economic Impact of Immigration: Past Results and New
Approaches, paper presented at the annual meeting of the Association of Public Policy
Analysis and Management, Washington, DC, 1995.
17 Smith and Edmonston, The New Americans, p. 230.
18 Frank D. Bean, Lindsay B. Lowell, and Lowell J. Taylor, “Undocumented Mexican
Immigrants and the Earnings of Other Workers in the United States,” Demography,
February 1988. (Note: The authors assume that Mexicans who entered the United States
before 1975 did so legally and those who entered after 1975 did so illegally.)
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statistically insignificant). Because the results were about the same with either
weekly or annual earnings as the outcome variable, they surmised that immigrants
also have an inconsequential impact on the amount of time worked (i.e., number of
weeks worked) by the two native-born groups.19
A study by Altonji and Card focused on the implications of increased
immigration for less-skilled native-born workers (i.e., those with 12 or less years of
schooling). When the researchers accounted for the location decisions of immigrants
and compared differences over time in inter-area wage growth, they found that
immigration significantly reduced the earnings of the less-skilled group.20 Altonji
and Card analyzed immigration’s impact on the employment outcomes of less-skilled
natives as well. They concluded that, on balance, inflows of foreign-born labor had
neither a large nor systematically positive or negative impact on the job opportunities
of less-skilled native-born workers.21 They did find some evidence of displacement
among native-born workers in high-immigrant cities in those industries that
employed relatively large and increasing numbers of immigrants between 1970 and
1980, including low-wage manufacturing industries (e.g., apparel), service industries
(e.g., private households), and agriculture. Because the employment outcomes of
less-skilled natives across all industries were unaffected, however, the authors
suspected that the job losers were able to get new positions in other industries or in
other metropolitan areas.
Utilizing data from the 1990 census, Card subsequently analyzed the
employment effects of recent immigrants on native-born workers and on earlier
immigrants employed in the same occupation-based skill groups. He estimated that
immigrants admitted to the United States between 1985 and 1990 who were
employed in laborer and low-skilled service occupations slightly reduced the
employment rates of natives and older immigrants in this lowest paid, least educated
group. Only in the few cities in which the inflow of foreign-born low-skilled
competitors during the 1985-1990 period “expanded their unskilled labor forces by
as much or more than the Mariel boatlift affected the Miami labor market” did
immigration substantially lower the employment rates of young, less-educated
natives.22 Card similarly found that, based upon data from the 2000 census, an
increase in the relative supply of male immigrants who failed to complete high school
had only a small adverse effect on the relative employment of male native-born
dropouts.23 In contrast, he estimated no relationship between a city’s increased
19 Robert J. LaLonde and Robert H. Topel, “Labor Market Adjustments to Increased
Immigration,” in John M. Abowd and Richard B. Freeman, ed., Immigration, Trade, and the
Labor Market, (Chicago, IL, University of Chicago Press, 1991).
20 Joseph G. Altonji and David Card, “The Effects of Immigration on the Labor Market
Outcomes of Less-Skilled Natives,” in Abowd and Freeman, Immigration, Trade, and the
Labor Market.
21 Ibid.
22 David Card, “Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts
of Higher Immigration, Journal of Labor Economics, 2001, vol. 19, no. 1, p. 58.
23 David Card, Is the New Immigration Really So Bad?, (Cambridge, MA, National Bureau
(continued...)
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supply of low-skilled male immigrants and the wages of their native-born
competitors. Card’s research led him to suggest that those industries in high-
immigrant areas which rely heavily on low-skilled labor (e.g., agriculture; textiles,
apparel, and footwear; and low-skilled service industries) have been able to absorb
the increase in immigrant supply without harming similar native-born workers.
Schoeni addressed some of the shortcomings of the spatial approach by
examining a period of time (the 1970s and 1980s) rather than one year, as is true of
most of the other cross-sectional studies discussed above.24 He also adjusted for cost-
of-living differences between cities with varying immigrant concentrations and for
the influence of immigrants’ location decisions, both of which could bias the results.
Schoeni found evidence that immigration has the largest adverse effect on the
earnings and employment outcomes of natives with less than a high school degree.
To a lesser degree, the labor market experiences of high school graduates appear
depressed as well. For example, increased immigration during the 1970s might have
caused a 2.2% decline over the decade in the real (inflation-adjusted) wage of low-
skilled white men, and increased immigration during the 1980s might have led to a
1.18 percentage point rise in unemployment over that period among low-skilled black
men. Similarly, heightened immigration during the 1970s might have prompted a
7.5% decrease in the real weekly wage of low-skilled black women, and heightened
immigration during the 1980s might have produced a 0.55 percentage point increase
in unemployment among low-skilled white women. Thus, the form of the labor
market effect may have changed over time: in the 1970s, the wage of native-born
workers bore the brunt of immigration’s impact; in the 1980s, the impact shifted to
native-born workers’ employment according to Schoeni’s analysis. While his results
support the notion that immigration imposes considerable costs on native-born
workers with 12 or less years of schooling, Schoeni concluded that its economy-wide
effects are small, because in 1990 unaffected workers (i.e., those with more than a
high school diploma) made up more than half of all workers.
Johannsson and Weiler similarly covered a span of time (1998-2002) and took
the location decisions of low-skilled immigrants into account. They estimated that
metropolitan areas experiencing an increase in their low-skilled immigrant
population have a significantly lower rate of labor force participation among similar
native-born workers. The withdrawal of natives from the local labor force may partly
explain the markedly reduced unemployment rate among low-skilled natives in areas
with increased immigration. The researchers suggest that “lower-skilled older
natives with considerable mobility costs may opt to reduce their participation rather
than out-migrate in response to adverse local labor market shocks” such as an
immigration-induced increase in the supply of labor.25
23 (...continued)
of Economic Research, August 2005).
24 Robert F. Schoeni, The Effects of Immigration on the Employment and Wages of Native
Workers: Evidence from the 1970s and 1980s, (Santa Monica, CA, RAND, March 1997).
25 Hannes Johannsson and Stephan Weiler, “Local Labor Market Adjustment to
Immigration,” Growth and Change, vol. 35, no. 1, winter 2004, p. 74.
CRS-11
Federman, Harrington, and Krynski found evidence of displacement among
native-born manicurists in California between 1987 and 2002 when areas within the
state experienced a very large influx of Vietnamese manicurists. Specifically, it
appears that two native (i.e., non-Vietnamese) manicurists were displaced for every
five Vietnamese manicurists who entered the labor market. The displacement was
manifested more through native-born workers not becoming manicurists than the exit
of native-born manicurists from the occupation, which the researchers suggest is why
economists find little or no overall effect of immigration on employment among
native-born workers. “The dramatic increase in the number of manicuring jobs
following the entry of Vietnamese immigrants should dispel the notion that
immigrants and natives compete for a fixed number of jobs.”26 New forms of service
(e.g., walk-in nail salons) could be partly responsible for the increase in demand for
manicurists, according to the authors.
The Findings of Studies Using a Nationwide Approach
Topel analyzed the local supply and demand factors that might have affected the
wage of low-skilled compared to high-skilled men during the 1980s. Not only did
he find that the wage gap between the two groups widened in every region but that
this happened at different rates in different regions. In particular, the West recorded
the largest decline in low-skilled men’s relative wage.27 Topel estimated that if it
were not for the increased presence of immigrants in the West’s labor force, the
supply of low-skilled compared to high-skilled men would have fallen by more than
it actually did, and the relative wage of low-skilled men consequently would not have
fallen by as much as it did. He concluded “... that immigration has played ... [a
significant] role in affecting the supply and welfare of low-skilled men,” especially
in the West where it might have reduced their relative wage by some 10%.28
Enchautegui examined how much of the decline during the 1980s in the level
of real (inflation-adjusted) wages among workers without a high school diploma was
due to the influx of low-skilled foreign-born labor. She estimated that, at the national
level, the increased presence in the U.S. labor force of low-skilled foreign-born
workers explained just 4% of the 13% decline in real annual earnings of workers with
less than 12 years of schooling. From a national perspective, then, the increase in the
supply of foreign-born workers without a high school degree had little impact on the
erosion in low-skilled workers’ earnings during the 1980s. But, the explanatory
power of the heightened presence of low-skilled foreign-born workers appears to
increase with an area’s immigrant density:
26 Maya N. Federman, David E. Harrington, and Kathy J. Krynski, “Vietnamese Manicurists:
Are Immigrants Displacing Natives or Finding New Nails to Polish?”, Industrial and Labor
Relations Review, vol. 59, no. 2, January 2006, p. 315.
27 Robert H. Topel, “Regional Labor Markets and the Determinants of Wage Inequality,”
AEA Papers and Proceedings, May 1994.
28 Ibid., p. 21-22. (Note: Part of the relative wage decline could have occurred because of
changes in composition rather than in labor supply per se. In other words, if unskilled
immigrants earn less than unskilled natives the group’s average wage would fall. To the
extent this is true, the analysis overstates the negative impact of immigration on the relative
wage.)
CRS-12
In areas of low immigration, only 2 percent of the wage change can be attributed
to increased immigrant representation in the work force. In areas of medium
immigration, 14 percent of the wage drop is due to the larger immigrant share
among the low skilled, while in areas of high immigration, the influx of
immigrants accounts for 43 percent of the 7-percent decline in wages
experienced in these areas.... In Los Angeles [an example of a high-immigrant
area], the change in the proportion of natives and immigrants accounted for more
than half of the 9-percent decline in real wages of low-skilled workers.29
Another study directly examined immigration’s labor market impact by relating
occupational differences in immigrants’ share of employment to the wages of natives.
Although it could not address whether foreign-born labor contributed to the decline
over time in the wage level of low-skilled workers because the research covered just
one period, the cross-occupation analysis was conducted on a nationwide basis so it
is not susceptible to the previously discussed drawback of the inter-area approach.
Camarota estimated that as the share of foreign-born employment in an occupation
rose, the earnings of native-born workers fell significantly.30 Specifically, for every
1% increase in immigrant composition in an occupation, the weekly wage of the
average native-born worker in that occupation declined by 0.5%. The data suggest
that the largest negative effects were felt by low-skilled labor: among all natives with
12 or less years of schooling, a 1% increase in the employment share of foreign-born
workers reduced weekly wages by 0.66%; among all natives in low-skilled
occupations (i.e., jobs typically performed by workers with no more than a high
school degree), a 1% increase in immigrant composition lowered weekly wages by
0.8%.
Although Borjas, Freeman, and Katz found that immigration played a
statistically significant part in the declining relative wage of low-skilled workers,
they concluded that it had little effect on either the growth in wage inequality or in
the wage gap between college and high school graduates. The economists estimated
that, between 1980 and 1995, immigration expanded the relative supply of workers
with less than a high school degree by some 15%.31 If immigration had not been
skewed in this manner, the relative wage of the scarcer low-skilled natives would
have increased (assuming unchanged employer demand). By becoming a major
supplier of low-skilled workers and thereby changing the nation’s skill endowment
from what it otherwise would have been, immigration may have accounted for some
29 Maria E. Enchautegui, “Immigration and Wage Changes of High School Dropouts,”
Monthly Labor Review, October 1997, p. 8.
30 Steven A. Camarota, “The Effect of Immigration on Low-Skilled Native Workers:
Evidence from the June 1991 Current Population Survey,” Social Science Quarterly, v. 78,
no. 2, June 1997; and Stephen A. Camarota, The Wages of Immigration: the Effect on the
Low-Skilled Labor Market, (Washington, DC, Center for Immigration Studies, January
1998). (Note: This research employs the same procedure as the Borjas, Freeman, and Katz
study to adjust for the undercount of illegal aliens.)
31 George J. Borjas, Richard B. Freeman, and Lawrence F. Katz, “How Much Do
Immigration and Trade Affect Labor Market Outcomes?”, Brookings Papers on Economic
Activity, no. 1, 1997. (Note: The authors adjust for the undercount of illegal aliens in the
government data series and estimate the educational attainment of the undercounted
component of the foreign-born labor force.)
CRS-13
44% of the decrease over the 15-year period in the relative wage of workers with less
than 12 years of schooling. The economists further estimated that immigration
lowered the wage of low-skilled workers by about 5% between 1980 and 1995.
Borjas, in more recent analyses, made refinements to the national approach that
address some of the previously mentioned criticisms. He found that an increase in
the supply of immigrant labor by skill group (defined by educational attainment and
years of work experience) over the 1960-2000 period had a significantly adverse
impact on the wages of native-born men with whom they competed: a 10% increase
in the number of workers in a given skill group reduced the absolute weekly wage of
similar native-born males by some 4%, and their employment (i.e., weeks worked),
by some 3%.32 Even after allowing for the positive earnings impact that low-skilled
(high-skilled) immigrants can have on native-born workers in high-skilled (low-
skilled) groups, Borjas estimated that recent (1980-2000) immigration reduced the
wage of native-born workers in each skill group. Young (i.e., less experienced)
native-born males without a high school degree appear to have experienced the
greatest negative wage effect, which seemingly was due to the entrance into the
United States between 1980 and 2000 of predominantly low-skilled authorized and
unauthorized Mexican workers. The author found that the overall wage impact of
increased immigration was more modest over the long run as the capital stock
adjusted to the greater labor supply, but he suggested that distributional differences
remained in light of the concentration of Mexican-born immigrants in low-skilled
groups.33 Similarly, Borjas estimated that natives’ adjustment to the inflow of
immigrants through migration within the United States attenuates the adverse effects
of immigration:
the internal native migration response of native workers accounts for about 40
percent of the gap between the wage effects estimated at the state and at the
national level. At the metropolitan area level, the data indicate that the native
internal response may account for as much as 60 percent of the difference.34
Ottaviano and Peri similarly studied the effect of immigration between 1990 and
2004 on native-born workers by taking into account both education and experience,
but reached very different conclusions, in part because they found foreign-born
workers were imperfect substitutes for native-born workers within an education-
experience group (i.e., they worked in different occupations and had different skills).
The two researchers estimated that, in the long run, the average real wage of U.S.
workers increased significantly (by 1.8%) as a result of immigration over the 1990-
2004 period. The short-run wage impact, as of 2004, before capital had fully
adjusted to the increase in immigrants, was still a positive albeit more modest
increase (0.7%). Ottaviano and Peri further found a significantly smaller real wage
32 George J. Borjas, “The Labor Demand Curve is Downward Sloping: Reexamining the
Impact of Immigration on the Labor Market,” The Quarterly Journal of Economics, vol. 68,
no. 4, November 2003.
33 George J. Borjas, The Evolution of the Mexican-Born Workforce in the United States,
(Cambridge, MA, National Bureau of Economic Research, April 2005).
34 George J. Borjas, “Native Internal Migration and the Labor Market Impact of
Immigration,” Journal of Human Resources, vol. XLI, no. 2, spring 2006.
CRS-14
loss among the least educated U.S. workers — -1.1% in the long run and -2.2% in the
short run — than had previously been derived. Further, this small share of the U.S.
labor force was the only group found to have been adversely affected. They also
estimated that immigration had little impact on relative wages: it made only a small
contribution to the widening of the wage gap between college graduates and high
school dropouts, and helped to reduce wage inequality between college graduates and
high school graduates over the 1990-2004 period.
Policy Implications
Some policymakers have proposed further strengthening the U.S. border with
Mexico to curtail the entrance of unauthorized aliens and improving enforcement of
more stringent sanctions against employers who hire these predominantly low-skilled
workers, based in part upon the belief that immigration does, in fact, have adverse
consequences for low-skilled native-born workers. It also has been suggested that
Congress address the distributional issue some empirical studies have raised by
changing the composition of legal immigration. If, for example, individuals
permanently admitted to the United States under the employment-based category are
largely high-skilled, while those admitted under one or more of the other categories
(i.e., family preference, immediate relatives, diversity, or refugees and asylees) are
largely low-skilled, then the current numerical limits on the latter might be lowered
to mitigate immigration’s presumed adverse consequences for less-skilled natives.
Indeed, if the skill levels of immigrants do differ by admission category, then an
across-the-board cutback in the number of foreign-born persons allowed into the
United States would not be an effective remedy for the poor labor market
performance of low-skilled natives in recent decades. Only if foreign-born workers
who enter under each of the categories has roughly the same skill distribution would
an untargeted reduction in the overall level of immigration assist less-skilled U.S.
workers.
Yet, changing the composition of immigration may not be the most effective
way to improve the plight of low-skilled native-born workers. As noted earlier in this
report, several explanations have been offered for the increase in U.S. wage
inequality. If other factors (e.g., skill-biased technological change) have played a
greater role than the inflow of low-skilled foreign-born workers, then curtailing the
immigration of this group may not much affect the wage and employment outcomes
of low-skilled U.S. workers.35
35 Augustine J. Kposowa (“The Impact of Immigration on Unemployment and Earnings
among Racial Minorities in the United States,” Ethnic and Racial Studies, v.18, no. 3, July
1995) estimates that, although immigration significantly reduced the earnings of native-born
non-white workers in 1980, the low skill levels of minorities were a much stronger
explanatory factor. “While findings in this study show evidence of competition” between
native-born non-whites and immigrants in the labor market, “the real solution to the
disadvantaged position of minorities in the US labour market is to address and redress
fundamental problems that may be linked to their skill levels. ... From a policy point of view,
restricting immigration solely because immigrants compete with minorities in the secondary
labour market for jobs that are obviously low-paying and menial is a tacit admission that
(continued...)
CRS-15
Moreover, a policy that shifts the composition of foreign-born persons who
legally enter the United States — through permanent admissions or guest worker
programs — toward the more skilled might have unintended consequences. An
increase in the supply of foreign-born workers to high-skilled occupations might
adversely affect the wage and job opportunities of native-born workers in those
fields. Despite the considerable debate that preceded amendments to the professional
specialty (H-1B visa) guest worker program made by Congress to increase the
arguably inadequate supply of native-born workers qualified to fill information
technology jobs,36 little research has been undertaken to assess the effects of the
policy changes on native-born workers.37
Perhaps not surprisingly, in light of the conflicting results of the previously
discussed literature, there is no consensus among the few studies that have looked
specifically at the impact on high-skilled native-born workers of an increase in the
supply of comparable foreign-born workers. One researcher tentatively concluded
that while allowing into the country H-1B workers with information technology (IT)
skills may not depress the wages of U.S. workers in computer-related occupations,
the program might adversely affect the group’s unemployment rate.38 Another
analysis similarly estimated that an increase in temporary and permanent immigrants
does not negatively affect the wages of U.S. workers in professional occupations.39
Although a third study determined that H-1B workers in computer programming
occupations typically are paid much less than U.S. workers similarly employed in the
same state,40 perhaps the number of H-1B programmers in a given state is not
sufficiently large to lower the wages of native-born programmers in a given state. In
contrast, yet another empirical study found that an increase in the supply of labor to
a particular doctoral field caused by an influx of foreign students reduced the
earnings of competing science and engineering Ph.D. students who graduated at
about the same time. The economist attributed “roughly half of the adverse wage
impact of immigration on high-skill labor markets ... to the increased use of low-pay
35 (...continued)
such jobs should exist and that they are there for minorities to fill. A sounder and fairer
strategy would be one that attempted to provide equal opportunities and incentives to
minorities so that they too could move to the higher level sectors of the economy.” p. 625
and 626.
36 For information see CRS Report RL31973, Programs Funded by the H-1B Visa Education
and Training Fee, and the Labor Market Conditions of Information Technology (IT)
Workers, by Linda Levine.
37 B. Lindsay Lowell, “Skilled Temporary and Permanent Immigrants in the United States,”
Population Research and Policy Review, Apr. 2001, vol. 20, no. 1-2.
38 Madeline Zavodny, “The H-1B Program and Its Effects on Information Technology
Workers,” Federal Reserve Bank of Atlanta Economic Review, Third Quarter 2003.
39 Pia M. Orrenius and Madeline Zavodny, Does Immigration Affect Wages? A Look at
Occupation-Level Evidence, Federal Reserve Bank of Atlanta Working Paper 2003-2a,
Aug. 2003.
40 John Miano, The Bottom of the Pay Scale: Wages for H-1B Computer Programmers,
Center for Immigration Studies Backgrounder, Dec. 2005.
CRS-16
postdoctoral appointments [in science and engineering] as a way of adjusting to the
increase in [labor] supply.”41
If the composition of foreign-born workers were shifted toward the high-skilled,
it could make it more difficult to utilize one means commonly suggested to mitigate
any adverse distributional effects of immigration. Students and low-skilled native-
born workers often have been encouraged to become complements of rather than
substitutes for foreign-born workers. Expressed differently, they have been urged to
obtain a bachelor’s degree or undertake retraining at community colleges, for
example, to acquire higher order skills expected to remove them from competition
with low-skilled immigrants. But with the admission of more high-skilled foreign-
born workers, just obtaining higher skill levels may not be sufficient to avoid
potential wage suppression and displacement, based upon the results of at least some
of the above-described empirical literature.
41 George J. Borjas, Immigration in High-Skill Labor Markets: The Impact of Foreign
Students on the Earnings of Doctorates, National Bureau of Economic Research Working
Paper 12085, Mar. 2006, p. 27.