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Legal Status for Undocumented Workers Is Good for American Workers

Immigration reform activists

SOURCE: AP/Alan Diaz

Immigration reform activists hold a sign in front of Freedom Tower in downtown Miami, Monday, January 28, 2013.

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A new report by our colleagues at the Center for American Progress shows that creating a path for undocumented immigrants to earn legal status and citizenship will lead to substantial wage gains for these workers. In turn, these wage gains will help spur the American economy and lead to significant increases in gross domestic product, tax revenue, and jobs in the coming years.

Some observers may worry that the gains for newly documented immigrants will come at the expense of native-born American workers. But our review of economic research finds these fears to be unfounded.

Studies of the last large-scale legalization effort in 1986 found that legalization did not reduce wages for native-born American workers and, in some cases, actually raised wages. More recent research on the effect of increases in immigration over the past few decades find little to no wage or employment effects, providing additional confirmation for the earlier legalization studies, as well as alleviating concerns about possible harm from future immigration.

Further, this body of research finds that those with low levels of education, as well as Americans of color, are also likely to be unharmed by immigration, though the research does suggest that the wages of other immigrants may be reduced.

Contrary to common fears, immigrants are not frequently in direct competition with native-born American workers, in part because they tend to have different skill sets. Native-born American workers, for example, are likely to have much greater English language skills than new immigrants, allowing native-born workers to access more skill-intensive jobs.

American workers are not harmed and may even benefit from immigration, because immigrants tend to be complementary workers who help make Americans more productive. Bussers at a restaurant, for example, help to make waiters more efficient by increasing the number of tables a waiter can cover.

Other immigrants—those who are better established in the workforce—however, may find themselves in more direct competition with newly legalized workers, and the research suggests that the wages of the former group may suffer. Still, the small negative wage effect the research finds for existing immigrants is at least partially ameliorated for many mixed-status families—families that contain both documented and undocumented immigrants—by the increased wages that are a result of legalization for formerly undocumented workers.

Let’s take a closer look at the research on how workers are affected by immigration and legalization.

After the United States granted legal status to a large number of undocumented workers in 1986 through the Immigration Reform and Control Act, economists have been able to directly study the wage effects of granting legal status. The research of this period that focused on how the legalization of undocumented workers impacted native-born American workers finds that wages were unharmed.

Perhaps the most directly relevant study of the effect of legalization is by economists Elaine Sorensen of the Urban Institute and Frank D. Bean of the University of Texas at Austin. The study looked at the trends in wages of several groups and compared trends before the passage of the 1986 immigration reform to trends afterward. Researchers studied native-born workers and immigrants who had been in the United States for varying lengths of time. Each of these groups—native born and immigrant—was then divided into those of Mexican origin and white, non-Hispanic workers. These gradations allowed the authors to determine which groups, if any, newly legalized immigrants were competing against. The authors found that the wages of native workers, whether white or of Mexican origin, were not affected by the legalization of undocumented workers. The wages of more tenured immigrants of Mexican origin were decreased, however, because they tend to compete for the same jobs as newly legalized immigrants.

The other study most directly on topic is by economists Deborah A. Cobb-Clark, Clinton R. Shiells, and B. Lindsay Lowell, of Illinois State University, the International Monetary Fund, and the U.S. Department of Labor, respectively. Their research examined the effect of legalization on average wages for production workers in the manufacturing sector, a sector known at the time to frequently hire undocumented workers. Their study estimated the effect of legalization by looking at how average manufacturing wages differed across metropolitan areas with differing amounts of newly legalized workers. Cobb-Clark, Shiells, and Lowell found that legalization had a statistically significant positive effect on wages, though the magnitude of the increase was very small.

These results on the effects of legalization are consistent with a large and growing body of research on immigration and wages. An emerging consensus in the academic literature concludes that the wages of native-born workers, even low-skilled workers, are not significantly decreased by increases in immigration. In fact, immigration may very well increase their wages because the research suggests that the complementary effect may outweigh any impact from an increase in competition.

For years economists disagreed about the effect of immigration on wages. One group of economists, exemplified by Harvard University economist George Borjas, argued that immigration was a simple story of supply and demand. Immigrants increased the supply of labor and therefore reduced the wages of similarly skilled native-born Americans. Research in this vein tended to look at national labor markets when evaluating the effect of immigration and found significant decreases in wages for all workers, particularly for low-skilled workers.

A second group of economists argued that the national-level studies did not recognize that immigrants were not directly competing with many native-born workers because immigrants provided a different kind of labor than native-born Americans. This group of economists focused on studying regional labor markets to prove their point.

One study by University of California, Berkeley, economist David Card looked at the sudden influx of Cuban immigrants in Miami due to the Mariel Boatlift of 1980. He found that the large increase in low-skilled immigrants did not have any significant effect on the wages or employment opportunities of low-skilled native workers. Card separated out native workers into whites, blacks, Cubans, and Hispanics and found that none of these groups were adversely affected by the increased Cuban immigration.

More recent research has rectified these two strands of the literature—the national and the local approaches—to provide strong evidence that increases in immigration do not reduce wages for native-born American workers. This emerging consensus has been reflected in recent articles appearing in The New York Times and The New Yorker magazines, among other places.

The studies that are creating a new consensus take a national approach, such as those that found negative wage effects, but tweak the research method to account for several facts about the labor market that the area studies recognize. These adjustments, as detailed by Heidi Shierholz, an economist at the Economic Policy Institute, account for the difference in how readily employers switch between different types of workers.

First, the new national approach accounts for the inability of employers to perfectly substitute immigrants for native-born workers, who have skills that many immigrants cannot easily acquire, such as fluency in English. Since employers are less able to hire immigrants for jobs that require the kinds of skills most native-born workers have, fewer immigrants are competing against native workers than the method favored by Borjas assumed. Secondly, the new national approach takes into account the fact that employers can easily switch between high school dropouts and workers with a high school degree because these groups of workers have similar levels of job-relevant skills. Because of this hiring flexibility, the effect of an increase in immigrant workers who often have less than a high school degree is borne by a much larger group than previous research recognized.

The new national approach, like the older papers, also considers the role of immigrants as complements, making native-born workers more productive.

This new consensus is best reflected in several papers by economists Gianmarco Ottaviano of the Universita’ di Bologna, Italy, and Giovanni Peri of the University of California, Davis. In a 2012 paper Ottaviano and Peri studied the effects of immigration from 1990 to 2006 first by estimating the different elasticities of labor—how readily employers can substitute one kind of worker for another type of worker. The authors then plugged these estimated elasticities into a national labor model similar to one used by Borjas. They found native workers, on average, had their wages go up 0.6 percent due to increased immigration. And perhaps more interestingly, native-born workers with less than a high-school education also saw their wages increase. Ottavino and Peri did find, however, that increased levels of immigration reduced the wages of the average foreign-born worker.

More recent research has also found that immigration does not affect the employment of native-born workers. A 2009 paper by Peri and economist Chad Sparber of Colgate University found that immigration did not reduce the employment opportunities of native-born American workers. They found that native workers move into more highly skilled occupations in response to immigration. Specifically, black workers were more than three times as likely as nonblack workers to shift into higher-skill jobs. In a separate 2011 paper, Peri adapted the approach from his paper with Ottaviano to look at the employment effects of immigrants in California. Peri found that immigration to California between 1960 and 2005 did not affect the employment of native workers. This research implies that the legalization of undocumented immigrants would also not affect employment as these workers are already employed and therefore pose no threat to native workers.

In short, research on the 1986 legalization of undocumented workers, as well as more recent research on increased immigration, strongly suggests that a new effort to provide legal status for currently undocumented workers would not harm American workers, and in fact is likely to benefit them. Given that research also finds that legalization would increase the wages of the formerly undocumented workers, lawmakers should feel confident that legalization would be good for workers and the American economy.

David Madland is the Director of the American Worker Project at the Center for American Progress Action Fund. Nick Bunker is a Research Assistant at CAPAF.

* Note that the inflation adjusted average hourly wage of production and nonsupervisory workers declined by 3.7 percent from 1987 to 1992, but the research indicates that the Immigration Reform and Control Act’s legalization program did not cause the wages of native workers to decline.

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