Task Specialization, Immigration, and Wages

Abstract

Many workers with low levels of educational attainment immigrated to the United States in recent decades. Large inflows of less-educated immigrants would reduce wages paid to comparably-educated native-born workers if the two groups are perfectly substitutable in production. In a simple model exploiting comparative advantage, however, we show that if less-educated foreign and native-born workers specialize in performing different tasks, immigration will cause natives to reallocate their task supply, thereby reducing downward wage pressure. We merge occupational task-intensity data from the O*NET and DOT datasets with individual Census data across US states from 1960-2000 to demonstrate that foreign-born workers specialize in occupations that require manual and physical labor skills while natives pursue jobs more intensive in communication and language tasks. Immigration induces natives to specialize accordingly. Simulations show that this increased specialization might explain why economic analyses commonly find only modest wage and employment consequences of immigration for less-educated native-born workers across U.S. states. This is especially true in states with large immigration flows. show that this increased specialization might explain why economic analyses commonly find only modest wage and employment consequences of immigration for less-educated native-born workers across U.S. states. This is especially true in states with large immigration flows.

The Wage Impact of Undocumented Workers

“…However, a positive expected wage impact is consistent with results of Peri (2006) and Peri and Sparber (2009), who conclude that increased immigration leads to increased efficiency and productivity through task specialization. At the firm level this might manifest itself in documented manual laborers being reassigned to tasks that require more communication skills -25 -(or oversight of the new undocumented labor), while the undocumented workers specialize in the manual labor tasks.…”

“…Peri (2009) and Peri and Sparber (2009) suggest that efficiency and productivity can benefit from the task specialization that is likely to result as firms hire low-skill immigrants to perform the tasks previously performed by natives. The natives are re-assigned to relatively higher-skilled tasks that make better use of their comparative advantage, say, communication.…”

“…More recent evidence from Peri (2009) and Peri and Sparber (2009) suggests that immigrants do not crowd-out employment of native born workers; there is no significant effect on hours worked of native born workers in the short run, but hours significantly increase in the long-run; and that there is no short-run impact on native worker income. However, over time, a net increase of immigrants equal to one percent of employment significantly increases income per worker from 0.6 to 0.9 percent.…”

“…And, thirdly, certain skills, such as communication, are likely to be more lacking in undocumented workers (than in immigrants in general). And, according to Peri and Sparber's (2009) model, the presence of undocumented workers with limited communication skills would provide opportunities for even low-skilled native workers (or their employers) to shift the native skill contribution to production toward those that are more highly rewarded (specializing in tasks requiring greater communication skills). 1 The analysis in this paper makes use of longitudinal, administrative, individual-level data from the state of Georgia to investigate how the presence of undocumented workers affects the wages of documented workers.…”

Spillovers from immigrant diversity in cities

“…Borjas, 2015;Peri and Yasenov, 2015), recent findings leveraging detailed individual and firm-level data suggest that immigrants and natives can also be thought of as complements, with positive, albeit relatively modest wage benefits (Ottaviano and Peri, 2012;Dustmann et al, 2013;Lewis and Peri, 2014). Another strand of this recent work shows how immigrant entry in labor markets prompts natives to shift occupations, with generally positive outcomes measured in terms of wages and employment (Peri and Sparber, 2009;Cattaneo et al, 2013;Ortega and Verdugo, 2014;Foged and Peri, 2016).…”