The Wage Impact of Undocumented Workers

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in www.econstor.euThe paper has benefited from comments and suggestions from George Borjas, J. David Brown, Curtis Florence, Jerry Gonzalez, Gordon Hanson, Robert E. Moore, Pia Orrenius, Giovanni Peri, Debra Sabia, Eric Seiber, Chad Sparber, Madeline Zavodny, and seminar participants at the Departments of Economics at the Georgia Institute of Technology, the University of Kentucky, the University of Georgia Department of Public Administration and Policy, Claremont-McKenna College, and the University of California-Riverside. The research assistance of Gustavo Canavire, M. Laurel Graefe, Gustavo Uceda, and Eric Wang is much appreciated. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility. Abstract: Using administrative, individual-level, longitudinal data from the state of Georgia, this paper finds that a documented worker employed by a firm that hires undocumented workers can expect to earn 0.15 percent less than if employed by a firm that does not hire undocumented workers. However, in sectors where there are opportunities for task specialization and benefits from communication skills, documented workers can expect to earn a wage premium of less than 1 percent from being employed at a firm that also hires undocumented workers.JEL classification: J30, J15

The Drivers of Income Inequality in Rich Countries

“…More broad firm‐level studies of monopsony focus instead on particular occupations like nurses (Staiger et al ., ) or teachers (Falch , 2011; Ransom and Sims, ), or on a well‐defined type of worker like low‐wage workers in restaurants (Dube et al ., ) or undocumented workers in Georgia, USA (Hotchkiss et al ., ). In these and related studies, identification is attempted through the exploitation of natural or quasi‐experiments arising from policy changes, via policy differences across contiguous local labour markets, or using very rich data in relatively homogeneous labour market environments.…”

The Expected Impact of State Immigration Legislation on Labor Market Outcomes

“…DeFreitas () and Hotchkiss, Quispe‐Agnoli, and Rios‐Avila () investigate the wage impact of the presence of undocumented workers, finding only modest impacts that vary across worker skill level and across sectors. Brown, Hotchkiss, and Quispe‐Agnoli () present evidence that employing undocumented workers gives firms a competitive advantage, suggesting that the lower wages paid to undocumented workers likely derives from firms taking advantage of the workers' limited job opportunities and mobility, rather than reflecting merely lower productivity of the workers.…”

“…For example, see Hall (), Costa (), Benjamin et al. (), and Hotchkiss, Moore, and Rios‐Avila (). They are also larger than those estimated by Bhaskar, Manning, and To (), who reported elasticities in the range of 0.7 and 1.2; larger than those estimated by Manning (), who reported elasticities roughly equal to 1; and are similar to those estimated by Ransom and Oaxaca (), whose estimates were close to 2.0 for both men and women.…”

Does Employing Undocumented Workers Give Firms a Competitive Advantage?*

“…This paper does not address the overall welfare impact of firms employing undocumented workers. For example, the potential for consumers to pay lower prices as a result of firms employing cheaper labor (Cortes, 2008) or the possibility that documented workers may earn lower wages as a result of the presence of undocumented workers (Hotchkiss et al, 2012) are issues not addressed here.…”

“…4 4 See Hotchkiss et al (2012), Kossoudji and Cobb‐Clark (2002), and Rivera‐Batiz (1999). We implicitly assume firms know whether a worker is documented or not, though in reality firms must conduct costly background checks to be sure.…”