IMMIGRATION AND INEQUALITY

May 8, 2009

How does immigration affect the economic opportunities of American workers?  A controversial topic for decades, this question has become extremely important as approximately 1.25 million immigrants per year arrived in the United States between 2000 and 2005, with a third or more of them undocumented and with low education and skills.  Is the impact of these new arrivals on native wages related to the widening U.S. wage gap between high- and low-skilled workers?

David Card, a researcher with the National Bureau of Economic Research, attempts to answer this question in his new study.  Using data from Chicago, Detroit, Philadelphia, Los Angeles and other cities from 1980-2000, Card draws three conclusions:

  • Workers with less than a high school education are perfect substitutes for those with a high school education; in other words, dropouts and high school graduates, whether immigrants or natives, compete for the same jobs (although high school graduates earn somewhat more per hour).
  • Workers with a "high school equivalent" education and those with a "college equivalent" education are imperfect substitutes; the former simply do not have access to the same jobs, opportunities, or wages as the latter group.
  • Within broad education classes, immigrants and natives similarly are imperfect substitutes.

Together these results imply that the impacts of recent immigrant inflows on the relative wages of U.S. natives are small, says Card.  The effects on overall wage inequality (including natives and immigrants) are larger, reflecting the concentration of immigrants in the tails of the skill distribution and higher residual inequality among immigrants than natives. Even so, immigration accounts for a small share (5 percent) of the increase in U.S. wage inequality between 1980 and 2000.

Source: David Card, "Immigration and Inequality," National Bureau of Economic Research, Working Paper, No. 14683, January 2009.

For text:

http://papers.nber.org/papers/w14683

 

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