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Impact of Illegal Immigration on the Wages & Employment of Black Workers
implication is that we are capturing only about two percent of all undocumented workers in
the state, and, perhaps more importantly, this means that any impact of the presence of
undocumented workers that we identify is expected to be an underestimate of the impact we
would measure if we were capturing all undocumented workers in the analysis.
IV. Main Findings
A.
Impact on Wages
Based on the most recent estimates of the growth of undocumented workers between 2000
and 2007, the share of undocumented workers in Georgia has increased from four to seven
percent. Our analysis indicates that as a result of this growth in the share of undocumented
workers, the annual earnings of the average documented worker in Georgia in 2007 were 2.9
percent ($960) lower than they were in 2000. The results for the construction industry were
not very precise, but annual earnings for the average documented worker in the leisure and
hospitality sector in 2007 were 9.1 percent ($1,520) lower than they were in 2000. This
impact is expected to be lower for the U.S. overall, where we've seen only a two percentage
point increase in undocumented workers.
In addition, these estimated impacts of the presence of undocumented workers on wages are
larger than what others have found for the impact of immigrants as a whole.
B.
Displacement
Our results show that an increase in the share of a firm's new hires that is undocumented
leads to a
decrease
in documented workers leaving their jobs, but to an increase in
undocumented worker leaving. Like others have found for immigrants overall, we find that
newly arriving undocumented workers seems to displace earlier arriving undocumented
workers, but have no adverse effect on the separation of documented workers.
How could it be that arrival of a new set of workers results in less separation? There are two
mechanisms that could be at work to explain this—we did not test these theories, but offer
them, as others have, to illustrate how this result can be consistent with economic theory.
When an input to the production process becomes less expensive, it should have two effects.
In this case, it is labor that has become relatively less expensive with the arrival of
undocumented workers. The first effect is what is called the
substitution effect
. The lower
cost of labor entices firms to substitute away from capital inputs and use more labor; this
increases the demand for labor, thus employment.
The second effect is called the
scale effect
. The idea here is that if one input to the production
process becomes less expensive, total production becomes less expensive, inducing firms to
increase production, which, in turn, increases demand for all inputs, including labor.
C.
Why the impact of undocumented workers is expected to be greater
When workers do not have many alternative job prospects, they have been found to be less
sensitive to wage changes than if they could find new employment easily. What this means is
that these limited workers will be less likely to quit their jobs when they face low wages or
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