Undocumented migration to the United States and the wages of Mexican immigrants

 
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After years of Congressional deadlock, in November 2014 President Obama announced a series of executive actions on immigration reform. While not creating a path to citizenship, they could protect up to 5 million immigrants from deportation and provide the ability for many to work. Given the wide range of attitudes that U.S. citizens have toward immigrants, reactions in the media and public discourse have been sharply divided.

Research on the potential impact of these changes suggests a variety of effects: Many formerly undocumented workers could get a wage boost as they move from up the employment ladder — good for them, less good for employers who have depended on a steady supply of low-cost labor. It could also serve to slow or reverse the declining rate of economic assimilation of U.S. immigrants that began in 1980. A 2014 study in the Journal of Population Economics, “Empirical Characteristics of Legal and Illegal Immigrants in the USA,” finds that those who are undocumented are more likely to be less educated, male and lower paid, and that older immigrants and those who are more educated are more likely to be legal. However, for immigrants coming from Mexico, the more educated they are, the more likely they are to be undocumented in the United States. Further, illegal immigrants suffer what economists call a large “wage penalty” at all education levels.

A 2014 study in International Migration Review, “Undocumented Migration to the United States and the Wages of Mexican Immigrants,” examines the impact of a change in the proportion of undocumented immigrants on immigrant wages and provides data on this increasingly struggling underclass in America. The researchers, Douglas Massey and Kerstin Gentsch of Princeton University, use newly available data to examine the evolution of immigrant wages from 1990 to 2009. Also part of the analysis is the period before and after the enactment of the Immigration Reform and Control Act of 1986 (IRCA), which had a significant impact on employer hiring decisions: “Before 1986 it was perfectly legal to hire an undocumented worker into a U.S. job,” the researchers write. “Afterward employers faced civil penalties and fines for ‘knowingly’ hiring undocumented migrants and possible jail time for repeated offenses.”

The researchers’ central hypothesis is that “a rising share of undocumented workers competing in U.S. labor markets generally works to lower the wages of Mexican immigrants, who increasingly lack documents and labor rights in the U.S. and are thus uniquely vulnerable and exploitable.” The IRCA had the effect of making the hiring of a significant percentage of the U.S. residents of Mexican origin illegal. The 2014 executive actions will have the opposite effect, and one primarily felt by undocumented immigrants from Mexico: According to a Pew Research Center report, they constitute approximately two-thirds of those who will be eligible for deportation relief.

The Princeton study’s key findings include:

  • “Wages of both native and foreign-born Mexicans steadily rose in parallel from 1950 to 1970,” but started to diverge after 1970. This occurred despite the increasing skill levels of Mexican immigrants, as indicated by their level of education and other factors. While Mexican-Americans earned 11% more than foreign-born Mexicans in 1970, the differential was 62% in 2000 and 78% by 2007.
  • On average, undocumented migrants earned approximately 20% less than legal immigrants and 13% less than legal temporary workers.
  • As the share of undocumented Mexicans rises, wages tend to decline sharply — for every point of increase in the percentage of undocumented workers, real earnings fall by 2.1%. “The sharp decline in wages in the years leading up to IRCA seems to stem from the rising share of illegal migrants competing in U.S. labor markets, not from shifts in individual qualities or characteristics, including individual legal status,” the researchers conclude.
  • Moreover, “controlling for the share of undocumented migrants eliminates the downward trend in wages from 1970 through 1986 and accentuates the negative wage gap observed thereafter, especially in the late 1990s, when wages for virtually everyone else in the U.S. were rising in response to tight labor markets and strong surges in labor demand.”
  • Deeper analysis of the data reveals that the IRCA’s having been enacted was a key factor: “The average real wage fell from $11.45 during the pre-IRCA period to $8.94 in the post-IRCA era, and the highly significant negative interaction coefficient indicates that something clearly happened after 1986 to push the wages of Mexican immigrants systematically downward. The obvious candidate for this exogenous ‘something’ is IRCA’s sudden criminalization of undocumented hiring.”

“In sum, the net effect of U.S. immigration and border policies enacted during the period from 1985 to 2010 was to increase the vulnerability and undercut bargaining power at the low end of the U.S. labor force, most notably in sectors dominated by immigrant workers,” the researchers conclude. The policy changes “imposed a new ‘tax’ on the hiring of workers in sectors of the economy characterized by significant undocumented employment, which employers extracted from their workers in the form of lower wages.”

Keywords: immigration reform, Hispanic, Latino, wages, executive actions, election issues

Last updated: December 10, 2014

 

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Citation: Massey, Douglas; Gentsch, Kerstin. “Undocumented Migration to the United States and the Wages of Mexican Immigrants,” International Migration Review, Summer 2014. doi: 10.1111/imre.12065