This paper explores the impact of immigration on the wages and employment of U.S. workers — a topic that remains central to current economic and political debates. The authors review a number of earlier models to estimate the effects of immigration on the wages of U.S. workers with varying education and age levels from 1960 to 2000. While these studies have been influential, they have not been updated to reflect more recent immigration trends or to incorporate modern econometric techniques. The paper aims to address these gaps. It begins by reviewing three common approaches to estimating the effects of immigration on labor market outcomes: natural experiments, shift-share instruments, and the national “factor-supply” approach. The first approach uses sudden changes in immigrant supply in specific locations to identify causal effects, but its results may not be generalizable. The second approach exploits variations in immigrant inflows across U.S. commuting zones, using preexisting immigrant networks to predict new arrivals. The third approach, which the paper revives and extends, analyzes the national effects of immigration on wages by skill group. The paper finds that immigrants and natives are not perfect substitutes in the labor market and that there is a degree of “complementarity” that has positive effects on native wages. It estimates that the recent inflow of immigrants from 2000 to 2019 increased wages for less educated natives by 1.7 to 2.6% and had no significant wage effect on college-educated natives.
Immigration’s Effect on US Wages and Employment Redux,
National Bureau of Economic Research, April 2024, 52 pp.
Authors: Allesandro Caiumi & Giovanni Peri