Policy Matters is a quarterly series of reports that provide timely research and guidance on issues that are of concern to policymakers at the local, state, and national levels.

Volume 4, Issue 3 by Fernando Lozano and Todd Sorensen is entitled: The Labor Market Effects of Immigration Reform.


Executive Summary

Since 1965, the United States has experienced a large increase in the number of immigrants. Not only did the number of authorized immigrants increase with the lifting of national origin quotas, the number of undocumented immigrants also increased after the end of the temporary guest-worker policies such as the bracero program. Undoubtedly this has changed the United States labor markets and reframed policy discussions.

The issue of undocumented immigration has grown in importance during the past two decades, as the number of such immigrants has increased significantly, and as immigrants have arrived to many new destinations in the United States. These trends have prompted calls for greater immigration enforcement, but also for an eventual path to legalization for those who have lived and worked in the United States for many years.

In this study we explore the evolution of the current undocumented population over the last
two decades and its demographic characteristics. We also briefly summarize the federal government’s current and past policies towards immigrants. Finally, we explore the potential change in labor market outcomes among currently-undocumented immigrants if a future program that allows them to gain documents, such as the Immigration Reform and Control Act (IRCA) did in 1986, and as the proposed McCain-Kennedy immigration reform bill of 2007 would have done if enacted into law.

Our study uses a new approach to find the causal impact of IRCA on immigrant wages. We take advantage of the fact that immigrants who had been in the United States since before 1982 were eligible for IRCA, while those who came afterwards were not eligible. By estimating the likelihood that an individual Mexican migrant appearing the U.S. census is undocumented, we compare changes in the wages of those who were eligible for IRCA to those who were not.

We find that a legalization program would increase immigrant wages by more than 20 percent. We also find that most of this effect can be attributed to immigrants switching into higher paying oc- cupations after legalization, rather than receiving higher wages in the jobs they previously held. These results, combined with other studies, suggest that a path to legal status will likely: a) help immigrants by improving their earnings, b) increase U.S. economic productivity by allowing immigrants to find jobs better matched to their skills, and c) have a negligible impact on the wages of native-born workers.

Fernando Lozano is assistant professor of economics at Pomona College, and Todd Sorensen is assistant professor of economics at UC Riverside. Both are labor economists whose specializations include immigration and labor supply. This report draws from a recent paper by Lozano and Sorensen entitled “The Labor Market Value to Legal Status” (2010).

For more information, contact Todd Sorensen at (951) 827-1475 or by email: todd.sorensen@ucr.edu