Transcript The Labor Supply of Undocumented Immigrants: Towards an Assessment of

The Labor Supply of Undocumented
Immigrants: Towards an Assessment of
the Impact of Status Regularization
George J. Borjas
Harvard University
August 6, 2015
1. Regularizing the status of
undocumented workers
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DHS estimates that 11.4 million undocumented persons
reside in the United States (as of January 2012).
Congress is considering proposals to regularize the
status of the undocumented population and provide a
“path to citizenship,” while President Obama has issued
executive orders that grant some form of amnesty to
about half of this population.
2. Evaluating the impact of a
regularization
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Predicting the impact of the regularization on the inflows
and outflows of funds into any government program
immediately runs into an impenetrable roadblock: We
know almost nothing about the economic status of the
11.5 million undocumented persons in the United States.
We know little about their employment history (so, for
example, we do not know how many would potentially
meet the 40-quarter eligibility requirement for Social
Security). We know little about their earnings history,
about their financial contributions to various government
programs, or about how those earnings and
contributions would change if their status were
regularized.
3. What this paper does
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This paper represents a first attempt at providing some of the
requisite background information involved in conducting any
such future evaluation. In particular, the paper provides a
comprehensive empirical study of the labor supply behavior of
undocumented immigrants in the United States.
The analysis is based on data drawn from CPS files that
attempt to identify the “likely undocumented” population at
the individual level. This identification is an extension of the
methodology employed by DHS to estimate the size of the
undocumented population.
I have the 2012-2013 CPS files created by the Pew Research
Center, and have “reverse engineered” the method to all
1994-2014 March CPS files.
4. Main findings
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Labor supply, men: Undocumented men > Legal
immigrant men > Native men.’
Labor supply, women: Native women > Legal immigrant
women > Undocumented Women. The undocumented
are always at the “extreme” in labor supply.
Labor supply of undocumented men rose dramatically
between 1994 and 2014. The relative employment rates
of undocumented women also rose, but at a much
slower rate.
The labor supply of undocumented men and women is
much less responsive to wage changes than that of legal
immigrants, which in turn is less responsive that that of
native persons
5. Undocumented immigration (DHS
estimates)
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Jan. 2000: 8.5 million.
Jan. 2005: 10.5 million.
Jan. 2007: 11.8 million.
Jan. 2008: 11.6 million.
Jan. 2010: 10.8 million
Jan. 2011: 11.5 million
Jan. 2012: 11.4 million
25% live in California; 16% in Texas; 59% come
from Mexico.
6. Estimating size of undocumented
population
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Residual Method. Originated in 1987 in work by Jeffrey
Passell (now at PEW Research Center) and Robert Warren
(Chief Statistician of INS at the time).
We know how many “green cards” have been given out. We
can calculate expected size of legal immigrant population by
using mortality rates and age at migration, and accounting for
out-migration.
We have enumerations of number of foreign-born in country
(Census, ACS, CPS).
Adjust the number of foreign-born for persons in US with
student visas, H-1Bs, etc.
Difference between the adjusted number enumerated and the
expected number of legal immigrants is the DHS estimate of
the number of undocumented immigrants.
7. Key assumption used in estimating
size of illegal population by DHS
8. Pew method to identify undocumented
at micro level in CPS
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Created by Jeff Passell.
Immigrants entering the U.S. before 1980 are legal.
Immigrants entering as refugees are identified as such based on
country of origin and year of entry.
Immigrants with temporary visas (e.g., students, diplomats, hightech workers) are legal.
Immigrants in some occupations are legal (working for the
government, licensed occupations, veterans).
Immigrants receiving some types of public assistance are legal.
Some family relationships extend legal status to relatives.
Residual number of undocumented immigrants is larger than DHS
estimates. So use a “probabilistic assignment process.” Passell then
creates a new weight so that aggregates match DHS numbers.
I have the micro files for March 2012 and March 2013 CPS.
9. Pew: fraction of legal and undocumented
immigrants in population
0.18
0.16
Frac on of popula on
0.14
0.12
0.1
Legal
0.08
Undocumented
0.06
0.04
0.02
0
20
25
30
35
40
45
Age
50
55
60
65
10. Reverse engineering the process
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Legal if citizen.
Legal if arrived before 1980.
Legal if receives Social Security, SSI, Medicaid, Medicare, or Military
Insurance.
Legal if works for government or is a veteran.
Legal if lives in public housing.
Legal if works in occupation that requires some type of licensing
(Examples: Legislators, Accountants, Architects, RNs, Teachers,
Inspectors of Agricultural Products, Lawyers, Air Traffic Controllers).
Legal if certain family members are legal immigrants.
The residual group is undocumented.
I have added the undocumented identifier to all March CPS files
between 1994 and 2014.
11. Fraction of undocumented immigrants in
population
0.12
0.1
Frac on of popula on
Pew
0.08
Reconstruc on
0.06
0.04
0.02
0
20
25
30
35
40
45
Age
50
55
60
65
12. Means of key variables, pooled 2012-2013
13. Predicted age-employment profile, Pew,
men
14. Predicted age-employment profile, Pew,
men, adjusted for education
15. Predicted age-employment profile, Pew,
women
16. Predicted age-employment profile, Pew,
women, adjusted for education
17. Differences in labor supply (relative to
natives)
18. Labor supply trends, men, 1994-2014
0.9
0.88
0.86
Na ve
Legal
Undocumented
Frac on employed
0.84
0.82
0.8
0.78
0.76
0.74
0.72
0.7
1990
1995
2000
Year
2005
2010
2015
19. Labor supply trends, men, taking out year
effects
0.12
0.1
0.08
Na ve
Legal
Frac on employed
Undocumented
0.06
0.04
0.02
0
-0.02
-0.04
1990
1995
2000
Year
2005
2010
2015
20. Labor supply trends, women, taking out
year effects
0.05
0
Frac on employed
Na ve
Legal
-0.05
Undocumented
-0.1
-0.15
-0.2
1990
1995
2000
Year
2005
2010
2015
21. Labor supply elasticities, men
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Uses data aggregated at skill-year level. Log wage on r.h.s. is mean
log wage of skill group in a particular year. Last column includes
state-year fixed effects (so aggregated at skill-state-year level).
22. Hours of work and wages, native men
8
7.8
Log annual hours
7.6
7.4
7.2
7
6.8
6.6
6.4
6.2
6
0.5
1
1.5
2
2.5
Log hourly wage
3
3.5
23. Hours of work and wages, legal
immigrant men
8
7.8
Log annual hours
7.6
7.4
7.2
7
6.8
6.6
6.4
6.2
6
0.5
1
1.5
2
2.5
Log hourly wage
3
3.5
24. Hours of work and wages, undocumented
men
8.5
Log annual hours
8
7.5
7
6.5
6
0.5
1
1.5
2
2.5
Log hourly wage
3
3.5
25. Labor supply elasticities, women
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Uses data aggregated at skill-year level. Log wage on r.h.s. is mean
log wage of skill group in a particular year.
26. Towards an evaluation of
regularization programs
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This is just a first step. A “stylized fact” implied by the research
is that undocumented men “come to the United States to
work.” But that stylized fact does not apply to undocumented
women.
Because undocumented men work and their labor supply is
insensitive to changes in the wage, it is almost surely the case
that many will have worked 40 quarters by the time they reach
retirement age. It is unclear, however, whether their employers
collected FICA taxes.
The implications for the Social Security system are yet to be
determined. A similar analysis of earnings determination in the
undocumented sample needs to be conducted, although
preliminary data indicate that undocumented workers earn far
less than both legal immigrant and natives, even after adjusting
for observable skills.