The minimum wage and migration decisions

This paper investigates the local labor supply effects of changes to the minimum wage by examining the response of low-skilled immigrants’ location decisions. Canonical models emphasize the importance of labor mobility when evaluating the employment effects of the minimum wage; yet few studies address this outcome directly. Low-skilled immigrant populations shift toward labor markets with stagnant minimum wages, and this result is robust to a number of alternative interpretations. This mobility provides behavior-based evidence in favor of a non-trivial negative employment effect of the minimum wage. Further, it reduces the estimated demand elasticity using teens; employment losses among native teens are substantially larger in states that have historically attracted few immigrant residents.

That is from a 2014 paper by Brian C. Cadena, and here is Jorge Pérez Pérez:

I find that areas in which the minimum wage increases receive fewer low-wage commuters. A 10 percent increase in the minimum wage reduces the inflow of low-wage commuters by about 3 percent.

And here is one bit from a research paper by Terra McKinnish:

Low wage workers responded by commuting out of states that increased their minimum wage.

Via the excellent Jonathan Meer, you don’t hear about this evidence as much as you should.


Is this the apple story again?

In an earlier blog post, Cowen linked a piece by Will Wilkinson in which he recommended, among other things, "[g]ranting states some authority to mint visas to meet their specific labor market needs [to] . . . help dry up demand for undocumented workers, stave off depopulation, keep businesses in place, and fill in fiscal gaps", and as a way to revitalize rural and small-town America. This libertarian idea (way to go Will!) is coupled with some not so libertarian ideas.

It's almost like he's trying to present more than one point of view on here. Vincent Geloso, by the way, has the best thoughts on the minimum wage to date.

That article is dumb, in that its argument only makes sense if wages = MPL. If W < MPL, firms will under-innovate because they can get excessively cheap labor instead.

Which is to say, one’s opinion on this is exactly isomorphic to how one views standard arguments for the min wage in terms of monopsony.

Why do you think businesses want more customers?

Trump voting customers seem to want busunesses to have fewer customers based on businesses having a max quota oof goods and services they are allowed to sell, so more immigrants will by conservative zero sum rules mean less consumption per consumer.

Leftists want more consumers based on the liberal zero sum rule that more consumers drives more workers, and more workers drives more consumers, more wage income drives more higher dollar value consumption.

of course low-skilled immigrants go to places with low mobile elasticity. High mobile elasticity means there is less safety. low-skilled immigrants have a worst case scenario of homelessness.

The minimum wage is a representative issue of dems and reps but it lacks the proper nuance to be able to do so. It instead operates as a labor economists wish list. As in the case of fraud, we don't know what it is until after it happens (is changed). As in the case of fraud, you need 2 sticking points. We don't even know if the minimum wage is a mechanical issue or a financial one.

"Low wage workers responded by commuting out of states that increased their minimum wage."

The welfare cash transfer from EITC, SNAP, and other means tested programs like government single payer Obamacare under 138% poverty cutoff, is so high that workers actively seek and spend more to work at lower than local market rates?

Workers would not spend more time and money traveling to take low wage jobs is everyone had the option of signing up for Medicaid, perhaps for a means tested fee, say a flat tax on income. Medicaid is, of course, government single payer health care.

(Create a master list of SSNs on Medicaid which employers must access once a quarter to trigger an extra FICA tax on employee basis, ie, an employee match given they have lower cost providing health benefits, or have healthier workers without paying for health benefits, which is the reason employers provided health benefits during WWII when labor shortages required employing workers with health problems given healthy workers had been drafted.)

Another way to interpret this "Low wage workers responded by commuting out of states that increased their minimum wage" finding is to say undocumented workers prefer "cheap" places where the cost of living is likely low (Texas vs Virginia) and they don't have to compete with "suburban privileged teens" for "good paying minimum wage jobs". Using cliche phrases to make my point.

Bonus trivia: in one of these "rankings" of states looking at the totality of circumstances the other day, even factors like state debt on state pensions due, California was ranked ahead of Texas (which was below average), and Virginia, Maryland were in the top 10 states, and all the "white" states (CO, NH, VT, MN, NE) were ranked high, as was (in the teens) Florida. Florida Man lives! In general the south states had the worse scores. AZ was also low (below average).

The "commuting" reference really does mean commuting: people who live near a state boundary change their commuting behavior in response to min wage.

'by examining the response of low-skilled immigrants’ location decisions'

The U.S. has a miniscule number of legal 'low skilled' immigrants. Most of the low skilled workers from other countries are not allowed to legally work in the U.S.

Making one truly wonder how a group of people trying to avoid being detected while working in the U.S. were able to be reliably surveyed as to their preferences of where they would be breaking the law to work.

Surveys are expensive, tedious, and sometimes inconclusive. Since you already know the answer you want, why bother?

You can make up for a lack of quality surveys by putting a lot of equations into your studies

Yes, It Can Be a Cop-Out

'Since you already know the answer you want'

It is not an answer, it is a challenge when talking about the largest group of low skilled workers, who do not have any permission to work in the U.S. Millions of workers are employed illegally in the U.S., and they generally take fairly extensive measures to try to keep from being discovered in any sense that would bring official attention.

Isn't this common knowledge?

Maybe the survey takers have a method that allows for a large group of people who want no attention to be reliably surveyed. Making this - 'Surveys are expensive, tedious, and sometimes inconclusive' - an observation that seems to miss the nature of the people being surveyed, most definitely including providing any information where they plan to reside and work illegally.

Up until 2001 or so, a significant number of Irish men worked - without permission - in the American construction industry in a number of cities. Do you think basically any of those Irish construction workers would talk to a stranger about their plans to work in Chicago or SF? Particularly to a stranger with an American accent?

So a high minimum wage improves the neighborhood. Especially fewer foreigners. Is that why democrat enclaves are enthusiastic about it?

Right. Successful pro-business red state policies, such as in Texas, tend to inundate the state with low skilled immigrants, with long term implications for the Republican Party.

Texans love cheap labor that's their problem. Dems love high cost labor that's their problem. Paying for labor appears to be the common problem but the majority of Americans believe working for a living is the right thing to do. LOL

of what value is the economics profession if its practitioners can not reach consensus on the relatively simple economic issue of Minimum Wage Laws effects ?

perhaps another 10,000 Minimum Wage essays will resolve things ?

Economists largely have a consensus

It disagrees with what journalists want to be true

And there's your problem

Are you going back?

No, I am here, in Brazil, and we, the people from Brazil, are taking our country back. As President Captain Bolsonaro pointed out, it is time to re-take our freedom.

You, Thiago, managed to ask it and get an unanimous agreement from all the you, people of Brasil?

I am mesmerized and forever grateful to the infallible collective wisdom of the workers masses in Brasil. The people of Brasil have all the same, consistent, sophisticated, rock-hard, just, political awareness, even more than the people of North Korea.

A 10 percent increase in the minimum wage reduces the inflow of low-wage commuters by about 3 percent.

Looks like we need a 330% increase in the minimum wage.

p.s. You say low-wage, but everyone knows you mean illeg(oops...undocumented immigrants!

High minimum wages cause businesses to move, and limit their labour demand; this limits low wage migration. This is known. Can't draw migrants if you don't stay in business (#RollSafeThinkAboutItMeme).

For a given level of static unskilled labour demand that is inflexible to wage changes, high minimum wages (and income compressing measures generally) will draw in higher levels of unskilled migration, as per the standard Borjas model.

How many minimum wage paying businesses are able to move? Many such concerns are tied to local customer bases (hospitality, retail etc.)

Medicaid is, of course, government single payer health care.

So, it's free. Careful, there's a herd of unicorns over there.

I might be a bit naive asking the question, but what do you really think about people like Warren or Sanders?
A) they are not aware of the studies linking increases in minimum wage and unemployment
B) they do not believe them for some reasons
C) they think the “total social welfare” improves because the employed are more than the unemployed
D) they just want to be elected and don’t give a shit about the unemployed
E) none of the above (please, articulate)

Something like C with maybe a little A and B, believing that people making 'a living wage' is more important than the people who do not get employed at all (and the studies that show this are biased and anti-socialist)

B) they do not believe them for some reasons
D) they just want to be elected and don’t give a shit about the unemployed
F) they want to punish people who accumulate wealth (WARREN)

If they're anything like the Seattle Brain Trust (B) & (F) are the main outward justifications, but when it comes down to it, (D) is the critical factor.

The "raise min wage" message isn't meant for min wage workers. Who would aspire to such a pathetic future as a higher min wage? It's real purpose is social signaling to middle and upper middle class liberal voters who, having achieved substance, want to feel like their doing something for the pathetic people. That's why it doesn't matter what the result is.

Why Thiago comment is not here anymore? I do not want to hurt any feelings, and in truth I come here for Alex’s and Tyler’s posts (and the comments), but Thiago posts are at least 10% of my motivation.

Is your life really that pointless, hun?

Thanks, but you know what the poet said: "We live in a political world: wisdom is thrown in jail. It rots in a cell, is misguided as hell, leaving no one to pick up the trail".

What a loser you must be. The last thing the world needs is a cheerleader for shithole fascists.

No but what the world does need is someone so lonely that they sockpuppet others to make themselves feel wanted.

I'm here to serve. Brazil first, then this website.

Lighten up: if you think you can tell who a loser is from a few words on an internet site maybe your philosophy of life is rather attenuated.

There are a few bots who are allowed to post here by sad bot-meister commenters, but most of the comments here are from posts are from people, people who have lived real lives for a long time, who have grandparents who could tell you stories about the past that you may or may not believe but that would still be stories, real stories, what we call stories .....

Tell me why Bolsinaro is a fascist and Cuomo isn't.

Go for it.

Incorporate into your explanation the charges that were dropped against the guy who killed the unborn child in his murder victim, look it up if you don't know what I am talking about, little anti-Stengel

"Accused murderer spared abortion charge thanks to Cuomo's new law" ---
NY Post, Feb 8, 2019.

Shut up about Bolsinaro unless you can explain that.

So that is it. We cannot freely talk about Captain Bolsinaro without upsetting the snowflakes. Such is life in Trump's America.

There's a word that means infants wet their bed frequently.

datz haarsh

fare but hazrsh

Hi, mouse!

ignatz --- Krazy Kat --- da constable !!! I remember !

The case has already been made that min wages were originally used for discrimination, right?

Also, it's interesting that there are no error margins on these numbers. The numbers seem reasonable at face value but while they may be "non-trivial," they're not economy-bending either. Even for Seattle's 50% hike in min wage, it suggests only a 15% reduction in immigrant flow, and that before figuring in the effect of myriad other state programs that throw money at immigrants.

So I guess it would be interesting to see error margins to see exactly how wide the spread is.

Whatever the case, Democrats clearly don't mean min wage increases to discriminate. Their intention is to pile benefits on immigrants, and they do so with many other

A bizarre argument.

Since it is true that an increase in the minimum wage destroys many low-wage jobs, it is reasonable to assume that many people who seek low-wage employment will not migrate to that market. I'm not sure this is a "good" thing though; generally increasing unemployment is viewed with some antipathy.

Also, if we assume that many illegal workers are in the underground economy, where niceties such as the minimum wage, payroll taxes, and other regulations are ignored, then an increase in the minimum wage would have the opposite effect. Hire a "legal" worker at $15/hour, plus payroll taxes, or hire an illegal at $10 with no add-ons. It makes the hiring calculus tip even further in the direction of the illegal worker.

This doesn't seem surprising at all. If he increase in the minimum wage decreases the job separating rate. it will be easier to find work elsewhere where the turnover rate is higher.

Comments for this post are closed