The Wage Penalty to Undocumented Immigration

This paper examines the determinants of the wage penalty experienced by undocumented workers, defined as the wage gap between observationally equivalent legal and undocumented immigrants. Using recently developed methods that impute undocumented status for foreign-born persons sampled in microdata surveys, the study documents a number of empirical findings. Although the unadjusted gap in the log hourly wage between the average undocumented and legal immigrant is very large (over 35%), almost all of this gap disappears once the calculation adjusts for differences in observable socioeconomic characteristics. The wage penalty to undocumented immigration for men was only about 4% in 2016. Nevertheless, there is sizable variation in the wage penalty over the life cycle, across demographic groups, across different legal environments, and across labor markets. The flat age-earnings profiles of undocumented immigrants, created partly by slower occupational mobility, implies a sizable increase in the wage penalty over the life cycle; the wage penalty falls when legal restrictions on the employment of undocumented immigrants are relaxed (as with DACA) and rises when restrictions are tightened (as with E-Verify); and the wage penalty responds to increases in the number of undocumented workers in the labor market, with the wage penalty being higher in those states with larger undocumented populations.

By George Borjas and Hugh Cassidy, via the excellent Kevin Lewis.


You mean they get paid less when they don't have documents because they aren't supposed to be (legally speaking) in the country where they are seeking wages?
"Penalty" in regular English at least sounds like they are having something inflicted on them that they don't deserve. That is sort of a political position. So,what is their wage "bonus" for being undocumentedly in the country, by which I mean the difference between what they are getting illegally and what they would be gettng back where they originated, or in some alternative place where they could have gone?
I'm not unsympathetic to folks seeking economic improvement. Open the borders, tear this wall down, Mr Gorbachev, as a Great American once said (although some believe he was a better B-actor than President).

"'Penalty' in regular English at least sounds like they are having something inflicted on them that they don't deserve."

No. The word is used in regular English to describe legal punishments. To say "death penalty" doesn't necessarily means one opposes it.

It also means "disadvantage, loss, or hardship due to some action". Actually, it is seldom if ever, used to mean "something inflicted on them that they don't deserve."

Penalty and etymologically related words can mean various things but they all have the sense of punishment, as any dictionary will confirm. Either I was unclear or you misunderstood. I wasn't saying penalties as such must be undeserved but rather that calling a wage difference a penalty suggests more than simply a difference. If the wage difference is a penalty/punishment then it must be for something (a sin, crime, infraction, or wrong-doing) that was either deserved or undeserved, depending on your view of the inherent unacceptablity of the thing that was done. Therefore the penalty is either just or unjust. For example, that they deserve the same wages whether or not they are undocumented, that there is something unfair about paying them less. Therefore it is unjust that these workers are not given documents. I'm neither arguing the numbers or the political preference, just the insertion of politics into the economic analysis.

From the Webster, "disadvantage, loss, or hardship due to some action
Loss of privacy is one of the penalties you pay for fame."

I am pretty sure there is a more cumbersome phrasing they could have used instead, but it is pretty clear what they meant: non-documented immigrants are at a disadvantage. They made it xlear by uaing the word "gap".

Put a penalty on hiring illegal aliens AND legal foreign workers. Fine employers $1000 a day per illegal worker. Asses a tax of $10 an hour on legal foreign workers to compensate for the American workers pushed out of those jobs.

Let's tax the American worker $1000 per day. They're the ones that push other Americans out of their jobs.

Gus, logic isn't your strong suit is it?
You should have gone with your first idea: "Oh yeah!"

What about the "wage penalty" imposed upon legal immigrants or citizens by unfair and illegal competition from illegal aliens? Illegal aliens now dominate industries such as construction, landscaping, hospitality, agriculture, trucking, and many others. Entry level jobs in those industries used to provide opportunities for legal residents to move up into middle class management positions or small business ownership. Not anymore. Why should a home builder contractor hire a recent high school graduate as a carpenter's apprentice when he can hire a bunch of illegals for $12/hr under the table? This has really hurt the non-college educated class but the elite class doesn't give a flying fig because they like their cheap landscapers and handymen.

I don't care about the penalty to illegals - they should be deported and their employers busted.

Bingo EdR.

Full text:

When they enter by jumping through all the necessary hoops and being checked for suitability they are "legal" immigrants, but when they don't, that is, the exact opposite, they are merely "undocumented" immigrants?

No. When they are outside of our borders waiting to get in, they are underprivileged. But once they are here, they are an oppressed mass.*

* And possibly also underprivileged. I have to check the latest intersectionality memo to see if I'm stacking correctly.

If an illegal with no training can do your job, you deserve to lose your job. Unions are disgusting trash that destroy shareholder wealth.

Yes, the "undocumented" euphemism is silly.

Not silly - a deliberate corruption of the English language for political gain. In NYC, they are trying to label the use of “illegal immigrant” a potential hate crime.

'In NYC, they are trying to label the use of “illegal immigrant” a potential hate crime.'

Which is stupid, as such a law would clearly be against the 1st Amendment. Any use of language, thankfully, is allowed in the U.S. without anyone needing to worry about being charged with a crime (the basic exceptions should not be necessary to explain here, one hopes).

In that case, show them your "undocumented assault rifle".

There's a looooooong distance between "illegal" and "worthless human".

"...Irish ..."

When I called my doctor's office yesterday I didn't have to listen to long message in Irish. That said, I would happily deport illegal aliens from Ireland.

We have laws, passed by Congress as per the Constitution, that set conditions for legal immigration. If we have the rule of law we have to enforce the law or it's a suggestion and not a law. It's not ok to choose not to enforce the law because the law breaker will vote for Democrats or is in an otherwise sympathetic class of people.

Unfortunately, the financiers of corrupt Republicans and all the Democrats are in favor of not enforcing the law, but the American electorate is in favor of enforcing the law.

If you don't like the law, then change it!

Well, duh. If illegals were as expensive as locals, the incentive of the corporations to scream "amnesty" would be much diminished.

Oddly enough the Left does not seem to have a problem with this treatment of people, as long as they have new "underprivileged masses" to fawn over.

The main finding is that the wage penalty for illegal immigration is surprisingly small.

dan1111, keep in mind that the legal wage is being dragged down at the low end as well.

I expect that's so, as illegal migrants can still find the market price - but remember wages is not the full "expense".

Consider that employing illegal migrants probably means they won't seek redress if injured, not allowed vacation, can be more easily fired at will, etc. Those are costs.

Also consider impacts over time; relatively immobile, not unionised illegal workers will have trouble pay bargaining. Illegal employment is more displacing, and wage suppressing, and condition degrading than it is actively wage reducing.

I remember the New Yorker, when it was still principally employing reporters, as opposed to memoirists, had a good story about a poultry processing facility somewhere, and the parade of different ethnicities it had recruited (and sometimes bused in, across borders) to make up its workforce over the years (initially it was local Amish, and as the story concluded they were looking to bring over ... Nepalese, I think it was).

One thing I recall, if not the precise details: this woman from Central America had worked there for like 15 years. She was perhaps on the bosses' radar because she had agitated for the workers to be given better gloves. Or gloves. Anyway, one day she was injured - cut - so badly that she was unable to work. She was called in to the office and the owner of the plant pulled out a file and said, why, we've noticed some discrepancy with your social security number, looks like you were here illegally, goodbye.

I find the centrality of chicken to our immigration woes interesting because I don't care for it that much, and could happily eat it not above once a year.

So what's it going to be, Open Borders or not? You STEM/Econ nerds need to stop pussyfooting around and pull the trigger, either let everyone in (except the people who might be or might become rapists or welfare cheats), or don't.
And don't start with the America is a nation of immigrants. It's also a nations of genocide and race-based slavery. Not going to lie or name-call, but you STEM/Econ nerds are the reason Trump got elected.

This post and the full paper make zero claims about what the correct immigration policy should be. It's simply an attempt to measure what is actually happening...but sure, why not ignore that and jump straight to the stupidest version of political immigration arguments?

And by "stupidest version" I specifically mean reducing the entire range of possible immigration policies to an argument about "open borders".

Name-calling is inappropriate, Dan.

He didn't insult you. Just your stupid ideas.

That's an indirect way of calling the person who mentioned (not endorsed) the idea stupid, which is unacceptable and cowardly. In addition, "insulting" ideas, rather than engaging them in a meaningful, sincere way, is a fascist practice, inappropriate in a democracy. Moreover, I don't feel insulted, Dick. You East Coast elite egghead types still don't get it. Trump voters (and real Americans in general) want answers, not a long list of "possible immigration policies" that all seem to impact them adversely, and indeed, "penalize" them for being native born, hard working, Christians. You arrogant Coastal pseudo-intellectual useful idiots are the reason America's president is a has-been mediocre reality show star. The People have spoken.

"The People have spoken"

OK, and what have they gotten for it? Anything materially change for Trump voters in the past 3 years? Big boom in manufacturing employment, no more illegals, lots of new coal mining? No, of course not.

Team Red won the game and got to cheer. Now there's another game next November. What's the point spread?

Am I wrong in interpreting this result to mean that employers do not fear consequences of hiring undocumented workers? (Or at least don't think those consequences are large monetary terms.) If so is it because laws are not enforced, or because penalties for violation are so small?

Many of the employers are mom & pop businesses such as restaurants and small retail shops. They're almost always hired under the table in such places, and it's not unknown for the business owners themselves to be illegal.

For some reason, many people have a notion that illegals have corporate jobs but work in them with false papers. I guess there are such people, but the vast majority of them work in a parallel underground economy that's specifically set up to hire and employ them in large numbers.

So, "going after the employers" could be far harder than it may seem.

Let's just suspend all immigration from Latin American countries and be done with it. No more papers.

Just let them all in already!

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