The effect of immigration on the wages of the natives

Abstract

This study investigates how immigrants affect the wages of native people, using 1% representative sample of the U.S. population of 2019 American Community Survey (ACS) data. The natives and the immigrants are separated into two groups based on their education: the “low skill” group and the “high skill” group. The “low skill” group contains individuals who only have a high school diploma or less or attended college without getting a degree. Individuals who are more educated, for example college graduates, or those who own an associate degree or a master’s degree belong to the “high skill” group. To account for the impact of immigration on wages of native individuals this study uses regressions with variables that are separated in two groups, the occupational level variables, and the individual level variables. The occupational - level variables are the following: the percentage of men in each occupation, the average education level of people in each occupation, and the immigrant variable, that is the percentage of immigrants in each occupational category. The individual - level variables are the following: the individual’s employment status, sex, minority status, and the education level. There is also the difference between the age of the individual and the average age of their occupation and the difference between the age of the individual and the average age of their occupation squared. The dependent variable that will be used is the log of the natives’ weekly wages for four different specifications. The first specification will be performed to check the affection on the wages of all native workers. The second regression is using the same variables as the first, with the addition of two interactive terms. The first one is the product of the average occupational education level and the percentage of immigrants in the occupation. This will define if the amount of immigrants in an occupation is dependent upon the average occupational education level. The second interaction term is the product of the percentage of men in each occupation, multiplied by the percentage of immigrants in each occupation, in order to define if the percentage of immigrants in an occupation is dependent upon the percentage of men in that occupation. The third specification will be performed as the first one, but only for low-skilled native workers, in order to define how immigrants affect the wages of this vulnerable group and finally, the last regression only for high-skilled native-born workers. Next, since USA has a lot of minorities in its population, this study will show how immigrants affect the wages of native individuals who belong in minorities and non-minority groups. In terms of the findings, when looking at individual level, all the natives are affected negatively by immigrants, especially those who are low skilled in terms of their education. But, when looking at the occupational level, immigration has different effects for each occupation category. Native individuals that are employed in occupations that have low average education level are negatively affected by immigration, while native individuals that are employed in occupations that have high average education level are positively affected by immigration. Also, the effect of immigration on minorities and non minorities is very similar.