The Effects Of Immigration: An Examination Of Relative Wages In California's Agriculture

Abstract

Economic theory suggests that certain native workers experience a decrease in their wage in response to an inflow of immigrants. However, a large number of empirical studies have failed to find substantial negative effects on the wages of natives due to immigration. In this paper, I identify three possible aggregation problems that may lead to such small estimates of the reduction in natives’ wages: First, immigrants from various countries with varying characteristics are often lumped together in the literature. There are substantial differences between immigrants from different source countries, however, e.g., in terms of education. Second, Metropolitan Statistical Areas may not exhibit much across-variation in immigrant shares so that the influence of immigrants on natives’ wages may not be distinguishable from other factors. Third, most previous work assumes that the effect on natives’ wages is the same regardless of the industry in which a native works. This may not be a plausible assumption to make given that immigrants are heavily concentrated in some industries. I address these issues in the following ways: First, I use a special immigrant definition to focus on a certain type of immigrant. I define an individual as an immigrant if that person entered the United States within the previous ten calendar years and if that person reports his or her ability to speak English as “Not well” or “Not at all.” Second, I examine the state of California, the state that has been the state with the highest levels of immigration in recent decades. Third, I focus on the agricultural sector within California, an industry that has one of the highest shares of immigrant workers of all industries. I examine whether modifying the research strategy typically employed in previous work by taking these three aggregation issues into consideration enables researchers to find substantial negative effects of immigration on the wages of natives. I study the impact of immigration on native agricultural workers in California by comparing their wages to the wages of native agricultural workers in a large region in the Northern part of the United States. In that comparison, regional differences in the cost of living must be accounted for. I achieve that by expressing agricultural workers’ wages relative to the wages of a reference group that is chosen for its small share of immigrants. In the comparison of relative wages, I find that low-skilled natives in California’s agriculture indeed do earn lower hourly wages than their counterparts in the North of the United States, thus reconciling empirical estimates with economic theory.