Since the 1980s the stock of immigrants to the US has been rapidly increasing potentially disrupting labor markets across the country. A large body of literature estimates the relative wage impact of immigration on high- and low-skill workers, but we know much less about how these effects map onto changes of the earnings structure. I begin with descriptively documenting the evolution of foreign-born workers in the natives’ wage distribution, showing that, over time, they have become increasingly over-represented in the very bottom. I then undertake two distinct empirical approaches in deepening our understanding of the way foreign-born shape the earnings structure. First, I construct a counterfactual wage distribution with lower immigration levels and estimate reduced-form quantile treatment effects. Second, I build and estimate a standard theoretical model featuring Constant Elasticity of Substitution (CES) technology and skill types stratified across wage deciles. Both analyses uncover similar monotone effects: a one percentage point increase in the share of foreign-born leads to a 0.1-0.2 (0.2-0.3) percent wage decrease (increase) in the bottom (top) decile and asserts no significant pressure in the middle.
Vasco Yasenov joined the Goldman School of Public Policy as a Postdoctoral Scholar in August 2017. He received his PhD in Economics from UC Davis earlier the same year and his B.S. in Mathematics-Economics from UC San Diego in 2012. His research focuses on quantifying various effects of immigration on the receiving economy with a focus on the labor market implications. He has also studied the impact of school start time and scheduling policies on students' test performance. His research on these topics has been covered by The Wall Street Journal, The Washington Post, The Economist, The Atlantic, Business Insider, Bloomberg View, The Chicago Tribune, and Vox.com among others. Vasco is also a Research Affiliate at the Institute for the Study of Labor (IZA).
*This working paper was made possible by the US 2050 project, supported by the Peter G. Peterson Foundation and the Ford Foundation. The statements made and views expressed are solely the responsibility of the authors.