Policy Research

Rethinking the effect of immigration on wages

Gianmarco Ottaviano, Giovanni Peri

Summary

The article attempts to estimate the overall effects that immigration has on wages of both U.S. natives and other immigrants at various education levels. Unlike the majority of studies trying to estimate this effect, this study is done at the national level and thus allows for a general equilibrium view on how sensitive to substitution various labor types are. The study uses census data and finds that the cumulative effect of immigration between 1990-2007 lead to an overall increase in the wages of native citizens by a somewhat small 0.6%. Additionally, the study estimated that immigration during the same time period could be attributed to a roughly 6% decrease in wages of other immigrants. There was slight evidence that immigration could have caused small (less than 2%) decreases in wages of natives without a high school diploma. Overall, however, there appears to be a very small effect on wages.

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Policy Implications

This article can be used in attempting to factor in costs of increased or decreased immigration into the country. The findings here suggest that wages of native workers are barely if at all affected by immigration which could lead the way for policies that favor immigration to become more desirable if other benefits are present. Additionally, it is possible that increasing immigration at rates similar to 1990-2007 could increase U.S. wages overall.