Effects of Immigration on Native Workers in Construction
November 9, 2017
ARE grad student Zach Rutledge analyzed changes in annual earnings and weeks worked for US-born construction workers employed alongside foreign-born workers. The share of foreign-born workers was rising, especially until the 2008-09 recession, so Rutledge used an imperfect instrument variable estimator to determine migrant impacts on native workers, finding that rising share of migrants reduced the number of weeks worked by US-born workers but not their weekly earnings. ARE grad student Ali Hill thought the analytic approach was novel and compelling.
This paper provides new empirical estimates of the short-run impacts of immigration on the employment opportunities of US-born workers. We focus on the constructor sector, a primary employer of immigrant workers in the US and one of the economic sectors with the highest share of immigrants, about 29% in 2016 according to the Bureau of Labor Statistics. Using panel data at the metropolitan area-year level of aggregation constructed from US Census and American Community Survey data, we find that a 10 percentage point increase in the share of immigrant workers reduces annual earnings of US-born construction workers by at least 3.7%, with workers in immigrant-prone trades experiencing earnings reductions in excess of 7.3%. These bounds are derived using a so-called “imperfect instrument approach” (Nevo and Rosen, 2012), whereby the share of immigrant workers is instrumented by the share of immigrants across all sectors of the economy. Our partial identification strategy relies on the assumptions that the share of immigrants across all economic sectors in a market is positively correlated with construction-specific labor demand shocks about location and year effects, but less so than the share of immigrants in construction. Our results further indicate that US-born workers experience lower annual wages through reduced employment (fewer weeks worked per year) rather than lower weekly wages. In immigrant-prone trades, the unemployment rate of natives is predicted to increase by at least 3.7 percentage points for each 10 percentage point increase in the immigrant share.
Hill's Comments (Summary)
Broadly, this paper contributes to the understanding of the effects of immigration on the labor market outcomes for native-born workers in the United States. More speci cally, the paper examines the impact of changes in the share of foreign-born workers in the construction sector on annual earnings, weekly earnings, number of weeks worked within a year, and unemployment rates for native-born construction workers. To do this, the paper uses 1990 and 2000 U.S. Census data as well as American Community Survey data (ACS) from 2003 to 2011. Because increases in immigration are likely correlated with unobserved demand-pull factors which also a ect the income and employment outcomes of natives, the OLS estimator is biased. The authors are the rst to use an imperfect instrumental variable (IIV) to partially correct this bias and estimate upper bounds on the impacts of immigration. The authors make substantial contributions to existing literature through their results and the novel application of this methodology. Using the IIV, the authors nd estimates of the effects of immigrant share on annual earnings and employment rates for U.S. natives that are negative, signi cant, and larger in magnitude than previous estimates.