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Legal Status Boosts Immigrant Wages


Legal Status Boosts Immigrant Wages

Granting legal status to undocumented residents does not harm native workers’ wages, UC Riverside study reports.

(March 1, 2011)

RIVERSIDE, Calif. – Granting legal status to undocumented U.S. residents helps them find jobs that are better suited to their skills, and helps increase wages and economic efficiency, according to a study by economics professors at the University of California, Riverside and Pomona College.

This report comes on the heels of a national survey of Latinos which shows that immigration reform is an even bigger priority for Latino voters than the economy or health care. With Latino voters growing in numbers in many presidential battleground states, studies like these may also point to political benefits that may arise from immigration reform, in addition to the economic benefits noted.

Previous studies also demonstrate that legalization would not depress wages or employment among U.S. citizens, according to this study, which appears today in Policy Matters, a quarterly journal published by UC Riverside.

Economists Fernando Lozano of Pomona College and Todd Sorensen of UC Riverside determined that granting legal status increases the average pay of undocumented immigrants by 20 percent.

"Most of these effects can be attributed to immigrants switching into higher-paying occupations after legalization, rather than receiving higher wages in jobs they previously held," they said in their paper, "The Labor Market Effects of Immigration Reform."

"This research is an important piece of the larger picture on immigration reform," Sorensen said. "A path to legal status will help immigrants by improving their earnings, increase U.S. economic productivity by allowing immigrants to find jobs better matched to their skills, and to top it all off, will likely have only a negligible impact on the wages of native-born workers."

Sorensen and Lozano, citing earlier reports from the Pew Hispanic Center, said the population of undocumented immigrants has grown by about 250,000 per year over the last 20 years, and numbers approximately 12 million nationally. The majority of that population – between 70 and 80 percent – is Latin American and is concentrated in a small number of states.

Citing a 2009 paper from the Federal Reserve Bank of Atlanta, the economists noted that "exploitation of undocumented workers is frequently cited as an explanation of low pay, with the presumption that these workers would have much more power vis-à-vis their employers if they were to gain legal status."

For these and other reasons, the report notes, "undocumented workers are unwilling or unable to use the competitive force of outside offers in the labor market to keep their wages on par with their documented counterparts."

Undocumented immigrants may also be unable to perform the same types of jobs as native-born workers or authorized immigrants, the authors note in their summary of other studies. "Native-born workers are more likely to specialize in occupations that require more communication (taking advantage of being native speakers of English), leaving low-skilled immigrant workers to specialize in occupations that are more intensive in manual tasks."

Lozano and Sorensen developed a new model to determine the impact of legal status on immigrant wages that combines data from the U.S. Census and Mexican Migration Project (MMP), and compares wages of immigrants who arrived in the United States before 1982 and were eligible for legal status under the 1986 Immigration Reform and Control Act, and those who arrived after the cutoff date. The MMP surveys Mexican citizens who return home, as well as family members of those who immigrated to the United States permanently.

The economists found an increase of about 20 percent in wages, which they said can be attributed to switching into higher paying occupations, rather than receiving higher wages in the jobs that immigrants would have held without a status change.

"Given the big increase in wages and job freedoms, it is perhaps not surprising that the vast majority of Latino voters want to see immigration reform happen sooner rather than later," Sorensen said. "But it's also important to note that the U.S. economy as a whole also benefits, given increases in economic efficiency and wage returns to skills."

Finally, the Policy Matters paper measures only monetary benefits to legal status, Lozano noted. "There are other benefits that we do not (cannot) measure: for example the psychological reward of not living 'in the shadows,' ability to return back and forth to the country of origin, and incentives to invest in host-country specific capital like learning English," he said. "In the face of our inability to measure these unobserved benefits, our estimates represent a lower bound in the welfare of an immigrant due to legalization."

The study is available online at policymatters.ucr.edu.

The University of California, Riverside (www.ucr.edu) is a doctoral research university, a living laboratory for groundbreaking exploration of issues critical to Inland Southern California, the state and communities around the world. Reflecting California's diverse culture, UCR's enrollment has exceeded 21,000 students. The campus opened a medical school in 2013 and has reached the heart of the Coachella Valley by way of the UCR Palm Desert Center. The campus has an annual statewide economic impact of more than $1 billion.

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