Academic journal article Economic Commentary (Cleveland)

Do Foreign-Born Workers Cause Native-Born Workers to Move or Leave the Labor Force?

Academic journal article Economic Commentary (Cleveland)

Do Foreign-Born Workers Cause Native-Born Workers to Move or Leave the Labor Force?

Article excerpt

The impact of foreign-born workers on the native-born workforce in a local labor market has been investigated in a number of research studies, but the impact and its magnitude are as yet unclear. Many empirical studies have estimated the effect of immigration on wages and unemployment, but the results are inconclusive. Estimates of the effect on unemployment have fallen over a wide range, and most estimates of the effect on wages have been small and negative for less-educated workers (see Blau and Kahn, 2014). However, most studies have focused on only these two possible effects of immigration. Other ways in which the local labor market might adjust to an influx of foreignborn workers, such as native-born workers exiting the labor force or moving to another labor market, have been explored less. Because these other channels of adjustment could partially mute the impact of foreign-born competition on native-born workers' wages and employment, they should be investigated in more depth.

In this Commentary, we focus on these other adjustment channels. Using individual-level data, we calculate both the probability of an individual dropping out of the labor force and of migrating to another state as the fraction of the foreign-born population changes, controlling for demographic and local labor market characteristics. In order to account for any remaining omitted variables, we introduce the interaction of state and time as fixed effects that capture potential differences in the local labor markets' business cycles. Given the features of the data we use, we limit our analysis to short-term effects in the local labor market.

our results indicate that less-educated native-born workers do react to the presence of foreign-born workers in their local labor market. We find that less-educated native-born workers are more likely to either move to a different state or drop out of the labor force in states with higher fractions of foreign-born workers. Though the effects are quantitatively small, they are not insignificant.

Data

To analyze changes in labor force participation rates, we use data from the monthly matched Current Population Survey (CPS). To analyze changes in interstate migration, we use data from the Annual Social and Economic Supplement (ASEC) of the CPS. The CPS does not follow workers who move across states, but it asks detailed questions about the respondents' previous migration patterns, so we know exactly where respondents have lived in the past year. Consequently, we focus on migrations that occurred within the year preceding the interview.1

Table 1 shows descriptive statistics for the sample of primeage (25-54) male workers used for the migration analysis. Following the literature, we exclude women from the main analysis because women's labor market decisions tend to have a strong nonmarket component (for example, the decision to take care of children).2 The characteristics of the sample used for the labor force participation analysis are qualitatively the same. The majority of the male workers in the sample are younger than 40, white, and less-educated, where less-educated means having a high school diploma or less. Most are native-born, healthy, and married. The average unemployment rate in the state in which they worked in the year prior to their interview was 6.6 percent. As for the share of the foreign-born workers in the state, we see a wide variance. The median is 11 percent of the labor force, but the minimum is 1 percent and the maximum is 36 percent.

Table 2 shows other descriptive statistics for the states in which native-born workers lived before and after moving from one state to another. Workers tend to move from states with higher concentrations of foreign-born workers to states with lower concentrations. Similarly, they tend to move from states with higher unemployment rates to states with lower rates.

In the next section, we try to estimate the probability of workers moving across states as well as dropping out of the labor force. …

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