In August, 2010, CBS News and Vanity Fair commissioned a national poll that asked 1082 people, ““Do you think illegal immigrants coming into this country take jobs away from American citizens, or do they mostly take jobs Americans don't want?” Nearly 90 percent of the respondents chose one of the two options offered but 34 people said they had no opinion on the subject and 105 volunteered that it was a bit of both. Suppose we drop the latter two groups and specify:

High School D

ropout

High School G

rads

Some Colle

ge

College G

rad

Post-Gra

d0

10

20

30

40

50

60

70

80

Jobs Nobody WantsTake Jobs AwayPerc

ent Figure 1. Attitudes about whether Immigrants take Jobs away from natives by education

Immigrants Take Jobs… All High School & less College & moreAway 42.5% 52.6% 33.6%Nobody else wants 57.5% 47.4% 66.4%

“Conventional Model”

The United States has a guest worker (GW) program that allows American employers to hire temporary foreign laborers to fill low-skilled jobs such as lawn care (LC) workers. To hire one of these workers, an employer must apply for a H-2B visa, presenting evidence that the company could not find native workers willing to fill the jobs

Source: Seminara, David. (2010) “Dirty Work: In-Sourcing American Jobs with H-2B Guestworkers,” Center for Immigration Studies.

The Labor Department expects to issue thousands of H-2B visas this year, many of which will be used to hire temporary lawn care workers. Suppose the market for lawn care workers is composed only of natives and guest workers—i.e., ignore the presence of illegal immigrants. Assume that it is costless for employers to apply for H2-B visas and that foreign workers bear the cost of traveling to the United States. Suppose the demand for lawn care workers is:

where w is the hourly wage and L is measured in thousands of lawn-care workers per year. Suppose the supply of native workers (N) and the supply of guest workers (G) in the market for lawn care workers are:

What was the equilibrium wage and number of lawn workers? What would have the wage had been had their been no H-2B program? What is the implied displacement rate?

0 25 50 75 1000.00

2.50

5.00

7.50

10.00

12.50

0 20 40 60 80 100 120 140 1600.00

2.50

5.00

7.50

10.00

12.50

0 25 50 75 1000.00

2.50

5.00

7.50

10.00

12.50

Supply of Native Lawn-Care Workers

Supply of Guest Lawn-Care Workers

Supply of Lawn-Care Workers

Lawn Care Workers (thousands per year)

Wage ($

per hour)

0 20 40 60 80 100 120 140 1600.00

2.50

5.00

7.50

10.00

12.50Market for Lawn-Care Workers

Lawn Care Workers (thousands per year)

Wage ($

per hour)

The Immigration EquationBy Roger Lowenstein.

The New York Times Magazine, July 9, 2006

Mannuel I.

Immigrant from Guatemala.

House Painter.

Norma M.

Immigrant from Mexico

Housecleaner.

Salvador C.

Immigrant from Mexico.

Construction.

The question of whether “more job seekers from abroad mean fewer opportunities, or lower wages, for native workers -- is one of the most controversial ideas in labor economics.”

=round(#,0)

Figure 1. California Manicurists, 1987-2002

𝑁𝑚=𝛿0+𝛿1 ∙𝑉𝑚+𝛿2 ∙𝑇+𝜇𝑚

Empirical Specification

𝑚=1…34metro areas

0 5000 10000 15000 20000 250000100020003000400050006000700080009000Los Angeles

CA Manicurists, 2002

Non-Viet

Manicuri

sts (#)

Viet Manicurists (#)

Non-Viet Manicurists (#)

Viet Manicurists (#) Time Trend…T=0,…,15

𝛿1=  0.745(25.39 )

Do Vietnamese manicurists displace native manicurists?

𝑁𝑚=𝛿0+𝛿1 ∙𝑉𝑚+𝛿2 ∙𝑇+𝜇𝑚

Empirical Specification

𝑚=1…34metro areas

Non-Viet Manicurists (# per 1000 residents)

Viet Manicurists (# per thousand residents)Time Trend…T=0,…,15

Do Vietnamese manicurists displace native manicurists?

Non-Vietnamese Manicurists per 1,000 ResidentsOLS (2)

Viet. Manicurists per 1,000 Residents -0.388***(11.40)

Time Trend -0.008**

(2.25)

Constant 1.346***

(53.92)

Observations 544

R-squared 0.346

Absolute value of t-statistics in parentheses

* significant at 10%; ** significant at 5%; *** significant at 1%

Table 1. Explaining the Number of Non-Vietnamese Manicurists using WLS

where

Assume

Empirical Specification

True Model

𝑁𝑚=𝛿0+𝛿1 ∙𝑉𝑚+𝛿2 ∙𝑇+𝜇𝑚

Unobserved demand shocks that vary across cities, e.g., increased demand by “tweens” and their parents in Contra Costa, according to a couple of newspaper articles.

𝐸 (�̂�1|𝑉𝑚)=𝛿1+𝛿2 ∙𝑐𝑜𝑣 (𝐷𝑚 ,𝑉𝑚)𝑣𝑎𝑟 (𝑉𝑚)

Increases in demand increase the number of native manicurists.

¿ ¿

Vietnamese manicurists are drawn to cities with positive demand shocks and away from those with negative shocks.

(− )Displacement effect Upward bias: the expected value of the estimated displacement effect is less negative than the true displacement effect.

¿

Instrumental Variable (IV) Estimation

Instrument relevance: Instrument exogeneity: z = historical size of Vietnamese enclave (VietEnclave)

instrumental variable

𝑉𝑚 (𝐷 ,𝑉𝐸 )=𝑉𝑚 (𝐷 )+𝑉𝑚 (𝑉𝐸 )

endogenous component, being part of the market for manicurists. exogenous component, being determined outside of the market for manicurists

Cov(VE, Cov(VE,

Hence, the instrument, , is likely to be relevant. Instrument purges of the component attributable to the demand shock due to some cities growing faster than others. Instrument exogeneity: 𝑐𝑜𝑣 (𝑉𝐸 ,𝜇)=𝑐𝑜𝑣 (𝑉𝐸 ,𝛿3 ∙𝐷𝑚 )≈0

The historical size of Vietnamese Enclaves (VE) is likely to be a valid instrument.

Non-Vietnamese Manicurists per 1,000 ResidentsOLS 2SLS or IV

Viet. Manicurists per 1,000 Residents -0.388*** -0.703***(11.40) (11.88)

Time Trend -0.008** 0.013***

(2.25) (2.66)

Constant 1.346*** 1.374***

(53.92) (50.69)

Observations 544 544

R-squared 0.346 0.242

Absolute value of t-statistics in parentheses

* significant at 10%; ** significant at 5%; *** significant at 1%

Table 1. Explaining the Number of Non-Vietnamese Manicurists using WLS