The new labor market: immigrants and wages after IRCA

We examine the effect of the Immigration Reform and Control Act (IRCA) on migrants' wages using data gathered in 39 Mexican communities and their U.S. destination areas. We examine changes in the determinants of wages before and after the passage of IRCA, as well as the effects of its massive legalization program. Migrants' wages deteriorated steadily between 1970 and 1995, but IRCA did not foment discrimination against Mexican workers per se. Rather, it appears to have encouraged greater discrimination against undocumented migrants, with employers passing the costs and risks of unauthorized hiring on to the workers. Although available data do not permit us to eliminate competing explanations entirely, limited controls suggest that the post-IRCA wage penalty against undocumented migrants did not stem from an expansion of the immigrant labor supply, an increase in the use of labor subcontracting, or a deterioration of the U.S. labor market.