Recent Immigrants as Labor Market Arbitrageurs: Evidence from the Minimum Wage

Area of Science:

• Labor Economics
• Immigration Studies
• Urban Economics

Background:

• Canonical economic models highlight labor mobility's role in minimum wage impact assessments.
• Empirical research on minimum wage effects often overlooks direct analysis of location decisions.
• Understanding immigrant labor supply is crucial for evaluating wage policies.

Purpose of the Study:

• To investigate the local labor supply effects of minimum wage changes.
• To examine how low-skilled immigrants' location decisions respond to minimum wage variations.
• To provide behavioral evidence on the employment consequences of minimum wage policies.

Main Methods:

• Analysis of low-skilled immigrant population shifts across labor markets with differing minimum wages.
• Robustness checks against alternative interpretations of migration patterns.
• Estimation of labor demand elasticity using teen employment data.

Main Results:

• Low-skilled immigrants demonstrably move towards labor markets with stagnant minimum wages.
• This observed mobility serves as behavioral evidence for non-trivial negative employment effects of minimum wage hikes.
• Employment losses among native teenagers are more pronounced in states with lower historical immigrant attraction.

Conclusions:

• Immigrant location decisions are sensitive to minimum wage differentials, indicating significant labor supply responses.
• The findings support the hypothesis that minimum wage increases can lead to adverse employment outcomes.
• Policy implications include considering the differential impact on vulnerable native-born populations.