Understanding the Impact of Immigration on Labor Markets: A Tale of Two Miamis

In 2015, the United Nations estimated an international migrant population of 243 million people around the world. Immigration has been a recurrent phenomenon in many economies and prompts a continuous debate regarding its impact on socioeconomic indicators — particularly within the labor market. However, analyzing the effects of immigration on the labor market is challenging because it is difficult to understand the direction of causality between socioeconomic factors and immigration trends.

One situation several decades ago offered a natural experiment through which the impact of immigration in labor markets could be analyzed. In 1980, approximately 125,000 Cuban immigrants arrived to Miami from the Port of Mariel, which increased Miami’s labor supply for a short period of time. Labor economist David Card utilized this natural labor supply shock to study the effects of immigration on wages and unemployment. He found that the inflow of Cuban immigrants did not have a significant effect on wages and unemployment rates for the less-skilled workers in the metropolitan area of Miami.

In a new study, George Borjas, a Professor of Economics and Social Policy at the Harvard Kennedy School, reexamines the impact of the Mariel boatlift using different comparison groups. He finds that the increase in Cuban immigrants did have a significant and negative impact on the wages of high school dropouts in Miami. Borjas argues that 60 percent of these Cuban immigrants were high school dropouts. Thus, he estimates that the number of high school dropouts in the labor force increased by 20 percent in Miami as a result of this labor supply shock. In contrast, Card estimated that the increase was only seven percent.

Using census and American Community Survey data, Borjas estimated the number of Cuban immigrants arriving each year between 1955 and 2010. Based on these datasets, he created four placebo groups for comparison: the ‘Card placebo,’ which used the cities in the Card study; the ‘employment placebo’ with workers from four cities that were most similar to Miami prior to 1980; the ‘low-skill placebo’ consisting of four cities that had similar pre-Mariel growth among the low-skill employment sector; and the “synthetic placebo, which creates a city based on a set of characteristics similar to the Miami labor market before the Mariel boatlift.”

Controlling for city and time, he found a negative effect on wages for the least skilled workers in Miami across all comparison groups. Specifically, he found that the wages of low-skill workers in Miami dropped by at least 20 to 30 percent on average. Additionally, the evidence suggests that the wage effect weakened after 1986 and disappeared by 1990.

When reconciling the differences in these results, it is important to keep in mind that both studies face external validity issues because they focus on a particular set of immigrants with varying characteristics, including education level, ability and motivation. As a result, the findings cannot be applied to immigration broadly speaking. In addition, both papers’ authors estimate their results by comparing different samples of immigrants grouped by different identifying assumptions. Moreover, neither study provides conclusive evidence that immigration has negative or positive effects on labor outcomes. As such, policymakers should be very cautious when considering tailoring policy recommendations on the basis of these findings alone. As the current immigration debate further polarizes the country, additional research on the long-term effects of immigration on labor markets is needed in order to better understand the extent of its economic impact.

Article source: Borjas, George. “The Wage Impact of the Marielitos: A Reappraisal.” Industrial and Labor Relations Review (2017).

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