Immigration, labor market mobility, and the earnings of native-born workers : An occupational segmentation approach

I Introduction INCREASED IMMIGRATION TO THE UNITED STATES IN RECENT DECADES has led to concerns over the displacement of native-born U.S. workers and the possibility of lower wages for those native-born workers who must compete with this immigrant labor pool. (1) The intensity of competition between native and immigrant workers, however, will not only be a function of the size of immigrant flows but will also depend on the ability of immigrants to enter occupation segments that are compatible with their skills and the extent to which those jobs are occupied by natives. The question, therefore, is which native workers, if any, tend to be vulnerable to increased immigrant competition for jobs? This question has been addressed in previous work, but the innovation in this study is the adoption of a specific segmented labor market approach and the examination of the impact of numerous forms of labor mobility. If immigrant and native labor are highly substitutable in a particular labor market, then an influx of immigrants into that labor market is likely to cause native wages to decrease. On the other hand, if immigrant workers face barriers to entry in particular labor markets or do not have the skills to be competitive, then the wages of natives in that market should not be affected by immigration. There are, however, exceptions to the traditional view. For example, the effect of immigration on wages could be altered by demand-side factors or differences in the institutional structure of labor markets that affect the bargaining power of capitalists and workers. Empirical results from previous studies suggest that traditional human capital segmentation based on educational characteristics may not be adequate to identify those native workers who benefit from, or those who are hurt by, increased immigration. For example, many have found ambiguous effects of immigration on less-educated blacks and Hispanics, who are presumed to be the most substitutable for recent immigrants (Borjas 1994). (2) This does not seem to be theoretically consistent with evidence of larger low-skilled immigration flows unless labor markets are segmented. Also, findings of negative immigration effects on wages of higher-educated Hispanic natives runs counter to the presumed complementarity (or, at least, minimal substitutability) of this labor with low-skilled labor (Pedace 1998). One response to these unexpected results is that educational characteristics alone are not sufficient to define distinct and meaningful labor market groups. Labor market segments are also determined by industrial structures, worker organization strategies, and/or technology (Rosenberg 1989). In other words, some individuals in a cohort with identical educational characteristics may find high-paying jobs with good working conditions while others are involuntarily placed in low-paying jobs with poor working conditions and few opportunities for advancement (Leontaridi 1998). Therefore, the significant negative effects of immigration on native U.S. Hispanics with a high school education may be reflecting intense competition between these workers in a confined set of occupations and not competitive pressures faced by the entire group of similarly educated workers. In this article, labor markets are segmented in an attempt to capture differences in institutional forms. If there are "noncompeting" groups of workers whose wages are affected by specialized factors, including skills, activities, working conditions, and bargaining rules, a standard formulation of wage determination will not apply (Dunlop 1988). Occupational segmentation may provide a better framework for addressing the issues of immigrant competition in the labor market by accounting for differences in the structure of compensation in various occupations (Dickens and Lang 1985) and the possible relegation of workers into labor market sectors independent of their skill attributes (Castles and Kosack 1973; Piore 1979). …