Measuring the Labor Market Impacts of Hurricane Katrina Migration: Evidence from Houston, Texas

Hurricane Katrina made landfall on the US Gulf Coast as a category-three storm on the morning of August 29, 2005. With winds reach? ing speeds of 130 miles per hour and storm surges as high as 27 feet, Katrina caused unprec? edented damage along the coasts of Alabama, Mississippi, and Louisiana. Unofficial estimates suggest that 100,000 to 150,000 evacuees moved to the Houston, Texas, metropolitan area, repre? senting a 3 to 4 percent increase in the population (Adrian Campo-Flores 2005). ' Some anecdotal evidence suggests that many evacuees expect to stay in the Houston metro area indefinitely.2 Katrina disproportionately affected minorities and the disadvantaged. Thomas Gabe et al. (2005) find that the evacuees who were most acutely affected by the storm were significantly more likely to be black, poor, and unemployed and were significantly less educated compared to other evacuees and compared to the nation on average. In this paper, I examine the effect of the migration of Katrina evacuees on the Houston metropolitan area labor market using Current Population Survey (CPS) data from September 2000 to August 2006. To quantify the effect of Hurricane Katrina migration, I compare wages and employment before and after the storm among nonevacuees residing in Houston (or, "native Houstonians") and in other metro areas that were not directly or indirectly affected by the storm. In addition, I allow the effects to vary by gender, education, and race and ethnicity. The existing studies of the effect of immigra? tion on the labor market outcomes among native born workers provide a good point of comparison for this analysis. (See Rachel M. Friedberg and Jennifer Hunt (1995) and David Card (2005) for reviews of this literature.) In a study similar to this one, Adriana Kugler and Mutlu Yuksel (2006) find negative employment effects among low-educated native workers and positive wage effects among highly educated workers in the US border states after Hurricane Mitch struck Central America in October 1998. More gener? ally, there are numerous studies that examine the impact of an unexpected increase in the local labor supply due to immigration, including papers by Card (1990), Hunt (1995), William Carrington and Pedro de Lima (1996), and Friedberg (2001). Collectively, these studies find small and insig? nificant effects of immigration on local labor market outcomes for native workers. Other studies estimate the effect of immi? gration on local labor markets using varia? tion across receiving areas and across time in the immigrant share of the labor force, and these studies produce conflicting results. Card (2001, 2005) finds that local labor market out? comes for unskilled natives are only marginally affected by immigration, while George J. Borjas (2006) shows that the wage effect of immigra? tion increases when the labor market is defined at the national level instead of at the local level, since workers are more likely to migrate between localities than between countries in response to increased labor market competition due to immigration. However, Gianmarco I. P. Ottaviano and Giovanni Perri (2006) argue that by ignoring capital mobility and by assuming that immigrant and native workers are perfect substitutes in the labor market, Borjas overstates the size of the effect. * Industrial Relations Section, Firestone Library, Prince? ton University, Princeton, NJ 08544 (e-mail: mfifer@ princeton.edu). I am grateful to Henry F?rber, Elizabeth Fussell, Alan Krueger, Michael Rothschild, Jesse Rothstein, and Cecilia Rouse for their guidance, and Leandro Carvalho, Jason DeParle, Matthew Ericson, Jane Fortson, and participants at the Princeton University Graduate Labor Lunch and Public Finance Working Group and at the Tulane University Disaster and Migration Conference for helpful comments and suggestions. I am responsible for the contents and for all remaining errors. 1 Jason De Parle, "Katrina's Tide Carries Many to Hope? ful Shores," New York Times, April 23, 2006. 2 Susan Saulny, "Putting Down New Roots on More Solid Ground," New York Times, September 7, 2005; Simon Romero, "Shelters Grow Empty as Apartments Open Up," New York Times, September 8, 2005.