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

American Journal of Economics and Sociology, The,  April, 2006  by Roberto Pedace

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Other results consistent with expectations are the smaller positive and sometimes insignificant effects of immigration on wages in the secondary sector. Since job ladders are virtually nonexistent in the secondary sector, workers are not likely to have opportunities to take advantage of supervisory roles. Even if some movement is possible within the secondary sector, the rewards are not likely to be as great as upward occupational mobility within the primary sector. For example, the transition from farm laborer to farm fore person, or from waiter to bartender, are not likely to be as rewarding as the movement from bank teller to manager. Therefore, the largest benefits of increased immigration will accrue to those who hold primary sector jobs and those who successfully transition from secondary to primary sector employment.

One anomaly, however, is that some Hispanics do not seem to benefit in a similar fashion. Recent immigration does not have a significant effect on Hispanic male wages and, in the secondary sector, Hispanic females are negatively affected by increases in recent immigration. Why are the experiences of Hispanics different from other groups? Is this the result of an institutional structure that acts to maintain the existing ethnic composition in the occupational hierarchy? Are Hispanics in the lowest positions in the occupational hierarchy both between and within sectors? These questions must be addressed before any negative effects on the labor market outcomes for these groups can be attributed solely to immigration.

Some evidence, however, implies that the answer to these questions may be in the affirmative. Tienda and Guhleman (1985), for example, find that only 27 to 57 percent of the gap in occupational status between Hispanic and non-Hispanic females would be closed if they had the same human capital characteristics. They also find that the average status level within occupation strata (e.g., operative and laborer; clerical and retail sales; services and crafts) is lower for Hispanic females compared to their non-Hispanic counterparts. Hispanic females, therefore, are disadvantaged because they tend to hold positions that are the lowest on the promotional ladder and that are likely to be the most accessible to recent immigrants. The significant negative effects of immigration on wages of secondary sector Hispanic females suggests that they may indeed face increased competition in the labor market.

The positive effects of immigration in the secondary sector for other native workers (e.g., white males and females) may seem puzzling, but one possible explanation is that any initial immigration effect has simply been offset by a virtually simultaneous increase in demand for labor in these occupations. This could imply that the demand effects of immigration outweigh the labor supply effects and/or simply that the supply parameters in the institutional wage-setting structure of the secondary sector differ from the primary sector. In addition, if the demand for labor in secondary sector occupations is relatively elastic (i.e., [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] > 1), an increase in immigration will initially reduce wages and employment levels for natives, but the increase in total employment will outweigh the reduction in wages. The wage bill will therefore increase, which may create a series of demand effects that cause equilibrium wages to rise. Future research should attempt to determine how these effects are propagated through the economy, since this explanation implicitly assumes that these positive demand effects disproportionately affect high-immigration areas.