Three essays on the effects of the minimum wage on labor market outcomes of immigrants in the United States
Open Access
- Author:
- Huang, Xuetao
- Graduate Program:
- Agricultural Economics and Demography
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- November 19, 2020
- Committee Members:
- David Gerard Abler, Dissertation Advisor/Co-Advisor
David Gerard Abler, Committee Chair/Co-Chair
Stephan J Goetz, Committee Member
Douglas Harvey Wrenn, II, Committee Member
Stephen Augustus Matthews, Outside Member
Guangqing Chi, Outside Field Member
Douglas Harvey Wrenn, II, Program Head/Chair - Keywords:
- minimum wage
segmented labor market model
lawful and unlawful immigrants
covered and uncovered sector
labor market outcome
simulation
Survey of Income and Program Participation (SIPP) - Abstract:
- This dissertation is a coherent combination of three related essays on the labor market outcome effects of the minimum wage on employment and wages, with an emphasis on low-educated low-wage immigrants. This dissertation is organized as follows. Chapter 1 presents some background of this study. This includes a discussion of coverage of minimum wage policies, both legally and theoretically, and a discussion about mechanisms of immigrants’ effects on native workers. These background discussions act as the starting point of market structure of the theoretical models and the connecting part between the theoretical models on immigrants and the empirical work on immigrants and native workers. Chapter 1 also outlines the organization of this dissertation. The first essay is a theoretical model. I build into the model employers’ maximization problem of choosing different types of immigrants to maximize profit, facing the tradeoff between the possibility to be caught when hiring unauthorized immigrants and the lower wages to pay for them under the table. Immigrants choose between different locations to maximize their expected wages. The prediction of the model is that the employment of permanent workers who earn a wage below the minimum wage (as in the uncovered sector) would increase first but decrease then with a turning point at around $10/hour. It also predicts that the employment of unauthorized workers in the uncovered sector has a reverse trend, so too high the minimum wage level would pressure employers to hire more unauthorized workers and force the employment of permanent workers to lower down. The second essay is another theoretical piece with alternative model setups. I assume unauthorized workers can also work in the covered sector and I call sectors with unauthorized workers unlawful sectors. There are two of them: unlawful covered sector and unlawful uncovered sector. Again, employers choose which sector they want to be in and how many different immigrants to hire in order to maximize their profits. In addition to that, permanent workers move between sectors in the destination country and unauthorized workers move between destination and originating countries to equalize their expected wages at equilibrium. The model predicts that permanent workers in the unlawful covered and uncovered sectors are two increasing curves of minimum wage and that unauthorized workers in the unlawful sectors are two decreasing curves of minimum wage. It seems that employers in the uncovered sector would prefer to hire permanent workers if both types of immigrants are available in that sector. The third essay is an empirical test for the two previous theoretical models. By using a longitudinal national survey data at person level, we identify the permanent and unauthorized immigrants mainly by their status of permanent residency: we use non-permanent residents to approximate unauthorized immigrants. I used two-way clustering models and two-way clustering Logit models with quadratic terms as the econometric methods. Furthermore, I tested several robustness checks by using different subsets of the longitudinal data. The overall results show that the first theoretical model works better in predicting the curvature of the employment and hourly wages related with minimum wage. These three essays fill the gap of nonlinear effects of the minimum wage on labor market performance in the context of immigrants.