Center on the Economics and Demography of Aging

The foreign-born share of the U.S. population has been gradually rising in recent decades and is approaching its historic maximum. Areas that have not traditionally received immigrants have experienced greater increases in the foreign-born share than have other areas with persistently high levels of immigration. This raises clear questions about the macroeconomic impacts of immigration on native workers. Economic theory suggests that immigration shifts out labor supply, reducing wages for natives in the short run because labor demand is downward sloping, and raising unemployment among natives if wages do not fall. Although theoretically sound and widely cited in the U.S. immigration debate, this static view has received mixed support in the scientific literature. Researchers continue to debate whether influxes of immigrants like the Mariel Boatlift of 1980 reduced wages or employment among native workers in Miami, with a body of empirical evidence that often appears ambiguous.

We contribute to this debate by comparing recent trends in the employment rates of native workers in immigrant-receiving geographical areas to recent trends in other areas. We utilize the rich geographic resolution offered by the annual U.S. American Community Survey, which samples roughly 1 percent of the entire U.S. population and allows us to examine trends in public data within areas as small as 80,000 residents. The time period covered by the ACS, 2005-2016, provides us a unique look at employment outcomes during a period of much economic turbulence and differential immigration patterns across states and regions.

In contrast to the implication of the static model, we find that rising foreign-born shares of thelocal labor force are robustly associated with increases in native employment rates over 2005-2016. Our model predicts each percentage-point increase in the foreign-born share isassociated with an increase in the native employment rate of 0.075 percentage point. Because the variation in the foreign-born share is large (SD = 0.15) relative to the variation in the native employment rate (SD = 0.04), our model implies that up to one quarter of the cross-sectional variation in native employment could be accounted for by variation in the foreign-born share ofthe labor force. By contrast, average annual changes in native employment and the foreign-born share are both about 0.1 percent, implying that a much smaller share of the typical annual change in native employment, only about 5 to 7 percent, might be attributable to changes inthe foreign-born share of the labor force.

These results suggest that during the first two decades of the 21st century, the presence of foreign-born workers was not detrimental to the employment prospects of native workers and may have been a net benefit. Whether immigrant labor actually raises the employment of natives on its own or is a marker of third factors that are causal is less clear and remains the subject of future investigations.