State Minimum Wage and Selective Migration by Immigrant Status Kristen Veit

1. STATE MINIMUM WAGES: 2000 - 2010 RESULTS Ordinary Least-Squares Estimates: Bayesian Spatial Autoregressive Model: Foreign-born are defined as individuals who report being born outside the U.S. and not being a U.S. citizen at birth. Recent immigrants are classified as those who fit these same criteria, but are reported to have been residing in the country for 5 years or fewer. Domestic-born workers are defined as individuals born in any of the 50 U.S. states or in any U.S. outlying area or territory. These include American Samoa, Guam, Puerto Rico, U.S. Virgin Islands, or any other U.S. possession. SUMMARY This study investigates how recent immigrants, long-time immigrants, and domestic-born natives across three education categories: no high school, some high school, and high school diploma respond to differences in state minimum wage rates. Using both an Ordinary Least Squares and a Bayesian Spatial Autoregressive estimation strategy, I find that migratory response to differences in state minimum wages varies for domestic- born high school graduates and foreign- born high school graduates. Domestic born high school graduates migrate from states with high minimum wages to states with lower minimum wages. Conversely, foreign born high school graduates migrate from states with lower minimum wages to states with higher minimum wages. These results suggest that higher minimum wage laws restrict the availability of legal work opportunities for domestic- born high school graduates while simultaneously increasing the opportunities, potentially through a larger uncovered underground labor market, for foreign- born high school graduates. State Minimum Wage and Selective Migrationby Immigrant Status Kristen Veit DISCUSSION FOR DOMESTIC-BORN WORKERS: Domestic-born workers with a high school diploma tend to flee states with higher minimum wages. Our findings are negative and significant for such individuals. FOR FOREIGN-BORN WORKERS: Results indicate that states with higher minimum wages experience greater migration inflow of low-skilled foreign-born workers, after controlling for various other factors of immigration. Results are positive for all three levels of educational attainment, but not significant for those without exposure to high school. FOR RECENT IMMIGRANTS: Our findings are positive, but not significant for recent-immigrants with a high school diploma. I was unable to find a significant number of observations for those whose maximum level of educational attainment is eighth grade or some high school. HYPOTHESIS Low-skilled workers, as a whole, are responsive to increases in state minimum wages, yet domestic-born and foreign-born workers respond differently. States with higher minimum wages experience a greater outflow of low-skilled domestic-born workers. States with higher minimum wages experience a greater inflow of low-skilled foreign born workers, as they seek opportunities in a larger, uncovered underground labor market. Over time, foreign-born workers will exhibit behavior patterns similar to those of domestic-born workers. Recent immigrants, who are expected to be more mobile than foreign-born or domestic-born workers, will be more likely to settle in states with higher minimum wages and a larger underground labor market. AVERAGE STATE MINIMUM WAGES: 2000 - 2010 PREVIOUS RESEARCH Borjas (2006) finds that low-skilled natives move away from states that have more low-skilled immigrants. Orrenius and Zavodny (2008) find that state legislatures tend to raise the minimum wage when the share of less-educated, low-wage native-born voters increases. Neumark and Nizalova (2007) show that unauthorized immigrants are more likely to migrate to states with higher minimum wages, as high minimum wages makes such workers more attractive to employers. Standard economic models predict that increases in state minimum wages will have adverse effects on the number of domestic workers able to find and maintain employment in the covered market. However, recent immigrants are likely to seek out states with higher minimum wages and a larger underground labor market. CONCLUSION I find that domestic-born workers with high school diplomas flee states with higher minimum wages, while foreign-born workers with the same level of education, or even just some exposure to high school, move toward states with higher minimum wages. Such findings suggest that domestic-born workers may be harmed by foreign-born workers who are less constrained by the legal minimum wages. Unauthorized immigrants may be more likely to migrate to states with higher wage rates, as they would be attractive to employers. Thus, there would be an increased supply of the low-skilled workers in response to a high wages, and therefore, poorer labor market outcomes for authorized workers better represented in surveys. As states increase the legal minimum wage, there are fewer jobs available at that specified wage. Thus, more jobs are available to those willing to work for pay below this threshold. ESTIMATION