Low-skilled immigrant workers are not displacing American workers

Here we study the economic effects of a large-scale experiment in the United States: natural randomization of nationwide, firm-level, restrictions on the employment of immigrants for low-skilled jobs. The United States has one major work visa for low-skilled labor in the non-farm economy—the H-2B visa. US employers’ access to those visas is limited by a quota and allocated in part through a random lottery administered by the federal government. This exogenous variation in restrictions on immigrant employment allows unusually transparent, policy-relevant estimates of how US firms and workers adjust. After publicly predicting treatment effects with our hypothesis testing and pre-analysis plan, we collected data from both winners and losers of the 2021 H-2B visa lottery in a novel firm survey. This allows preliminary testing of early theoretical predictions about the magnitude and variation of the effects of low-skilled immigration restrictions. It also allows estimation of firm-level, immigrant-native “combined” elasticities of substitution (Hicks 1936).

We find that external permission to hire immigrants for low-skilled jobs expands marginal firms’ output. Put another way, exogenous restrictions on hiring the profit-maximizing number of immigrants for low-skill jobs make marginal firms contract. These restrictions cause a large and statistically significant reduction in revenue and investment. Sanctions cause neither an increase nor a decrease in the employment and profit rates of low-skilled domestic workers. Losing the lottery reduces the employment of low-skilled immigrants by 56%. This reduction forces firms to contract, reducing activity by +0.164 for revenue and +1.03 for investment (statistically distinguishable from zero) and with an elasticity of +0.102 for low-skilled US employment and an elasticity of +0.100. Rate of return (statistically indistinguishable from zero at prevailing levels).

This is Michael A. Clemens and Ethan G. From Lewis, “Effects of Low-Skill Immigration Restrictions on US Firms and Workers: Evidence from Randomized Lotteries,” NBER Working Paper #30589, October 22, 2022.

The method is quite clever. As lucky employers are selected by lottery, there is no selection bias. This means that Clemens and Lewis can look at job changes for employers who win the lottery and employment changes for employers who lose.

The authors put it more succinctly in their abstract:

Externally authorized firms to hire more immigrants significantly increase output (elasticity +0.16) with no decrease or increase in US employment (elasticity +0.10, statistically imprecise) in several pre-registered subsamples. The results indicate very little substitution of natives for foreign labor in policy-relevant occupations.

In short, low-skilled Americans are not losing their jobs to low-skilled immigrants.

HT2 Tyler Cowen.

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