Undocumented migration to the United States and the wages of Mexican immigrants

Prior work has documented the remarkable decline in the real wages of Mexican immigrant workers in the U.S. over the past several decades. Although some of this trend might be attributable to the changing characteristics of the migrants themselves, we argue that a more important change was the circumstances under within Mexican immigrants competed for jobs in the U.S. After 1986 a growing share of Mexican immigrants was undocumented, discrimination against them was mandated by federal law, and enforcement efforts rose in intensity. We combined data from the Mexican Migration Project (MMP) with independent estimates of the percentage undocumented among Mexicans living in the U.S. to estimate a series of regression models to test this hypothesis. Controlling for individual characteristics helps to explain the decline in the wages of immigrants, but does not eliminate the trend, which is only explained fully when the percentage undocumented is added to the model. A key date is 1986, confirmed by a Oaxaca-Blinder decomposition analysis, when undocumented hiring was criminalized and undocumented migration revived after IRCA's legalization programs ended. As the percentage undocumented rose to new heights in the face of employer sanctions, immigrant wages fell below what we would have observed under the former policy regime. Using newly available data from Warren and Warren (2013), we examined how variation in the percentage undocumented by state and year from 1990 through 2009 affected immigrant wages and confirmed a strong negative effect, but the addition of an interaction term to the model indicated that the negative effect was confined largely to undocumented migrants, whose wage penalty rose from 8 to 18 percent as the percentage undocumented rose from its observed minimum to maximum.