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Earnings of undocumented workers soared during Obama years

MarketWatch logo MarketWatch 3/13/2017 Quentin Fottrell
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Undocumented workers’ incomes increased dramatically during the Obama years.

The gap in the hourly wage between undocumented workers and native workers is reduced by half once socioeconomic characteristics -- educational attainment, type of jobs, years since emigrating here and age -- are taken into account, according to a new academic paper, “The Earnings of Undocumented Immigrants,” by Harvard University economist George Borjas, and published Monday by the National Bureau of Economic Research, a Washington, D.C.-based research group.

This “wage penalty,” defined by Borjas as the gap between earnings of undocumented and legal immigrants, was about 10% in 2005, but fell to less than 4% by 2014 and, he adds, likely continued to narrow since then. Undocumented workers earn about 40% less than American workers, but that gap falls to 20% after controlling for the various socioeconomic and educational factors. “The adjusted wage of undocumented workers rose rapidly in the past decade,” the study found.

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Borjas, one of the country’s leading immigration economists, said the “wage penalty” between undocumented immigrants and native workers narrowed when Barack Obama became president. Over 11 million undocumented persons live here, and the Trump administration has vowed to crack down on undocumented immigrants, deporting those who have committed crimes and building a wall on the southern border with Mexico. That, he adds, is likely to change under President Trump.

Related: The number of undocumented immigrants working has fallen since the Great Recession

But Borjas had not expected to see wages improve for the undocumented. “I find it a fascinating trend,” Borjas told MarketWatch. “I was shocked by it.” He has one theory about why this might be happening. “Maybe employers haven’t felt afraid to hire undocumented workers during those years, at least when it comes to the legal ramifications.” The rise in wages seems to have begun shortly before 2008, as the Bush administration was trying to enact amnesty programs, he added.

Additional support for the theory that employers have become more generous: More states are using E-Verify, an internet-based system that allows businesses to determine the eligibility of their employees to work in the U.S., which has led to a decrease in undocumented immigrants in those states with that technology. Without E-Verify, all the employer has to do is collect the information. With E-Verify, they must check their social security electronically to verify it’s a valid number.

After 20 years of rapid growth, separate research suggests that the number of undocumented immigrants has fallen in recent years, as states crack down on these workers and some foreign economies have improved. There were 8 million unauthorized immigrants in the U.S. working or looking for work in 2014, down from around 8.3 million during the Great Recession, according to the Pew Research Center, a nonprofit think tank based in Washington, D.C.

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