The lack of jobmobility appears to be a major reasonthat the wages of illegal immigrantsdo not increase asmuch as those of other workers.
increase of about one dollar an hour (in 1989dollars) for both male and female immigrants who had been illegal previously, about a 15percent rise.
Legalization of status “has a direct positiveeffect on the earnings of illegal immigrants,”according to Rivera-Batiz.
“An analysis of undocumented immigrants legalized after the1986 U.S. immigration policy reform showssignificant wage growth in the four years fol-lowing legalization.”
Importantly, Rivera-Batiz noted, “These gains are due mostly to thechange in legal status itself, not to changes inthe characteristics of immigrants over time.”
However, some of the improvement in thelot of previously “illegal” workers came fromthe willingness of such workers to invest intheir human capital or U.S. labor market skills(education, training, and English language)after the assurance they could stay permanent-ly in the United States. That is an additionalfactor arguing in favor of the positive fiscaland economic impact of legalization. “Thegreater educational attainment and Englishproficiency of workers after legalization may have not been achieved if the workers had re-mained illegally in the U.S. instead of apply-ing for legalization,” noted Rivera-Batiz.
Other researchers have also found that le-galization helped raise the wages of those whopreviously lacked legal status. In an analysisof the 1986 legalization program, University of Michigan economist Sherrie A. Kossoudjiand Australian National University economistDeborah A. Cobb-Clark concluded, “Uponarrival in the U.S. labor market, unauthor-ized men’s wages would have been 14 percenthigher if they had been legal workers.”
Overtime, the wage “penalty” that workers pay forbeing here illegally increases, on average, to 22percent, according to Kossoudji and Cobb-Clark. Some part of this wage penalty for ille-gal immigrants is because those here illegally have “little incentive to invest in human capi-tal while unauthorized and then have largeincentives to invest once legalized.”
The lack of job mobility appears to be amajor reason that the wages of illegal immi-grants do not increase as much as those of other workers. Unlike illegal immigrants, le-gal workers are free to change jobs as a way to increase wages. Studying data of illegal im-migrant male workers, Kossoudji and Cobb-Clark found that because of legalization such workers became “free to pursue job opportuni-ties,” and their wages grew.
Replacing the current flow of illegal immi-grants with legal temporary visa holders wouldalso be a gain for taxpayers. A 2009 study forthe Cato Institute by Peter Dixon and Mau-reen Rimmer, both with the Centre of Policy Studies at Monash University in Australia,compared various scenarios and concluded thatU.S. households would gain approximately $260 billion a year with a new law that permit-ted widespread use of legal temporary visas ascompared to increased border enforcement.
Using an economic model developed forthe U.S. International Trade Commission,Dixon and Rimmer compared an increase inborder enforcement—basically a continuationof current U.S. policies—to a new policy of significant use of temporary visas. A scenarioof increased border enforcement that reducesthe supply of illegal immigrants by 28.6 per-cent would lead to a cost of $80 billion a yearfor U.S. households, according to Dixon andRimmer. U.S. household welfare would besimilarly reduced if stricter interior enforce-ment reduced illegal immigration and shiftedemployer costs to paying for unproductive ac-tivities related to legal compliance.In contrast, a policy that relied on increasesin temporary visas would achieve a “welfaregain for U.S. households . . . equivalent to1.19 percent of the gross national product,or $170 billion.” U.S. households would gaineven more, the researchers note, from imple-menting a visa tax. Dixon and Rimmer write,“This [policy] would eliminate smugglers’ feesand other costs faced by illegal immigrants. It would also allow immigrants (now guest work-ers rather than illegals) to have higher produc-tivity. Both effects create a surplus gain for theeconomy by raising the value of immigrantlabor relative to the wage necessary to attractit. This surplus can then be extracted for thebenefit of U.S. households.”