The Effect of Minimum Wages on Immigrants

This study compares the effects of minimum wage laws on employment and earnings among low-skilled immigrants and natives in the U.S. Conventional economic theory predicts that higher minimum wages lead to higher earnings among the employed but lower employment rates. Minimum wage increases might have larger effects among low-skilled immigrants than among natives because, on average, immigrants earn less than natives due to lower levels of education, limited English skills, and less social capital. We use data from the Current Population Survey during 1994-2005 to examine how minimum wages at the federal and state level are related to employment-to-population rates, average hours worked, and average hourly earnings among nativeand foreign-born adults who do not have a high school diploma. Our results do not indicate that minimum wages have adverse employment effects among low-skilled immigrants or natives. Higher minimum wages may discourage settlement by low-skilled immigrants, however, while most low-skilled adult natives earn too much to be directly affected by minimum wage laws in recent years. JEL classifications: J23, J38, J15