Reservation Wages: An Analysis of the Effects of Reservations on Employment of American Indian Men

American Indians have experienced a large degree of difficulty in the labor market. They have lower levels of labor-force participation, higher levels of unemployment and lower wages than the rest of the population, which in turn leads to lower median household income and higher poverty rates. Despite the fact that these economic problems are particularly acute for Indians living on reservations, no previous research has examined the effects of reservations on individual employment rates, controlling for other observable attributes. In this paper, we examine the effects of reservations on employment using a sample of young males from the National Longitudinal Survey of Youth 1979 (NLSY79). We compare outcomes for Indians with those of a nationally representative cross section of the same birth cohort controlling for (i) contemporaneous proximity to a reservation and (ii) whether the respondent lived at age 14 in a county with a reservation. Controlling for other factors, including local labor-market conditions, proximity to a reservation reduces the probability of employment among Indian men by 11 percentage points. Having lived in a county with a reservation at age 14 reduces the probability of employment among Indian men by 5–10 percentage points. Neither measure of proximity to a reservation reduces employment of other groups.