The Effect of Minimum Wages on Immigrants

Pia Orrenius, Federal Reserve Bank of Dallas
Madeline Zavodny, Agnes Scott College

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 lower employment rates overall but higher earnings among the employed. These effects may be larger among low-skilled immigrants than natives because, on average, immigrants earn less than natives due to lower levels of education, worse English ability, and less social capital. We use data from the Current Population Survey during 1994-2005 to examine how minimum wages are related to employment-to-population rates and average hourly earnings at the state level. We do not find evidence of adverse employment effects among low-skilled adults, immigrants or natives, although this may partly be due to the fact that low-skilled immigrants appear to move away from states that pass minimum wage hikes.