The causal effects of measures against unauthorized workers on labor market outcomes

Abstract: In this thesis I investigate the labor market outcomes following the imposition of restrictive measures against unauthorized labor. I do this by studying the causal effects of the Arizona’s migration laws LAWA and SB 1070 on labor market outcomes in terms of employment, wages and the usual hours worked per week. In 2008, Arizona implemented The Legal Arizona Workers Act (LAWA), demanding all employers to use the verification system E-Verify to validate the authorization of employees, and forbid employers of knowingly hire unauthorized immigrant workers. In 2010, The Arizona Senate Bill 1070 (SB 1070) followed, illegalizing unauthorized workers to work or apply for a job in the state, and requiring immigrants to carry compulsory documents with them at all times. Using data from the American Community Survey between the years of 2001 and 2016 and a Synthetic Control Method (SCM), I show that LAWA and SB 1070 had a negative impact on employment in Arizona of 1.1 to 3.6 percentage points, and a decline in yearly income of between 2040 to 4750 dollars for the working age population of Arizona. The effect is larger for the Hispanic low-educated population, and I find evidence of negative effects on Hispanic low-educated authorized workers as well. I find no clear evidence of improved labor market outcomes among the competing group of non-Hispanic low-educated workers, indicating that they are not substitutes to the unauthorized population. I interpret my results as evidence of mismatches on the labor markets with a lack of substitutability between authorized and unauthorized workers. I conduct permutation tests to establish inference (Abadie et al, 2010) and perform additional robustness checks to validate my results.