The Effects of Immigration on California's Labor Market

As of 2004 California employed almost 30% of all foreign born workers in the U.S. and was the state withthe largest percentage of immigrants in the labor force. It also received a very large number of Mexican anduneducated immigrants during the recent decades. If immigration harms the labor opportunities of natives,especially the least skilled ones, in the form of downward wage pressure, pressure to move out of the stateor increased likelihood to loose their jobs, California was the place where these effects should have beenstronger. By analyzing the behavior of population, employment and wages of U.S. natives in California inthe period 1960-2004 we address this issue. We consider workers of different education and age as imperfectlysubstitutable in production and we exploit the differences in immigration across these groups to infer theirimpact on US natives. Our estimates use international migration to other U.S. states as instrument forinternational migration to California to isolate the ?supply-driven? variation of immigrants across skills andidentify the labor market responses of natives. We find that in the considered period immigration did notproduce significant migratory response or loss of jobs of natives. Moreover we find that immigrants wereimperfect substitutes for natives of similar education and age, hence they stimulated, rather than harmedthe demand and wages of U.S. native workers.