Economic and Magnet Effects of Work Authorization for Asylum Seekers: Descriptive Evidence from the United States

Legalizing work by asylum seekers is politically contested. Many states view work permits as a necessary expedient for self-reliance. Others limit or ban asylum seekers' labor, citing concerns about labor-market competition for natives, fiscal drain, and ‘magnet' effects on subsequent asylum inflows. Empirical tests of these effects are numerous in Europe, rare in the United States. We use full-universe anonymized court records that precisely locate asylum applicants' residences to test the effects of the post-2021 surge in asylum-seeker arrivals on native labor-market outcomes, and on fiscal and economic-growth indicators at the local level. Using a nationality-based shift-share instrument across commuting zones, we find that an asylum-seeker inflow equal to 1% of local population raises incumbent employment by 2.8 percentage points, wages by 6.3%, and local real GDP by approximately 5.5%, while reducing unemployment and means-tested public-benefit reliance. The result is consistent with asylum seekers' labor acting as a strong complement to native labor and native capital in the production process due to task specialization. It is also in line with independent estimates of macroeconomic impacts from general-equilibrium models. We find no relationship between major changes in the number of asylum applications (past collapses and recent surges alike) and changes in US employment-authorization policy for asylum seekers. The evidence supports a substantial stimulus to local economies from asylum seekers' labor, and shows no important role for formal work authorization in asylum seekers' migration decisions.