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Employer sanctions: A policy with a pitfall?

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  • Stark, Oded
  • Jakubek, Marcin

Abstract

This chapter investigates the impact of the imposition of sanctions for employing illegal migrants on the welfare of native laborers. In response to such sanctions, managers in a firm may be reassigned from the supervision of production to the verification of the legality of the firm's labor force. The chapter analyzes three different conditions of the host country's labor market: full employment, voluntary unemployment, and minimal wage in combination with involuntary unemployment. It is shown that when the sanctions are steep enough, a profit-maximizing firm will assign managers to verification, which impedes the firm's productivity. The impact on the wages and / or employment of the native laborers depends on the efficiency of the verification technology, namely on the percentage of the 'filtered out' illegal laborers in relation to the fraction of reassigned managers. If this efficiency is not high enough, the sanctions bring in their wake consequences that fly in the face of the very aim of their introduction: the welfare of the native laborers will take a beating.

Suggested Citation

  • Stark, Oded & Jakubek, Marcin, 2021. "Employer sanctions: A policy with a pitfall?," University of Tübingen Working Papers in Business and Economics 149, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    • Handle: RePEc:zbw:tuewef:149
    DOI: 10.15496/publikation-57928
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    References listed on IDEAS

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    1. Davila, Alberto & Pagan, Jose A, 1997. "The Effect of Selective INS Monitoring Strategies on the Industrial Employment Choice and Earnings of Recent Immigrants," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 138-150, January.
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    More about this item

    Keywords

    Employer sanctions; Illegal migrant laborers; Welfare of native laborers;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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