Anti-Immigration Reform and Reductions in Welfare: Evidence from the Meatpacking Industry

The assumption that immigrants take jobs away from native workers presupposes that native workers and immigrants compete in the same labor market. If native and immigrant labor are substitutes, or they would accept the same kind of work, then both types of labor should have similar compensating wage differentials. The standard textbook theoretical discussion on compensating wage differentials implies that firms must compensate workers with more dangerous jobs with higher salaries. Given two jobs with identical pay, the employee will be more likely to accept the job with safer working conditions, assuming that the worker is aware of the job characteristics and has a range of jobs to choose from (Ehrenberg & Smith, 2016). The equilibrium outcome of this model leads to a world in which the workers with the highest tolerance for hardship will take the most difficult jobs and will be compensated with higher wages for their efforts (Cahuc et al., 2014). If workers have the same compensating wage differentials, this will lead to the optimal outcome described above. However, Orrenius and Zavodny (2009) found that immigrants tend to work in riskier occupations on average. The authors were concerned that the government might need to intervene if immigrants accept riskier work as a result of a lack of information. They suggested that future research should examine whether immigrants do in fact, earn the same compensating differential as native workers. If immigrant labor accepts riskier work than natives on average, then maybe the two should be viewed as complements rather than substitutes, which would undermine the “they took our jobs” narrative.