The Impact of Legal Status on Immigrants’ Earnings and Human Capital: Evidence from the IRCA 1986

Abstract

This paper analyzes the impact of IRCA 1986, a U.S. amnesty, on immigrants' human capital development and labor market outcomes. Because of IRCA, the 1975-1981 arrivals were all legalized by 1990. However, many of the 1982-1986 arrivals remained illegal. Using the California Latino immigrants in Census 1990, I find that the 1975-81 arrivals on average outperform the 1982-86 arrivals in men's wage, women's labor force participation rate, and English-speaking ability. This finding is not a general trend of labor market conditions, because the analysis using refugees and U.S.-born Latinos, which are two comparison groups without legal status issue, indicate no difference in outcomes between pre-1982 and post-1982 cohorts.

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“…Recent changes in state policies in the U.S., such as mandatory electronic verification of work authorization, have exacerbated the unauthorized worker wage penalty in those states and pushed some of those workers out of wage and salary jobs and into self‐employment (Bohn and Löfström, ; Orrenius and Zavodny, in press). Lack of legal status also slows the acquisition of English‐speaking skills and reduces female labor force participation (Pan, ). Not only does undocumented status delay the socioeconomic incorporation of immigrants, but it also delays the integration of their children and grandchildren (Bean et al ., ).…”

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“…Chinese Student Protection Act beneficiaries presumably were more skilled, on average, than the typical green card recipient and much more skilled than the beneficiaries of previous legalization programs. Kaushal (2006) and Pan (2010) conclude that the positive wage effects of NACARA and IRCA, respectively, were much larger among men with at least a high school diploma than among the less educated. Relatively skilled immigrants were better able to move into higher‐paying occupations when they legalized their status.…”

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“…The identification strategies in both Pan (2012) and Barcellos (2010) suffer from similar limitations. First,…”

“…As a matter of fact, legalisation should reinforce immigrants' incentives to invest in human capital by increasing their returns to education. As far as we know, the only article that investigates this channel is Pan (2012). Besides analysing the impact of the IRCA amnesty on labour market outcomes (see section 3.1), she examines the English-speaking ability of immigrants, finding that male immigrants who could have benefited from the 1986 legalisation were more proficient than those who were (probably) excluded from the amnesty.…”