Immigrant-Native Wage Differentials and Immigration Reform

The US Immigration Reform and Control Act of 1986 (IRCA) increased the monitoring of illegal employment and fined employers who hire undocumented immigrants. Since these provisions tax immigrant wages, it might be expected that the immigrant-native wage gap would increase after IRCA. This hypothesis is explored by decomposing immigrant-native wage differentials before and after IRCA. It is found that (i) the immigrant-native wage gap increased; (ii) in each year most of this gap was due to individual and job characteristics; (iii) the change in the gap is due primarily to overvaluation of native characteristics and to a lesser extent to undervaluation of immigrant characteristics.