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Policy Brief

Immigration and African-American Employment Opportunities: the Response of Wages, Employment and Incarceration to Labor Supply Shocks

Professors George J. Borjas, Jeffrey Grogger, and Gordon H. Hanson

Brief prepared by Sheila Kyte, MPIA 2007

Click here to access this brief in PDF form.

The employment rate of black men, and particularly of low-skilled black men, fell sharply from 1960 to 2000. At the same time, the incarceration rate of black men rose significantly. Professors Borjas, Grogger, and Hanson examine the connection between immigration and these trends in black labor-market outcomes. Using data from the 1960-2000 U.S. Censuses, they find a strong link between immigration, black wages, black employment rates, and black incarceration rates, at both the state and national levels. Their analysis suggests that immigration has indeed lowered the wage rates of blacks and they investigate if lowered wage rates led blacks to leave the formal labor force and turn to illegal activities instead.

As immigrants disproportionately increased the supply of workers in low-skill groups, particularly after 1980, the wage of black workers in these groups fell, the employment rate declined, and the incarceration rate rose. Black employment dropped because immigrant labor substituted for black labor; black incarceration rose because when low-skill workers experienced a decrease in wages they were more likely to engage in crime. Borjas, Grogger, and Hanson also examine the effect of immigration on white men, and find that while the increase in the labor supply due to immigration reduced wages, the effect on the employment and incarceration rates for whites is much lower than for blacks.

The authors consider the potential confounding effect of the crack epidemic and find the advent of crack cocaine served as a “technological innovation” in the crime industry. Urban street gangs serve as business organizations that provide the distribution networks and neighborhood presence to market and distribute crack. Since black men disproportionately participate in these gangs, and the criminal justice system is biased against crack cocaine, they have experienced disproportionate increases in prison rates.

Borjas, Grogger, and Hanson are the first to examine if there is a link between a resurgence of large-scale immigration in the U.S. and the employment and incarceration rates of the black population. They maintain that although the evidence suggests that immigration played a role in generating adverse labor-market outcomes for black men, we would have witnessed much of the decline in black employment and the concurrent increase in black incarceration rates even if there had been no immigration in the past decades, due to other labor-market shocks such as technological change.  One potential policy implication is that the U.S. government should compensate the economic losers from immigration, perhaps by providing employment training for displaced workers.