Minimum Wages and the Labor Market Effects of Immigration

This paper exploits the non-linearity in the level of minimum wages across U.S. States created by the coexistence of federal and state regulations to investigate how the prevalence of minimum wages affects the labor market impact of immigration. We find that the effects of immigration on the wages and employment of native workers within a given state-skill cell are more negative in U.S. States with low minimum wages (i.e., where the federal minimum wage is binding). The results are robust to instrumenting immigration and state effective minimum wages, and to implementing a difference-indifferences approach comparing U.S. States where effective minimum wages are fully determined by the federal minimum wage over the whole period considered (2000-2013) to U.S. States where this is never the case. This paper thus underlines the important role played by minimum wages in mitigating any adverse labor market effects of lowskill immigration.