Recent Immigrants as Labor Market Arbitrageurs: Evidence from the Minimum Wage

Abstract

This paper investigates the local labor supply effects of changes to the minimum wage by examining the response of low-skilled immigrants' location decisions. Canonical models emphasize the importance of labor mobility when evaluating the employment effects of the minimum wage; yet few studies address this outcome directly. Low-skilled immigrant populations shift toward labor markets with stagnant minimum wages, and this result is robust to a number of alternative interpretations. This mobility provides behavior-based evidence in favor of a non-trivial disemployment effect of the minimum wage. Further, it reduces the estimated demand elasticity using teens; employment losses among native teens are substantially larger in states that have historically attracted few immigrant residents.