Undocumented workers in the labor market: an analysis of the earnings of legal and illegal Mexican immigrants in the United States

This paper studies the differences in earnings between Mexican legal and illegal immigrants in the United States. The analysis includes a cross-sectional examination of the wage differences between legal and undocumented workers as well as a longitudinal analysis examining the impact of legalization on the earnings of previously-undocumented workers. It is shown that the average hourly wage rate of male Mexican legal immigrants in the United States was 41.8% higher than that of undocumented workers while female legal immigrants earned 40.8% more. Though illegal immigrants have lower education and English proficiency, and a shorter period of residence in the United States, than legal immigrants, it is shown that differences in the observed characteristics of legal and illegal immigrants explain only 48% of the log-wage gap between male legal and illegal workers and 43% of the gap for women. An analysis of undocumented immigrants legalized after the 1986 U.S. immigration policy reform shows significant wage growth in the four years following legalization. These gains are due mostly to the change in legal status itself, not to changes in the characteristics of immigrants over time. Received: 7 July 1997/Accepted: 16 March 1998