IMMIGRATION AND REAL WAGE

Time Series Analysis of Immigration and the Real Wage

Time Series Analysis of Immigration and the Real Wage

Introduction

The study is related to immigration and the real wage which particularly focuses on United States. The phenomenon is important to study as it relates to real wage which is calculated as an aggregate of goods, consumer goods and services. The real wage is determined by the size of the nominal wage and price levels for consumer goods and services, as well as taxes paid from salaries. The real wage decreases with inflation if inflation is not offset by the indexation of wages. Therefore, it is important that the real wage should be compared with the immigration.

Research Question

- Is there an effect of increasing immigrants on the real wages in United States?

Hypothesis

H o: There is an effect of increasing immigrants on the real wages in US.

H A: There is no effect of increasing immigrants on the real wages in US.

Literature Review

For simplicity, it is assumed that labor markets in the migrated countries are perfectly competitive, and the quality of the work that is qualifications, training, etc are the same. If migration between the two countries is prohibited, then the equilibrium in the labor markets for case in point, in Mexico and the United States will be determined by supply and domestic supply. Suppose that in this case, the equilibrium wage rate for work of equal qualifications will be $ 10 per hour in the U.S. and $ 5 per hour in Mexico, and the number of employees, respectively, 120 for 40 million people. If the United States and Mexico will remove all restrictions on labor migration, the Mexican workers, trying to get a larger payment for their labor will migrate to the United States. Labor supply in Mexico will be reduced; this can be graphically shown a shift in the supply curve to the left in the position. At the same level of demand for labor will lead to increased hourly rate of wages. In the U.S., on the contrary, the proposal in the labor market will grow at the expense of immigrants; shift the supply curve to the right in the position. According to past researchers, it is found that in this context, the growing competition between immigrants in the U.S. labor market equilibrium result in a lower hourly wage rates.

Theoretically, the migration of workers would have to continue for as long as the U.S. wages will be higher than other country. This means that free migration should have been in some time lead to a leveling of wages in the two countries (Edwards, 2009). However, a more realistic assumption would be that a complete alignment will not happen because, as already noted, relocation to another country due to migrants at considerable cost. Therefore, the gain in wages for workers of other country should be sufficient to offset these costs. In relation to this, it is assumed that the influx of workers hourly wage rate of other country in the ...