Immigration, unemployment and labor force participation in the US

Critics of immigration often allege that immigration worsens US-born workers’ labor market outcomes, such as their employment and earnings. A large body of economic research has examined how immigration has affected natives’ wages. Most of these studies have concluded that immigration has little or no adverse effect on US natives’ wages. However, few studies have examined other key dimensions of US natives’ success in the labor market: unemployment and labor force participation. Understanding how immigration affects unemployment and labor force participation among US natives is important for several reasons. The foreign-born share of the population is the highest in a century, and immigrants account for 1 in 6 workers. Although unemployment is currently near a record low, it soared during the Great Recession of 2007-2009 and was slow to return to pre-recession levels. Labor force participation, meanwhile, has been declining for years, a trend that accelerated with the recession and has yet to reverse. Unemployment and labor force participation are markedly worse among disadvantaged groups, such as less-educated workers, that may compete the most intensively with immigrants in the United States. This study examines the relationship between immigrants’ share of the labor force and US natives’ unemployment and labor force participation rates using comprehensive data from 2005-2013. The study controls for economic conditions that may affect the number of immigrants in a state and presents two-stage least squares estimates that control for endogeneity. The results of the state-level analysis indicate that immigration does not increase US natives’ unemployment or reduce their labor force participation. Instead, having more immigrants reduces the unemployment rate and raises the labor force participation rate of US natives within the same sex and education group