Immigrant-Native Wage Differentials and Immigration Reform

The Immigration Reform and Control Act of 1986 (IRCA) increased monitoring of illegal employment and fined employers who hire undocumented immigrants. Since these provisions tax immigrant wages, we expect the immigrant- native wage gap to increase after IRCA. We explore this hypothesis by decomposing immigrant-native wage differentials before and after IRCA and find that 1) the immigrant-native wage gap increases; 2) in each year most of this gap is due to individual and job characteristics; 3) the change in the gap is due primarily to overvaluation of native characteristics and to a lesser extent to undervaluation of immigrant characteristics