Panel Paper: The Impact of Low-Skilled Immigration on the Market for Early Care and Education

Thursday, November 7, 2019
Plaza Building: Concourse Level, Plaza Court 7 (Sheraton Denver Downtown)

*Names in bold indicate Presenter

Chris M. Herbst and Umair Ali, Arizona State University

Between 1980 and 2015-2017, the immigrant share of the U.S. early care and education (ECE) workforce increased from five percent to nearly 20 percent (Authors’ calculations). The goal of this paper is to study the impact of rising low-skilled immigration on the ECE market, including the supply of native ECE workers, compensation, and market prices.

This paper draws on two data sources: 1990-2010 U.S. Decennial Census (IPUMS) and 1990-2017 Quarterly Census of Employment and Wages (QCEW). The Census analytic sample will consist of working-age native women with no more than a high school degree residing in the 150 largest U.S. cities. The outcome variables will be the log of hourly wages and indicator variables denoting whether a given women is employed in the home-, center-, or school-based ECE sector. The QCEW is an establishment-level database of employment and compensation for industries covered by state unemployment insurance laws. The analytic sample will consist of firms within the NAICS “child day care services” industry. Key outcomes will be the number of establishments, number of employees, and weekly income.

To quantify the impact of low-skilled immigration, this paper exploits cross-city and over-time variation in the size of the low-skilled immigrant workforce. Specifically, the key independent variable is the share of low-skilled immigrants in the workforce in a given city and year. An important concern with this variable is that it may be endogenously determined: since immigrants are not randomly assigned to cities, their locational preferences may be correlated with the unobserved determinants of the outcomes of interest. Thus this paper will use an instrumental variables strategy to recover the causal effect of low-skilled immigration. The instrument takes advantage of the possibility that new waves of immigrants are likely to settle in cities that already include a large number of individuals from the same country. Formally, the instrument uses the historical distribution of immigrants from a given country to assign the share of immigrants from that country to the same city in subsequent time periods. This instrument has been used extensively to study the impact of low-skilled immigration (e.g., Amuedo-Dorantes & Sevilla, 2014; Card, 2001; Cortes, 2008; Cortes & Tessada, 2011; Furtado, 2015).

There are several reasons why, from a policy perspective, this topic is important. First, the ECE sector contains one of the highest concentrations of immigrant labor in the economy. Indeed, it is currently the eighth largest occupational destination for female immigrants (AIC, 2017). Second, immigrants are disproportionately employed in the informal ECE sector—specifically as private household workers—where wages are low, employment protections are relatively weak, and opportunities for professional development are few. Fully 50 percent of immigrant ECE workers are employed in home-based settings, compared to 29 percent of their native counterparts (Park et al., 2015). In contrast, only 15 percent of immigrants are employed as center-based preschool teachers (natives: 27 percent).