Sanctions for Whom? The Immigration Reform and Control Act's "Employer Sanctions" Provisions and the Wages of Mexican Immigrants

Peter Brownell, University of California, Berkeley

Past research has found that wage differences between authorized and unauthorized immigrants could be entirely explained by human capital factors prior to the 1986 passage of "employer sanctions." However, a significant post-1986 wage differential has been broadly understood as employers "passing along" expected costs of sanctions through lower wages for unauthorized immigrants. In this paper, I use administrative data on employer sanctions enforcement combined with survey data from the Mexican Migration Project to test this explanation. I find employer sanctions enforcement levels do affect Mexican immigrants' wages, reducing them about 21% for each dollar in fines collected per employee from non-compliant firms in the same industry, state, and year. However, levels of employer sanctions enforcement have no statistically significant differential effect based on legal status. That is, while sanctions may cause national-origin wage discrimination against Mexican immigrants, they do not explain the wage gap between authorized and unauthorized Mexicans.