Employment Effects of State Legislation against the Hiring of Unauthorized Immigrant Workers

We analyze the impact of the 2007 Legal Arizona Workers Act (LAWA) on employment outcomes of low-skilled Arizona workers, with a focus on the states' unauthorized population. The intent of LAWA was to limit unauthorized workers' economic opportunities as a way to deter further illegal immigration and as such is likely to increase poverty among an already marginalized population. Specifically, we assess whether the legislation reduced the formal employment opportunities of the targeted population. We also look for evidence of an unintended consequence of the policy: whether LAWA pushed workers into informal employment, and if so what are the likely consequences for these workers and their families. Using the synthetic control method developed by Abadie, Diamond and Hainmueller (2010), we find no statistically significant pre-post LAWA differences in wage and salary employment rate for the vast majority of workers in Arizona. Only among the workers most likely to be unauthorized – non-citizen Hispanic men with at most a high school education – do we observe a statistically significant relative decline in the probability of wage and salary employment. We also identify a substantial and statistically significant relative increase in the rate of self-employment among the same group of likely unauthorized workers, and not among other groups. Our data suggests that this shift is likely associated with an increase in poverty among unauthorized immigrants.