Question

What factors can explain the relatively small effect of low-skilled immigration on the wages of low-skilled workers?

Short answer

Minimum wage laws ensure that low-wage workers' income does not fall below a certain level, resulting in a labour shortage.

Step-by-step solution

Definition

Low-skilled labor: "Low-skilled labor" refers to a segment of the workforce having a limited skill set or a little amount of work to do. Unskilled job is associated with lower income and is defined by a lack of educational attainment, such as a high school diploma, GED, or lack thereof.

Explanation

Minimum wage laws ensure that the compensation of low-wage workers does not fall below a certain level. Furthermore, indigenous and immigrants typically do not compete for the same jobs. In a low-skilled occupation, a minimum wage will result in a labor scarcity. If the market wage is low, a legally enforceable minimum wage can entice workers to work, boosting their job search efforts and, as a result, lowering unemployment. If the market rate is high, a legally enforceable minimum wage may discourage workers from looking for work since job openings are few.