Abstract
The major theme of this paper is aimed to show the adverse effects of immigration control in a labor market where distinct job segmentation between natives and immigrants exists.
Various revisions in immigration policy were often motivated by widespread concern over the alleged adverse impact on native employment from the arrival of immigrants. Facing increasing unemployment pressures, most of governments in the world have a strong tendency to restrict the inflow of immigrant labors for the sake of providing more employment opportunities to native labors. However, it can be shown in this paper that, restricting immigrant labors from competition, will only yield adverse effects to both native labor and immigrant labors, employment prospect for native labors will be worsen rather improved by expulsion of their competitors. In the case of Chinese urban labor market, my first argument for this point comes from the fact that native labors and immigrant labors are, much often if not always, located in two segmented parts of job market where little labor mobility is occurring. Withdraw of immigrant labors will not be much helpful to provide more room for native labors because the rooms vacated are little attraction to them and they would even prefer to wait as unemployed.
My second and main argument against immigration control comes from the wage linkages between native labors and immigrants that formally presented by the model in this paper. It is understandable to see, withdraw of immigrant labors in urban informal sectors, besides hurt the production in that sector, will unambiguously push high the wage level in that sectors. Since there exists a positive relationship between the wage level of native workers in formal sectors and that of immigrant workers in urban informal sector, a major finding in the paper, the rise of immigrant worker's wage level will force urban formal firm to pay higher wage to native labors. Intuition behind this point is, using efficiency wage consideration, native workers tend to devote less efforts measured in efficient units when they find the opportunity cost of being caught shirking is reduced, due to the rise of unemployment subsidy which argued to be positively connected with the income level of informal workers. Then, a higher formal wage is provided when the new equilibrium of labor market is reached, but consequently, the demand for native workers is reduced and more urban unemployment incurs. Therefore, ironically, immigration policies that aimed at protecting the employment opportunities of native workers will only make them suffer more loss.
And it is further addressed in this paper that, the formation of urban unemployment in today China can be at least partly attributed to the over-priced formal wage, which may argued as a consequence of restricted immigration. And even when the rise of urban unemployment in China is defined as a result of demand deficiency, the demand deficiency itself can be largely attributed to the roots such as low purchasing power of rural residents, undersized urbanization level, and expanding income gap between urban and rural residents, which all can be attributed to the ill-advised immigration control and long-existed urban-rural social and economic segregation.