**6. Policy application: Immigration**

Immigrant workers can either be substitutes for native-born workers or complements to them. When immigrant workers are perfect substitutes for native-born workers, they have the same skills and compete for the same jobs. Thus, an influx of immigrant workers increases the labor supply, shifting the labor supply curve to the right.

The impact of immigration on the labor market when immigrant workers are substitutes for native-born workers is illustrated in **Figure 11 (a)**. As the immigrants enter the labor market, the labor supply curve shifts to the right, increasing the total employment from 300 to 320. In addition, the hourly wage rate decreases from \$20 to \$18. Because many immigrants are low-skilled workers, economic studies have found that an influx of immigrants depresses wages for low-skilled native-born workers in the short run. And, because many immigrants are also highskilled, a similar substitution effect occurs for some high-skilled workers [6]. Since native workers are less likely to accept the lower wage, the employment of native workers decreases.

However, when workers are complementary, an influx of immigrant workers can increase the productivity of the native workers. Thus, an increase in immigrant labor can raise the demand for native workers.

The impact of immigration on the labor market when immigrant workers are complements for native-born workers is illustrated in **Figure 11 (b)**. As the immigrants enter the labor market, the labor demand curve for native workers shifts to the right, increasing the total employment of native workers from 300 to 330. In addition, the hourly wage rate of native workers also increases from \$20 to \$23.

#### **Figure 11.**

*The impacts of immigration on labor market. (a) the impact of immigration on the labor market when immigrant workers are substitutes for native-born workers, (b) the impact of immigration on the labor market when immigrant workers are complements for native-born workers.*

**Figure 12.** *The impacts of minimum wage on labor market*.
