Cross-Border Earnings of Mexican Workers Across the US–Mexico Border

ABSTRACT

This article studies the evolution of the earnings obtained by Mexican-born workers that live in Mexico but work in the US, with respect to the earnings obtained by Mexican-born workers that reside in Mexico in municipalities adjacent to the United States. Between 2000 and 2010 there was a significant decline in the quantity of cross-border workers, followed by a slight increase between 2010 and 2015. The study shows that cross-border workers earn nearly double what similarly skilled non-cross border workers earn, where these differentials are accentuated among women and the low-educated. Given that the two groups have similar human capital levels, the earnings gap is mainly a result of the different returns to their productivity related characteristics they receive in the US and Mexican labor markets, respectively. Besides their higher earnings, cross-border workers also have shorter workweeks and are more likely to be male, married and salaried employees.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 A BCC entitles the card-holder to enter the US for a period of 72 hours within a 25-mile radius of the international border, exclusively for tourism, shopping, and social visits. It does not allow the bearer to engage in employment activities on neither a temporary nor long-term basis (Chávez 2011, 1321).

2 The U.S. Department of Homeland Security denotes as alien commuters the individuals with legal permission to cross into the US to work. Following Vargas-Valle (2015), the present study uses the term cross-border worker to refer to those laborers with or without legal permission to work in the United States.

3 A growing literature has focused on different aspects related to Mexican cross-border workers. These topics include their occupations of employment and political affiliation (Ericson 1970; Acuña 1988), their contribution to wage and salary income in the border region (Alegría 1990), the effect of the Immigration Reform and Control Act on the number of the cross-border workers (Estrella 1993), their sociodemographic profile and self-perceptions (Escala and Vega 2005; Vega 2015), the strategies used to navigate the border and the resources that US border and immigration policy offers to borderland residents that they employ to construct their livelihoods (Chávez 2016), and the relationship between cross-border work and the education decisions of other household members (Vargas-Valle 2015).

4 Author’s calculation based on the 2006–2010 5-year sample American Community Survey. Figure estimated based on workers between 18 and 65 years of age.

5 To minimize unobserved heterogeneity, cross-border workers who are US-born citizens are not included in the sample.

6 An exception was the ERMEU collected in 1998. The ERMEU presents detailed socioeconomic information on local and cross-border workers, including whether the respondent has a US entry document, Green-Card or is a US-citizen.

7 To interpret the results, let $x$ denote the difference in mean log earnings between cross-border workers and local workers. Consequently, the implied percentage earnings differential is $e^{x-1}$. For differences of 0.25 or less in absolute value, log earnings differences closely resemble percentage earnings differentials. For larger differences, percentage earnings differentials can be calculated using the formula presented above (Trejo 1997, 1245).

8 Per OECD (2016), in 2014 the average annual number of hours worked in the US equaled 1,789. In contrast, the number of hours worked in Mexico ascended to 2,228 hours, the highest number among all Organisation for Economic Co-operation and Development member countries.

9 Based on a series of interviews, Escala and Vega (2005) observe that cross-border workers are mostly employed in low-skilled occupations such as being a construction worker, store employee, school janitor, or a housekeeper, among others.

10 Results when the earnings structure of local workers is assumed to reflect the non-discriminatory standard are available upon request.

11 Since there is no information on the number of hours worked in the Intercensal Survey and given the endogeneity associated with monthly earnings, the main analysis is performed on hourly earnings. Hence, the results presented in Table 5 are limited to 2000 and 2010. OLS regressions that use log monthly earnings as the explained variable provide similar results. OB decomposition results and the estimation of a cross-border premium on both hourly and log monthly earnings are presented in Table 6 and Table 7, respectively.

12 Due to their lower earnings and occupational status, living in Mexico allows cross-border workers to compensate for their lower returns and lower levels of human capital as they are exposed to cheaper living costs and have a higher purchasing power south of the border.

13 Information on the occupational distribution of cross-border workers separated by whether they lived in the US five years prior to being surveyed are available upon request.

14 In results not presented, it is observed that the effect of commuting on log monthly earnings is negative but increasing. This likely arises because workers with the shortest commutes are generally middle and upper middle class laborers that travel to work using private transport. On the contrary, workers with the lowest earnings are unlikely to be able to afford private transportation and rely on public transport which leads to longer travel times. Finally, the highest earning cohort is partly comprised by cross-border workers who have the longest commutes. This result differs from the one observed among U.S.-based workers, where Mora and Dávila (2011) show a positive but decreasing relationship between compensation and time traveled to work.

15 When occupation dummies are introduced, with respect to hourly earnings, in 2000 the explained component almost completely disappears, where it is reduced from 0.033 to 0.001 log points, while in 2010 it drops from 0.104 to 0.059 log points. Concerning monthly earnings, occupation dummies decrease the explained component from 0.054 to 0.006 log points in 2000 and from 0.128 to 0.061 log points in 2010.

16 A potential problem with Equation (4) is the underlying assumption that observable characteristics similarly affect the labor market earnings of cross-border and local workers.

17 High-skilled workers denote individuals that at least have some undergraduate studies, i.e. 12 years of study or more. Low-skilled workers represent individuals that at the most completed their high-school studies, i.e. have less than 12 years of study.