This paper investigates the impact of Venezuelan migration on the real wage in Colombia. The author exploits the exogenous shock to the Colombian labor supply due to large-scale inflows of Venezuelans beginning in the second half of 2016 when the borders between the two countries were reopened after about a year of being closed. The analysis relies on labor and socioeconomic data from the Gran Encuesta Integrada de Hogares of Colombia’s Departamento Administrativo Nacional de Estadistica (DANE), data on migratory flows of Venezuelans in Colombia from the Unidad Administrativa Especial de Migracion Colombia (UAEMC), and data on the numbers of Venezuelans living irregularly in Colombia from the Registro Administrativo de Migrantes Venezolanos (RAMV).
- Following the opening of the border between Colombia and Venezuela in the second half of 2016 there were significant inflows of Venezuelan migrants to Colombia, the majority settling in regions near the border. The Economically Active Population (EAP) of the border regions of La Guajira and Norte de Santander is estimated to have increased by approximately 10 to 15 percent since the reopening of the border in 2016.
- The increase in labor supply in La Guajira and Norte de Santander caused a decline in real hourly wages of approximately 6 to 9 percent on average.
- The decline in real wages was larger for workers with lower skills (defined as individuals with less than a secondary-level education). Low-skilled workers experienced a decline in real wages, on average, 7 percentage points greater than that experienced by skilled workers. This result is consistent with other studies indicating the ‘downgrading’ of migrants and refugees, i.e. regardless of educational attainment and skill level, migrants and refugees frequently work in low-skilled jobs, generating pressure on real wages in this segment of the labor market.
- The effect was also stronger for informal workers (defined as individuals without employer contributions to a pension fund or contributory health plan). On average, wages fell by approximately 9 percentage points more for informal workers compared to formal workers. This result suggests that Venezuelan migrants are participating mainly in the informal labor market.
- There is a stronger decline in the real wage for men than for women, consistent with a traditional role assignment within households. The male labor supply increased at a greater rate than the female labor supply, producing a larger wage decline for male workers.
In his conclusion, the author argues for state intervention in regions receiving Venezuelan migrants to mitigate the effect of the labor supply shock on real wages, including programs to generate employment and/or boost aggregate demand.