This paper examines the short-term effects of Venezuelan migration on wages and employment of native workers in Colombia. Between 2015 and 2019, Colombia received around 1.8 million displaced Venezuelans, increasing the country’s population by almost 4 percent.
Approximately 60 percent of natives and 90 percent of Venezuelan migrants are in the informal sector. Venezuelan migrants and Colombian natives speak the same language and have a similar cultural background, which increases their substitutability in the labor market. While Venezuelan migrants and Colombian natives have similar levels of education, Venezuelan migrants are heavily concentrated in occupations, such as restaurant work, construction, street vending, and domestic service, which typically require less education and indicating ‘occupational downgrading’ of migrants.
The author exploits variations in the migration rate across 79 metropolitan areas in Colombia to isolate the effect of migrants on the employment and wages of native workers. In 2019, the migrant share across metropolitan areas varied from 1 percent at the 10th percentile to 8.6 percent at the 90th percentile. The analysis is based on data on labor market outcomes of migrants and natives from the Colombian National Integrated Household Survey (Gran Encuesta Integrada de Hogares, GEIH).
- Migrants have an adverse effect on the wages of native workers. A 1 percentage point increase in the migrant share decreases native hourly wages by 1.05 percent, or 0.59 percent after controlling for regional time trends. While these wage effects do not vary significantly by age or gender, they are larger for less educated natives, especially those who are in the informal sector, self-employed, or working in low-skill occupations.
- Migrants have a negligible effect on native employment and unemployment. Among natives younger than 25 years of age, migration causes a reduction in labor force participation, which is partially explained by a reduction in school dropouts. However, this result is not robust to the exclusion of metropolitan areas close to the Venezuelan border with high migration rates.
- Native movements across occupation skill groups and geography are small and play a limited role in mitigating local wage effects. Men with completed secondary schooling experienced minor upgrading from low- to middle-skill occupations, while men with post-secondary education experienced minor downgrading from high- to middle-skill occupations, alongside increases in self-reported underemployment. There is also a small movement of natives out of the formal sector in response to the migration shock.
- Wage effects are larger in cities that have a higher baseline informality rate and lower ease of starting a business.
The author notes that estimates of wage effects are larger than those typically observed in the literature, consistent with evidence that the economic effects of migration tend to be largest in middle-income developing countries, especially for less-educated workers in the informal sector. Migrant downgrading plays an important role in concentrating wage effects among lower-income natives. The finding that wage effects are moderately stronger in metropolitan areas with higher baseline informality rates and lower ease of starting a business, indicates that local economic conditions are a determinant of the labor market effects of migration and motivates the formulation of policies to facilitate business formation or encourage migrant relocation according to local economic conditions.