For immediate release: July 25, 2006

DALLAS—Excessive labor market regulations may lead to higher jobless rates and lower economic activity among immigrants, according to the July issue of the Federal Reserve Bank of Dallas’ Economic Letter.

In "How Labor Market Policies Shape Immigrants' Opportunities," senior economist Pia M. Orrenius and economic analyst Genevieve R. Solomon write that the gap between immigrant and native unemployment rates is generally smaller in countries—such as the United States—with fewer restrictions on labor markets.

"At a time when population and labor force growth in many developed countries are increasingly driven by immigration, more attention should be paid to the perverse effects of some labor market policies," write Orrenius and Solomon.

Labor regulations common in OECD countries—such as centralized wage-setting, restrictions on hiring and firing, employment taxes and minimum wages—can have more adverse effects on immigrant than native unemployment, according to the authors.

Additionally, young non-native workers—as lower-productivity employees—may be hurt more by labor market regulations than older immigrants, they assert.

The July 2006 issue of Economic Letter can be found at www.dallasfed.org.

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