Originally Posted by LCButterField
The fact that the skill distribution of immigrant labor (illegal + legal) is the inverse of that for native born means that for the most part immigrants are complements for domestic labor, not substitutes. Given this complementarity, and given specialization, the evidence is that immigration (of both types) may reduce inequality (see Peri's Task Specialization Immigration And Wages
Whether or not immigration (again, of both types) increases or decreases inequality by reducing the wages of low skilled labor comes down to determining the empirical value of a number of important parameters in a quite complex model. For California it seems that the effect of immigration is small and reduces inequality (see The Effects Of Immigration On California's Labor Market
and Rethinking The Effects Of Immigration On Wages
Interesting analysis, one small question though: My understanding from Peri's analysis was that part of the reason that inequality was actually decreased was because the influx of illegal workers added to the economy in two conflicting ways (conflicting in terms of their effect on inequality): they (potentially) brought the cost of labour (read: wages) down, thus (potentially) increasing inequality; while simultaneously increasing demand for goods, and thus creating jobs in the goods-creation/sales areas, which would decrease inequality in terms of helping to create (lower-skilled retail) jobs that would presumably be further up on the 'arch'. The overall effect on inequality then depends on which of these two effects has the more noticeable impact on the overall economy, to which one then resorts to the data you refer to above. His overall conclusion is that the increase in inequality due to drops in wages is less of an effect than the decrease in inequality due to the increase in demand. Do I have that approximately correct?