Question

Suppose there are two labor markets in a country: one for low-skilled workers and one for highly-skilled workers, suppose immigration of low-skilled workers occurs,

As immigration of low-skilled workers occurs, immediately, would the demand or supply in the low-skilled market shift? Which way?
As a result of the change above, what would happen to equilibrium wages and employment of native workers in the low-skilled market?
As a result of the change in wages described above, what happens to the demand for high-skilled workers? Consequently, what is the impact on the equilibrium wages and employment of natives in the high-skilled market?

Answer 1

a) As immigration for low skilled workers increaes, the supply of low-skilled workers goes up. It shifts to the right.

b) Equilibrium wages for low skilled workers decline. Employment levels of low skilled native workers goes down.

c) Lower wages in low skill job market allows employer to increase the wages of high skill workers. This is because high skill workers become more productive when they can afford to hire low skill workers for better personal services. Thus, their equilibrium wages go up, and their employment increases.