Academic journal article Social Security Bulletin

Research on Immigrant Earnings

Academic journal article Social Security Bulletin

Research on Immigrant Earnings

Article excerpt

Summary

As the first in a trio of pieces devoted to incorporating immigration into policy models, this review of research on immigrant earnings trajectories brings to light several findings. Controlling for demographic and human capital characteristics, immigrants often start their U.S. lives at substantially lower earnings, but experience faster earnings growth than natives with comparable years of education and experience. The extent to which the earnings trajectories of immigrants and natives differ varies by country of origin, with the source-country's level of economic development being a key determinant of the size of the U.S.-born/foreign-born difference. The earnings profiles of immigrants from economically developed countries such as Japan, Canada, or Western Europe resemble those of U.S. natives who are of the same age and education level. In contrast, the earnings of immigrants from developing nations tend to start well below those of U.S. natives with comparable education levels and experience, but rise more rapidly than their U.S. counterparts. Comparing the earnings profiles of immigrants of similar age, sex, and years of schooling, over time and across groups, a strong inverse relationship emerges between their initial earnings and their subsequent U.S. earnings growth. In other words, the lower (higher) the initial earnings are, the higher (lower) the earnings growth. These and other research results have important implications for the projection of immigrant earnings and emigration in microsimulation models, as discussed in the two articles following this one: (1) "Adding Immigrants to Microsimulation Models" and (2) "Incorporating Immigrant Flows into Microsimulation Models."

Introduction

Immigration policy in the United States and the source-country composition of U.S. immigration have changed radically over time. Ending a period of high immigration, the Emergency Quota Act of 1921 and the Immigration Act of 1924 created a system that allocated visas according to the national-origin composition of the late 19th and early 20th century U.S. population, favoring immigration from Western European countries and greatly reducing or eliminating immigration from Asia and Southern and Eastern Europe.1 With the end of World War II, various changes chipped away at the national origin system and, in 1965, an Immigration and Nationality Act made family reunification, as opposed to national origin, the primary determinant of entry. To a much lesser extent, the new system also made room for persons to enter via employer requests for needed occupational skills.2 Given differences in the relative economic opportunities between the United States and the countries whose immigration had been severely restricted before 1965, the source-country composition of U.S. immigration shifted. Most recent immigrants come from Asian and Latin American countries in marked contrast to the earlier European-dominated immigration (Table 1).

A perusal of immigration research over the 20th century reveals, not surprisingly, that the extent to which social scientists have studied U.S. immigration follows the ebbs and flows of U.S. immigration. With the restrictive immigration policy of the 1920s and subsequent decline in the number of immigrants entering the United States, immigration lost its luster as an interesting research topic. With the reopening of the U.S. admission gates in the 1960s and subsequent growth in the number of immigrants entering the United States, immigration reemerged as a hot topic. Whenever immigration has been studied, a key focal point for scholars and policy analysts has been, how do immigrants fare in the U.S. labor market? Though on the surface, a simple question, answering it has meant scaling a methodological hurdle: how to discern from the available data the earnings growth of immigrants as they live in the United States.

The first studies measured immigrant earnings growth with a single year of decennial census data, by comparing the earnings of immigrants who had recently arrived with the earnings of immigrants who had been in the U. …

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