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Should We Worry about the Composition of the U.S. Immigrant Population?

In January 2018, President Trump famously raised his concerns regarding the “lack of Norwegians” and the excess of immigrants from low-income countries entering the United States – and international media took swift notice. The concern over the composition of U.S. immigration flow is not at all new, however. Leading immigration economist George Borjas, Ph.D., has pointed out in several academic articles that the relative share of immigrants from Europe steadily declined over the 20th century, as more immigrants started to arrive from Central and South America, and Asia (Borjas, 1995 and 1999).[1] Borjas argued that in the 1980’s and 1990’s the weakening labor market performance of immigrants (as compared to U.S. natives) was directly related to the changing source country composition. More recently, low skilled immigration into the U.S. has drastically declined, as explained by Hanson, Liu, and McIntosh (2017).[2] Should the U.S. be very concerned about the composition of its immigrant pool as Trump rather bluntly argued? And would that give rise to a drastic change in the U.S. immigration policy? Let’s examine the data.

We took a look at the American Community Survey to evaluate those questions. To avoid arbitrarily categorizing source countries into “as good as Norway” versus “terrible, horrible, no good, very bad countries” we use the World Bank country classification based on the Gross National Income (GNI) per capita and OECD membership. Countries are grouped into low income (e.g. Afghanistan, Haiti, and Somalia), lower middle-income (e.g. Armenia, El Salvador, and India), upper middle-income (e.g. Cuba, Mexico, and China), high-income OECD (e.g. Chile, Norway, and Canada), and high-income non-OECD (e.g. The Bahamas, Saudi Arabia, and Russia). Since Mexico, China, and India currently constitute the vast majority of U.S.-bound immigrants in their respective groups, we look at those countries separately. Also, as we are interested in studying the labor market performance of immigrants relative to U.S. natives, we include individuals aged 18-65 in the descriptive analyses below.

First, worries regarding the huge influx of migrants from low-income countries do not seem warranted: the share of immigrant from low-income countries (as percentage of the total immigrant stock residing in the U.S.) is rather small (around three percent) and has remained steady over the period 2001-2017, both among the recent arrivals and the broader immigrant population. On the other hand, there is a definite downward trend in the share of immigrants who originate from high-income OECD countries, as well as a similar downward trend for Mexicans, with the latter being particularly prominent among recent arrivals. There is a corresponding increase in the number of migrants from lower- and upper middle-income countries, especially from India and China.

So then, are immigrants from low-income countries poorly educated and not succeeding in the U.S. labor market? Perhaps surprisingly, origin country income and the average education level of the immigrant group are not as highly correlated as one might think. Immigrants from Mexico, high-income non-OECD countries, and low-income countries are less likely to have a college degree than similarly aged U.S. natives, whereas those from China, India, and high-income OECD-countries are the most educated. The latter is largely explained by the H1-B visa program where a college degree is a minimum requirement for entry into the U.S. Educational attainment is gradually increasing among all groups, including U.S. natives. A recent study looks at immigrant niching into specific low-skill and high-skill labor markets (Eckstein and Peri, 2018).[3] The niching is very much related to the type of skills and human capital of the immigrant group. For example, almost one-in-four Indian immigrants works in a computing related job, whereas Mexican immigrants are heavily clustered in low-skilled manual jobs (e.g. laborers in construction, farm workers, cooks, and janitors).

Most analysts of immigrants in host country labor markets are concerned with their “assimilation” – how easily they are able to find employment and what their relative wage levels look like as compared to natives. We know that since the Great Recession, most immigrants are at least as likely to be employed as the average American native. The only exceptions are those from high-income non-OECD countries, whose employment rates are much lower. Conditional on being employed, immigrants are also more likely to work full time (30 hours or more per week) than employed natives, with the exception of  high-income non-OECD country immigrants in the post-recession years, as well as Chinese immigrants in the last few years of the data.[4].

While immigrants seem to find employment, most of them are not earning wages as high as the average American. There are many likely reasons for the immigrant-native pay gap, including language skills, under-employment relative to education, occupation and sector differences, and so on. Whether looking at the annual earnings, weekly wages, or hourly wage, the relative pay is low especially for those from Mexico and low-income countries. Even if we account for the immigrant – native differences in education, occupations, geographic locations, and other reasons that explain the pay gap, we still see all immigrant groups except for those from high-income OECD countries earning less than comparable natives.  

Additionally, many studies have looked at the immigrant – native wage gap in detail and find that the gap shrinks over duration of stay.[5] Immigrants in the U.S. also seem to perform better in the labor market than in most other countries.[6] Many more studies have tried to find impacts that immigrants may have on native employment and wages. Generally those impacts are very small or localized to specific groups.[7] Instead, immigrants are found to be an important economic force as firm founders, job creators, and innovators.[8] Taking the various facts into account, it would be hard to claim that immigrants in the U.S. are a “net negative” for the economy.

So are President Trump’s concerns regarding our immigrant pool valid, at least as far some real data and evidence can attest? We would argue that immigrants seem to fare relatively well in the U.S. labor market, and the changing source country composition is perhaps not much of a cause for concern. It remains, of course, important to ensure that immigrants can assimilate into the U.S. labor market, without any unnecessary legal or other impediments, as that guarantees the greatest positive net impact on the host country.

Sari Pekkala Kerr, Ph.D., is a senior research scientist/economist at the Wellesley Centers for Women at Wellesley College who studies labor markets, education, and families. Margaret Dalton is a research associate at the Harvard Business School and a former research assistant at the Wellesley Centers for Women.

 

[1] Borjas, George. “Heaven’s Door.” Princeton, NJ: Princeton University Press, 1999. Borjas, George. “Assimilation and Changes in Cohort Quality Revisited: What Happened to Immigrant Earnings in the 1980s? Journal of Labor Economics 13 (1995): 201-245.

[2] Hanson, Gordon, Chen Liu, and Craig McIntosh. “Along the watchtower: The rise and fall of U.S. low-skilled immigration.” Brookings Papers on Economic Activity, BPEA Conference Drafts, March 2017.

[3] Susan Eckstein and Giovanni Peri. “Immigrant Niches and Immigrant Networks in the U.S. Labor Market.” RSF: The Russell Sage Foundation Journal of the Social Sciences 4 (2018): 1–17.

[4] Due to the very large sample sizes in the ACS, most differences that appear small in the graphs are nevertheless statistically significant under standard t-tests for sample means.

[5] E.g. LaLonde and Topel. “Assimilation of Immigrants in the U.S. Labor Market.” In Borjas and Freeman (Eds.) Immigration and the Work Force. The University of Chicago Press (1992); Lubotsky. “Chutes or Ladders? A Longitudinal Analysis of Immigrant Earnings.” Journal of Political Economy 115 (2007): 820–867.

[6] E.g. OECD (2015) “Indicators of Immigrant Integration.” OECD, Paris.

[7] E.g. Kerr and Kerr. “Economic Impacts of Immigration: A Survey.” Finnish Economic Papers 24 (2011): 1-32; Ottaviano and Peri. “Rethinking the Effect of Immigration on Wages.” Journal of the European Economic Association 10 (2012): 152–197; Borjas and Doran. "The Collapse of the Soviet Union and the Productivity of American Mathematicians." Quarterly Journal of Economics 127 (2012): 1143-1203.

[8] E.g. Kerr and Kerr. “Immigrant Entrepreneurship in America: Evidence from the Survey of Business Owners 2007 & 2012.” NBER Working Paper 24494, 2018; Kerr. “Gift of Global Talent: How Migration Shapes Business, Economy, and Society.” Stanford University Press, 2018.

 

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