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The Effect of Changes in the U.S. Wage Structure on Recent Immigrants' Earnings

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  • Darren Lubotsky

    (Princeton University)

Abstract

Since recent immigrants tend to earn less than natives, their relative labor market status has been adversely impacted by an increase in the return to labor market skills and widening wage inequality over the past two decades. To evaluate the magnitude of this effect, this study uses Social Security earnings records matched to recent cross--sections of the SIPP and CPS to estimate the change in the return to skills among native--born workers. This is then used to adjust the earnings gap between immigrants and natives in order to estimate what the gap would have been if the return to skills had remained at its 1980 level. The results suggest that the return to skills rose by 40 percent between 1980 and 1997, leading to a 10 to 15 percentage point decrease in the relative earnings of recent immigrants. Thus examining solely the earnings of recent immigrants may lead to an overly pessimistic picture of their actual labor market skills.

Suggested Citation

  • Darren Lubotsky, 2001. "The Effect of Changes in the U.S. Wage Structure on Recent Immigrants' Earnings," Labor and Demography 0110003, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0110003
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    References listed on IDEAS

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    1. Kristin F. Butcher & John Dinardo, 2002. "The Immigrant and Native-Born Wage Distributions: Evidence from United States Censuses," ILR Review, Cornell University, ILR School, vol. 56(1), pages 97-121, October.
    2. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
    3. Borjas, George J, 1985. "Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 463-489, October.
    4. Per-Anders Edin & Robert J. LaLonde & Olof Aslund, 2000. "Emigration of Immigrants and Measures of Immigrant Assimilation: Evidence from Sweden," Working Papers 0020, Harris School of Public Policy Studies, University of Chicago.
    5. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
    6. Darren Lubotsky, 2007. "Chutes or Ladders? A Longitudinal Analysis of Immigrant Earnings," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 820-867, October.
    7. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
    8. Robert J. LaLonde & Robert H. Topel, 1992. "The Assimilation of Immigrants in the U. S. Labor Market," NBER Chapters,in: Immigration and the Workforce: Economic Consequences for the United States and Source Areas, pages 67-92 National Bureau of Economic Research, Inc.
    9. Wei-Yin Hu, 2000. "Immigrant Earnings Assimilation: Estimates from Longitudinal Data," American Economic Review, American Economic Association, vol. 90(2), pages 368-372, May.
    10. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
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    Cited by:

    1. Christian Dustmann, 2014. "Selective Outmigration and the Estimation of Immigrants Earnings Profiles," CReAM Discussion Paper Series 1402, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    2. Wojciech Kopczuk & Emmanuel Saez & Jae Song, 2007. "Uncovering the American Dream: Inequality and Mobility in Social Security Earnings Data since 1937," NBER Working Papers 13345, National Bureau of Economic Research, Inc.
    3. Heather Antecol & Peter Kuhn & Stephen J. Trejo, 2006. "Assimilation via Prices or Quantities?: Sources of Immigrant Earnings Growth in Australia, Canada, and the United States," Journal of Human Resources, University of Wisconsin Press, vol. 41(4).
    4. Antecol, Heather & Kuhn, Peter J. & Trejo, Stephen, 2003. "Assimilation via Prices or Quantities? Labor Market Institutions and Immigrant Earnings Growth in Australia, Canada, and the United States," IZA Discussion Papers 802, Institute for the Study of Labor (IZA).
    5. George J. Borjas & Rachel M. Friedberg, 2009. "Recent Trends in the Earnings of New Immigrants to the United States," Working Papers 2009-13, Brown University, Department of Economics.
    6. George J. Borjas, 2013. "The Slowdown in the Economic Assimilation of Immigrants: Aging and Cohort Effects Revisited Again," NBER Working Papers 19116, National Bureau of Economic Research, Inc.
    7. Bernt Bratsberg & Erling Barth & Oddbjørn Raaum, 2006. "Local Unemployment and the Relative Wages of Immigrants: Evidence from the Current Population Surveys," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 243-263, May.
    8. Deborah Cobb-Clark & Barbara Hanel & Duncan McVicar, 2012. "Immigrant Wage and Employment Assimilation: A Comparison of Methods," Melbourne Institute Working Paper Series wp2012n28, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

    More about this item

    Keywords

    Immigrant earnings and skills; returns to skill; U.S. wage structure;

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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