Slowdown in the economic assimilation of immigrants

 
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The aggregate number of foreign-born persons in the United States has never been higher than it is in 2013, but as a percentage of the population, the current number is still not quite as high as it was in the late 19th and early 20th century. “About 40 million foreign-born people now live in the United States,” the Congressional Budget Office (CBO) notes. “Of that group, not quite half have fulfilled the requirements of U.S. citizenship. Of the remaining people, about half are authorized to live and work in the United States, and about half are not authorized to live or work in the country.”

As the United States contemplates further policy reforms, the economics of immigration have become a chief topic of debate. The CBO has estimated that allowing more noncitizens to enter the United States lawfully could significantly bolster economic growth — for example, boosting GDP by 3.3% by 2023 — and help lower the budget deficit by nearly $200 billion over the next decade.

foreign born in the USA 1860-2010 (CBO)

It is almost proverbial that new immigrants frequently begin to “catch up” with U.S.-born residents’ socioeconomic mobility — hence, the idea of the American Dream. David Leonhardt of the New York Times suggests the cyclical nature of immigration patterns in his 2013 article “Hispanics, the New Italians.” Still, there is significant diversity even among broad immigrant cohorts. According to the Pew Research Hispanic Center, Latinos as a whole now have a higher rate of college enrollment than whites; but a variety of outcomes for Hispanic subgroups vary depending on the country of origin.

Yet some argue that aspects of assimilation may be changing in America. What is the evidence? A 2013 working paper for the National Bureau of Economic Research by George J. Borjas of the Harvard Kennedy School, “The Slowdown in the Economic Assimilation of Immigrants: Aging and Cohort Effects Revisited Again,” examines Census data to assess the gap in earnings between immigrants in the U.S. labor market and U.S. nationals. By examining earnings levels and growth rates, the author focuses on how recent immigrant groups have achieved relative “economic assimilation” (also called “wage convergence,” i.e., “the rate at which the wage gap between immigrants and natives narrows over time”).

The study’s findings include:

  • Immigrants joining the U.S. workforce during 1975-1979 saw the wage gap between new arrivals and comparable U.S. nationals fall by 14 percentage points over their first two decades of work, with the first decade recording faster convergence. However, those joining the U.S. labor force after the 1980s barely recorded a drop in the wage disadvantage: The 1985-1989 cohort saw a decline of only 7 percentage points, while the 1995-1999 immigrant cohort hardly registered any reduction in their wage gap during their first decade of work.
  • “In 1970, the most recent immigrant wave earned 23.5% less than comparable natives. By 1990, the immigrant disadvantage had grown to 33.1%, before contracting slightly to 27.3% in 2000. By 2010, however, the long-run trend in level cohort effects seems to have returned, and the latest wave of immigrants earned almost 33% less than comparable natives.”
  • The quality of human capital — specifically, the lack of English-language proficiency — has been found to contribute to low rates of wage convergence. Most nationalities (8 out of 10) show declines in English proficiency when comparing the late 1980s cohort and the late 1990s cohort.
  • Growth in the size of national-origin groups explained 25% of the declines in rate of immigrants’ economic assimilation and human capital — when national-origin groups are large, members perceive fewer benefits in improving language skills.
  • “The increasing size of the effective national-origin group … explains about 40% of the decline in the rate of (language) human-capital investments across the cohorts.”
  • An increase of 1 million persons in the national-origin group present in the United States is associated with a reduction in the growth rate of English proficiency by 4.9 percentage points, and reduction in the growth rate of economic assimilation by 3.8 percentage points.
  • Wage differentials varied between nationality groups: For example, Immigrants from China who arrived between 1990 and 1995 saw their rate of economic assimilation grow by 23%, over their first decade of work. Economic assimilation was 11.6% for Indians, 4.4% for Cubans, -6.3% for Mexicans and 10.2% for Filipinos. However, all nationality groups display a reduction in economic assimilation across historical cohorts.
  • Immigrants arrive with different skills, but even accounting for these variations, wage convergence of recent cohorts has been slower. Interestingly, the paper finds that “holding initial skills constant, immigrants who can most easily transfer their skills from one industrialized economy to another are also the immigrants who find it most expensive to invest in the post-migration period.”

The author states that these wage gaps were likely not caused by period-specific economic trends or changes in composition of immigrant groups, nor by changes in geographic settlement areas for immigrants. The data “consistently identify one factor — namely, national-origin group size — that is partly driving the observed decline in the rate of economic assimilation. As a result, the evidence suggests a potentially important hypothesis that is certain to become the focus of much research: the more recent immigrant cohorts have fewer incentives to invest in U.S.-specific human capital because the growth of the immigrant population makes those investments less profitable than they once were, and those reduced incentives have slowed the rate of economic assimilation.”

However, the paper also concludes that further research is merited to confirm this finding more definitively: “Because of the potential significance of the evidence, it is prudent to conclude by stressing the need for caution in the interpretation of the findings and the need for replication of the results before we can unequivocally assert that the trends revealed by the Census data describe an important part of the immigrant experience in the U.S. labor market.”

Related research: More limited language or educational attainment does not necessarily indicate a lack of motivation by immigrants. In a 2012 study published in Social Science Quarterly, “Who Doesn’t Value English? Debunking Myths About Mexican Immigrants’ Attitudes Toward the English Language,” researchers find a complicated picture in which new immigrants frequently place high levels of importance on language learning. “Our findings raise serious questions about the accuracy of widespread claims by commentators, politicians and the general public alike that Mexican immigrants simply do not desire to learn English,” the researchers conclude.

Tags: Hispanic, Latino

Last updated: August 13, 2013

 

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Citation: Borjas, George J. “The Slowdown in the Economic Assimilation of Immigrants: Aging and Cohort Effects Revisited Again,” National Bureau of Economic Research, June 2013, Working Paper 19116.