NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Economic Progress of Immigrants

"The next generation of second-generation workers, who will make up an important part of the workforce in 2030, may suffer from a sizable wage disadvantage of around 10 percent."

The famous U.S. "melting pot" that turns immigrants and their children into cultural and prosperous native "Americans" may not be working so well with the new arrivals of recent years. That's a thesis raised by NBER researcher George Borjas in Making it in America: Social Mobility in the Immigrant Population (NBER Working Paper No. 12088). "The social mobility of the immigrants who arrived a century ago may not be a good predictor of the assimilation prospects of current immigrants," he writes. It may be too early, he adds, to determine if a number of factors will prove important and slow down the rate of economic assimilation of the new immigrants. "Nevertheless, the dramatic shifts in the social, political, and economic climate suggest that ethnic differences could easily be incubated for much longer periods in the future."

In recent decades, a resurgence in large-scale immigration has raised the foreign-born share of the U.S. population -- from 4.7 percent in 1970 to 12.7 percent in 2003. And, the share of second-generation Americans with at least one foreign-born parent is expected to grow rapidly, from 10.5 percent in 2004 to nearly 14 percent by 2050. The grandchildren of current immigrants will make up another 9 percent of the population by mid-century.

Borjas suggests that, "the economic, social, and political consequences of delaying assimilation could be disastrous. The ethnic conflicts in many regions of the modern world, for instance, often originated centuries ago, and their consequences still fester." So, it is probably advantageous for the United States "to pursue intergenerational progress by immigrant households" in order to reduce the importance of ethnicity in determining socioeconomic outcomes in future generations and thus to encourage a cohesive social fabric.

Certain factors concern Borjas, though. First, in much of the twentieth century, the children of immigrants typically enjoyed wages somewhere between 5 and 10 percent higher than those of their parents. The second generation has the advantage of knowing English, graduating from American schools, and knowing the job market better. But the current generation of immigrants started out with relatively low wages compared to native Americans. So this suggests that the next generation of second-generation workers, who will make up an important part of the workforce in 2030, may suffer from a sizable wage disadvantage of around 10 percent.

Second, about half of the differences in relative economic status across ethnic groups observed in one generation persist into the next. There is a great deal of dispersion in socioeconomic status and earnings across the many national origin groups that make up the first generation of immigrants. It takes time for an immigrant and his children to acquire skills valued by an American employer, such as learning English, adopting the norms of the American workplace, and sometimes moving to an economically vibrant place outside an ethnic enclave. Since such a large proportion of current immigrants are Mexicans with poor education, it may take longer for them to catch up with natives. If the historical pattern holds up, the grandchildren of today's Canadian immigrants will earn about 17 percent more than the descendants of today's Mexican immigrants towards the end of the present century.

In contrast, the low-skilled immigrants of the early twentieth century were put to work building a rapidly expanding manufacturing sector. Three-quarters of Ford Motor Company workers in 1914 were foreign-born and came from less-developed areas of southern and eastern Europe. Their jobs evolved into stable and well-paid opportunities for immigrants and their descendants. It is "far from clear" that the employment sectors of immigrants today will have the same growth prospects, Borjas writes.

Third, the relative lack of ethnic diversity in post-1965 immigration may greatly reduce the incentives for assimilation. It allows the largest ethnic groups to essentially develop separate enclave economies and social structures, interacting little with the economic mainstream. In 2000, for example, Mexicans made up almost 30 percent of the immigrant population. In 1920, Germans and Italians, added together, comprised only 24 percent of the foreign-born population.

Fourth, political reaction to the social and economic dislocations associated with the First Great Migration prompted in 1924 strict limitations on the number and types of persons who could enter the country. In the 1920s, 4.1 million immigrants arrived in the United States. In the 1930s, only half a million persons entered. This "breathing period" during the Great Depression and World War II may have fueled immigrant social mobility by cutting off the supply of new workers to ethnic enclaves and reduced contacts with countries of origin.

Further, the earlier immigrants were "encouraged" to assimilate. For example, by 1918, half of the U.S. states restricted or eliminated German-language instruction. Several had curtailed freedom to speak German in public. German language publications declined from 554 in 1910 to 234 in 1920. Finally, the ideological climate that boosted social pressures for assimilation and acculturation throughout much of the 20th century has all but disappeared, writes Borjas

-- David R. Francis

The Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.
 
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