THE IMMIGRANTS: Introduction 2

This ”counterfactual” exercise further allows us to pinpoint w’hich of the recent immigrants1 characteristics has the greatest impact on changes in the wage distribution between 1970 (or 1960) and 1990. Both the scientific and popular literatures commonly cite the relative decline in immigrant/native education levels as the most important attribute explaining the increasing wage gap. Here Our analysis, however, suggests that it is race and ethnicity which most distinguishes recent immigrants, and that race and ethnicity (or unobservables correlated with race and ethnicity) “explain” much of the change in the comparative economic fortunes of recent immigrants once wage structure changes have been held constant.

Finally, we decompose the changes in the native-immigrant wage gap into a portion attributable to changes in characteristics, and a portion ai tributable to changes in skill prices. In doing so we return to a well known aspect of Blinder/Oaxaca decompositions which seems to have been ignored in the current debate: the group’s prices that are used to evaluate the differences matter. For example, when decomposing black-white wage differentials, it matters whether one uses the black or white coefficients to evaluate the differences in characteristics. Similarly, here it is crucial whether one uses the 1990 skill prices to evaluate the differences in the immigrant/native characteristics, or the skill prices from a time when the wage distribution was less dispersed.

The paper proceeds as follows: Section 2 provides a brief summary of the immigration literature and presents comparisons of average hourly wages of immigrants and the native-born. Section 3 switches the focus from summary statistics to the entire wage distribution. Section 4 investigates “counter-factual11 wage distributions for recent immigrants; we show what the wage distribution for 1960 and 1970 recent immigrants would have looked like if they had faced the 1990 wage structure. Section 5 decomposes changes in the immigrant/native wage gap into a portion attributable to changes in the wage structure and a portion attributable to changes in characteristics. Section 6 concludes.

Background and Summary Statistics

The focus of the economics literature has been on the rate of “assimilation” -the degree to which a foreign born individual will be paid comparably to an otherwise comparable worker. Using cross-sectional data, Chiswick (1978) observed that the degree of assimilation varied with the length of time an immigrant had lived in the U.S. Borjas (1987) argued that the same evidence is consistent with “declining cohort quality*, noting that identification of an assimilation profile from cross -sectional Census data required (unte.stable) assumptions about cohort effects.