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

Princeton IRS Working Paper No. 458

30 Pages Posted: 27 Sep 2001

Date Written: September 2001

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.

Keywords: Immigrant earnings, US wage structure, return to skill, Social Security earnings data

JEL Classification: C24, F22, J31, J61

Suggested Citation

Lubotsky, Darren H., The Effect of Changes in the U.S. Wage Structure on Recent Immigrants' Earnings (September 2001). Princeton IRS Working Paper No. 458, Available at SSRN: https://ssrn.com/abstract=284958 or http://dx.doi.org/10.2139/ssrn.284958

Darren H. Lubotsky (Contact Author)

University of Illinois at Chicago ( email )

University Hall Room 724
Chicago, IL 60607
United States

HOME PAGE: http://lubotsky.people.uic.edu/

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