Changes in the Relative Economic Performance of Immigrants to Great Britain and the United States, 1980–2000
| Author | John Schmitt,Jonathan Wadsworth |
| Published date | 01 December 2007 |
| DOI | http://doi.org/10.1111/j.1467-8543.2007.00646.x |
| Date | 01 December 2007 |
Changes in the Relative Economic
Performance of Immigrants to Great
Britain and the United States, 1980–2000
John Schmitt and Jonathan Wadsworth
Abstract
We compare the relative labour market performance of immigrants in the USA
and in Britain over the period 1980–2000, when the stocks of immigrants were
rising in both countries alongside differential shifts in demand and changes to
labour market institutions. We find that the average relative employment pros-
pects of immigrants are generally better in the USA than in Britain, particularly
for non-white immigrants, while the average relative wage prospects for immi-
grants are generally better in Britain, particularly for men. Over time, relative
wage and employment prospects for immigrants to the USA appear to have
deteriorated, particularly among women, in a way that is not as apparent in
Britain.
1. Introduction
Over the past 20 years, one of the most notable labour market developments,
common to both Britain and the USA, has been a rise in the number of
immigrants coming to live and work. The share of immigrants increased from
about 8 per cent of the US working age population in 1980 to about
14 per cent in 2000 and from 8 per cent to around 11 per cent in Britain,
a boost to the respective domestic populations of some 16 million and
1.8 million, respectively.1Over the same period, the labour markets of Britain
and the USA have been subject to two recessions and latterly a prolonged
period of growth. Both economies have also experienced increased trade with
the developed world, technological innovation and changes in labour market
institutions, notably declining union presence and tightening of welfare,
alongside periodic falls in the real value of the minimum wage, or its closest
John Schmitt is at the Centre for Economic and Policy Research. Jonathan Wadsworth is at
Royal Holloway College, University of London, the Centre for Economic Performance at the
London School of Economics and IZA Bonn.
British Journal of Industrial Relations doi: 10.1111/j.1467-8543.2007.00646.x
45:4 December 2007 0007–1080 pp. 659–686
© Blackwell Publishing Ltd/London School of Economics 2007. Published by Blackwell Publishing Ltd,
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British equivalents the wages set by wage councils. All these factors appear to
have contributed towards a deterioration of the relative labour market per-
formance of less-skilled workers manifested in widening inequalities in wage
and employment levels. However, these two countries do differ significantly
along other dimensions, notably with regard to patterns of demand and
sectoral composition, welfare systems, employment protection legislation,
the extent of union coverage, working hours and workplace regulation.
Moreover, despite similar aggregate trends in immigration, the composition
of immigrants in the two countries is somewhat different.
Against this background, the aim of this article is to give an overview of the
impact that the combined effect of these institutions and other changes may
have had on the wage and employment prospects of immigrants relative to
the native-born populations in these two countries. Many recent studies have
focused on the impact of rising immigration on native-born workers, (e.g.
Borjas 2003; Card 2001, 2005).2Relatively, little current attention has been
given to the performance of immigrants in the host labour market. For policy
purposes, it is important to know whether immigrants benefit from economic
conditions in the host country and, if so, how quickly they adapt and how
this adaptation process changes with time or across policy regimes. Com-
parative studies of the experience of immigrants in different countries are
rarer still. Antecol et al. (2006) is a notable recent exception, studying immi-
grants in the USA, Australia and Canada in 1980 and 1990, and looking at
the influence of each country’s institutional structures on relative immigrant
performance. They argue that assimilation of immigrant wages towards that
of native-born workers is faster in countries such as the USA, that make use
of fewer institutions in wage determination.
Our article builds on this comparative approach by first extending the
period of analysis for the USA, adding more recent micro data from the
2000 US Census and by comparing the experience of immigrants to another
English-speaking country, Great Britain, over the period 1980–2000 using a
time series of cross-sections taken from the General Household Survey
(GHS). We are interested in measuring any changes over time in relative
immigrant performance. To do this, we look at three different, but related,
concepts. First, we examine the average gap between immigrant wages and
employment relative to the native-born. Second, we look at the years in the
host country needed before immigrants’ earnings (or employment prob-
abilities) reach parity with those of native-born workers with comparable
characteristics (the assimilation profile), and how this varies over time and
within each country. Third, we track changes in the pace of immigrants’
longer-term earnings growth or employment prospects relative to the
native-born.
Earlier research has, of course, addressed some of the issues we examine
here. Chiswick (1978) used data from the 1970 US Decennial Census to
demonstrate that the earnings of male immigrants to the USA converged on
the earnings of US-born males after 10 to 15 years in the country. Borjas
(1985) concluded that use of a single cross-section of data on immigrants
660 British Journal of Industrial Relations
© Blackwell Publishing Ltd/London School of Economics 2007.
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