Immigration and Poverty Immigration and Poverty in the United Statesin the United States

Steven Raphael and Eugene SmolenskyGoldman School of Public PolicyUniversity of California, Berkeley

Chapter outlineChapter outlineDocument poverty trends among

the native and foreign bornExamine the relationship between

immigrant poverty and time in the U.S.

The compositional effect of immigration on U.S. poverty rates

The effect of immigration on native poverty via labor market competition

Basic Poverty TrendsBasic Poverty TrendsOverall poverty declines between

1970 and 2000, with a slight increase between 2000 and 2005

Native poverty at the end of the study period lies below the poverty rate at the beginning.◦Declines observed among all

racial/ethnic groups with largest declines among Hispanics and African-Americans

Proportion in Poverty, All U.S. Residents, Native-Born Residents, and Immigrants, 1970 to 2005

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Pro

po

rtio

n P

oo

r

All U.S. Residents

Native Born

Immigrants

Table 1 Poverty Rates Among the Native Born by Race/Ethnicity, 1970 to 2006 1970 1980 1990 2000 2005 Non-Hispanics

White 0.103 0.088 0.091 0.079 0.093 Black 0.362 0.301 0.306 0.252 0.267 Asian 0.094 0.084 0.112 0.123 0.125 Other

0.371 0.270 0.308 0.221 0.243

Hispanic 0.270 0.239 0.254 0.221 0.235

Immigrant poverty trendsImmigrant poverty trendsPoverty among immigrants

increases between 1970 and 2005 with largest increases for recent immigrants

Within country-of-origin groupings, poverty is stable or declines

Previous two patterns suggest that the composition of new immigrants has shifted decisively towards higher poverty source countries

Poverty Rates Among Recent Immigrants (Arrived Within Past Five Years) and Non-Recent Immigrants (Arrived More than Five Years Ago)

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Pro

po

rtio

n P

oo

r

Recent Immigrants

Non-recent Immigrants

Table 2 Poverty Rates Among Immigrants by Region of Origin, 1970 to 2005 1970 1980 1990 2000 2005 North America 0.090 0.080 0.081 0.076 0.080 Latin America

Mexico 0.292 0.264 0.294 0.265 0.261 Central America 0.159 0.206 0.224 0.199 0.179 Caribbean 0.147 0.164 0.186 0.175 0.179 South America

0.145 0.153 0.146 0.155 0.122

Europe Westerna 0.126 0.085 0.081 0.078 0.082 Easternb

0.143 0.089 0.092 0.117 0.109

Russian Empire

0.161 0.149 0.197 0.196 0.169

Asia East 0.134 0.127 0.156 0.151 0.150 Southeast 0.162 0.198 0.184 0.122 0.114 India/SW

0.146 0.172 0.124 0.110 0.098

Middle East 0.143 0.201 0.195 0.183 0.193 Africa 0.125 0.204 0.149 0.176 0.204 Oceania 0.119 0.159 0.161 0.121 0.105 Other 0.208 0.231 0.247 - 0.174

The Distribution of the immigrant The Distribution of the immigrant population has shifted to higher poverty population has shifted to higher poverty groupsgroups

Distribution of Immigrants by Region of Origin, 1970 and 2005

9.68.2

1.2

7.1

2.7

40.9

11.4

4.3

1.70.9

3.0

0.0

27.5

6.1

8.36.6

9.8

3.5

9.8 10.4

6.6

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

North

Am

erica

n

Mex

ican

Centra

l Am

erica

n

Caribb

ean

South

Am

erica

n

Wes

tern

Eur

ope

Easte

rn E

urop

e

East A

sia

South

east

Asia

India

/Sou

thwes

t Asia

n

Per

cen

t o

f R

esid

ent

Imm

igra

nt

Po

pu

lati

on

1970

2005

Immigrant poverty and time Immigrant poverty and time in the U.S.: constructing in the U.S.: constructing synthetic cohortssynthetic cohortsCalculate poverty rates for

specific arrival cohorts across census years◦e.g. poverty among those arriving in

65 to 70 in 1970, 1980, 1990 and 2000

Compare poverty rates across years

Table 5Synthetic Cohort Analysis of Immigrant Poverty Rates by Census Year and by Year of Arrival

Census Year

Year of First Arrival

1970 1980 1990 2000 2005

Immigrants 18 to 34 in Census Year Immediately Following Arrival

1965-1970 0.168 0.104 0.095 0.095 0.086

1975-1980 - 0.270 0.148 0.120 0.093

1985-1990 - - 0.296 0.175 0.136

1995-2000 - - - 0.285 0.168

Mexican Immigrants

Census Year

Year of First Arrival

1970 1980 1990 2000 2005

1965-1970 0.292 0.209 0.222 0.163 0.142

1975-1980 - 0.298 0.272 0.264 0.153

1985-1990 - - 0.350 0.264 0.222

1995-2000 - - - 0.325 0.273

Central American Immigrants

Census Year

Year of First Arrival

1970 1980 1990 2000 2005

1965-1970 0.220 0.147 0.094 0.125 0.113

1975-1980 - 0.303 0.161 0.126 0.105

1985-1990 - - 0.303 0.193 0.153

1995-2000 - - - 0.267 0.181

South American Immigrants

Census Year

Year of First Arrival

1970 1980 1990 2000 2005

1970 0.200 0.089 0.087 0.073 0.087

1980 - 0.259 0.112 0.098 0.065

1990 - - 0.223 0.103 0.074

2000 - - - 0.257 0.102

East Asian Immigrants

Census Year

Year of First Arrival

1970 1980 1990 2000 2005

1970 0.213 0.046 0.048 0.057 0.079

1980 - 0.229 0.054 0.057 0.068

1990 - - 0.317 0.098 0.071

2000 - - - 0.357 0.132

Southeast Asian Immigrants

Census Year

Year of First Arrival

1970 1980 1990 2000 2005

1970 0.157 0.037 0.024 0.056 0.039

1980 - 0.284 0.078 0.075 0.058

1990 - - 0.264 0.106 0.076

2000 - - - 0.215 0.079

Immigrant Poverty Rate Minus Native Poverty Rate by Arrival Cohort, Immigrants 18 to 34 at First Census Year Post Arrival

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

1970 1980 1990 2000 2005

Imm

igra

nt

- N

ativ

e P

ove

rty

1965 to1970

1975 to 1980

1985 to 1990

1995 to 2000

Qualifications to these Qualifications to these synthetic cohort results synthetic cohort results (Lubotsky 2007)(Lubotsky 2007)

Selective return migrationMeasurement error pertaining to

year of arrival

Contribution of immigration Contribution of immigration to poverty: compositional to poverty: compositional impactimpactwit – proportion of the U.S.

population at time t accounted for by group i

povertyit – poverty rate for group i in time t

iii

iii

povertywpoverty

povertywpoverty

200520052005

197019701970

Decomposing the change in Decomposing the change in the national poverty ratethe national poverty rate

)()( 197020051970200519702005

1970197020052005

ii

iii

iii

iii

iii

povertypovertywpovertywwPoverty

povertywpovertywPoverty

Decomposition of the Change in Poverty Rates, 1970 to 2005, Into the Component due to Shifts in Population Shares and the Component Due to Shifts in Group-Specific Poverty Rates

-0.002

0.005

-0.007-0.008

-0.006

-0.004

-0.002

0.000

0.002

0.004

0.006

Change poverty 1970 to 2005 Change due to change in population shares Change due to change in group-specificpoverty rates

Ch

ang

e in

pro

po

rtio

n p

oo

r

Contribution of immigration to Contribution of immigration to poverty: labor market poverty: labor market competition with nativescompetition with natives

AssumeImmigrants and natives are

perfect substitutesCapital is fixed

Wages

Employment

D0

S0

S1

W0

W1

E2 E0 E3

Are immigrants and natives Are immigrants and natives perfect substitutes?perfect substitutes?

Discussion of substitutability and complementarity among factors of production

Language and cultural differences

Differences in formal educational attainment

Differences in position in the earnings distribution

Table 8Distribution of Educational Attainment by Immigration States and by Race/Ethnicity for Adults, 18 to 64 Years of Age, 2000

Foreign-Born Native-Born American CitizensNon-Hispanic

WhiteNon-Hispanic Black Non-Hispanic Asian Hispanic

Education level

Men Women Men Women Men Women Men Women Men Women

< 9 year 21.61% 19.57% 2.315 1.63% 4.18% 2.93% 2.09% 1.63% 8.15% 7.22%9 to 12, no diploma

17.48 15.70 10.02 8.47 23.14 18.73 7.72 6.00 23.29 19.56

High school grad

19.02 20.76 29.04 28.99 33.90 30.18 18.67 17.43 29.80 28.70

Some college

18.43 22.05 31.37 34.66 28.16 33.81 36.60 36.94 28.10 32.37

Bachelors degree

12.62 14.09 17.80 17.81 7.60 9.89 24.18 27.04 7.45 8.78

Masters or higher

10.84 7.83 9.45 8.43 3.02 4.47 10.74 10.96 3.21 3.37

Distribution of Immigrant and Native Born Men Across Earnings Groups Based on Native Population Quartiles

42%

62%

23%

35%

41%

48%

22% 22%25%

32%

14%

26%

15%

9%

25%

21% 20%

17%

21%

7%

29%

12%

26%

10%

0%

10%

20%

30%

40%

50%

60%

70%

Immigrant Hispanic immigrant Native White Native Black Native Asian Native Hispanic

Q1

Q2

Q3

Q4

Is capital fixed?Is capital fixed?Immigration decreases the

capital-labor ratio, increasing the return to capital.

Capital stock should grow due to domestic savings and foreign investment

Wages

Employment

D0 D1

S0

S1

W0W2W1

E2 E0 E3

Simulating the effects of immigration Simulating the effects of immigration between 1970 and 2005 on native between 1970 and 2005 on native poverty ratespoverty rates Using PUMS data for 1960 through 2005, estimate a

CES production function that permits◦ Imperfect substitution between capital and labor◦ Imperfect substitution between labor of different

education levels◦ Imperfect substitution between labor of different

experience levels within the same education group◦ Imperfect substitution between immigrant and

native labor within the same education-experience groupings.

◦ Endogenous capital accumulation Use the estimated own-factor and cross-factor price

elasticities to simulate the effect of immigration shock on the national wage distribution

Simulate the impact on household income and construct counterfactual poverty rates

Relationships between substitution Relationships between substitution elasticities and poverty rateselasticities and poverty ratesThe effect of immigration on native poverty will be

higher … the higher the degree of substitutability between

immigrants and natives in similar skill groups the lower the degree of substitutability between

workers of difference educational attainment levels

the lower the degree of substitutability between workers of different experience levels within educational group.

The more sluggish the response of capital supply to immigration-induced changes in the return to capital

Figure 1A: Scatter Plot of the Native-Immigrant Log Wage Differential Measured by Year (1960 through 2005), Education, and Skill Groups Against the Corresponding Log Supply Differentials

-.4

-.2

0.2

log

we

ekly

wa

ge

diffe

rentia

l: n

ative

-im

mig

ran

t

0 1 2 3 4log supply differential: native-immigrant

log weekly wage differential: native-immigrant Fitted values

Appendix Table 2A Estimated Results from IV Regressions of the Natural Log of Weekly Wages Among Full-Time-Male Workers on Log Annual Hours Supplied Using Log Annual Hours Supplied by Immigrants as an Instrument Estimates of -1/ x Estimates of -1/ E and -1/ x

Using 1960 through 2005

Using 1970 through 2005

Using 1960 through 2005

Using 1970 through 2005

Log(Ltkj) -0.218 (0.072)

-0.109 (0.043)

-0.227 (0.117)

-0.095 (0.046)

Log(Ltkj) – Log(Ltk)

- - -0.631 (0.095)

-0.125 (0.057)

N 192 160 192 160

Appendix Table 3A Simulated Proportional Effects of Immigration-Induced Labor Supply Shocks Between 1970 and 2005 on Native-Born Weekly Earnings by Education and Experience Level Native Education-Experience group 8

14.9

33

exp

educ

immig

8

14.9exp

educ

immig

5.2

14.9exp

educ

immig

5.2

5exp

educ

immig

Less than high school

0 – 4 5 – 9 10 – 14 15 – 19 20 – 24 25 – 29 30 – 34 35 – 40

-0.00 -0.02 -0.02 -0.02 -0.02 -0.01 -0.01 -0.00

-0.01 -0.03 -0.04 -0.04 -0.03 -0.02 -0.02 -0.01

-0.07 -0.09 -0.09 -0.09 -0.09 -0.08 -0.08 -0.07

-0.05 -0.09 -0.10 -0.10 -0.09 -0.08 -0.07 -0.06

High school graduates

0 – 4 5 – 9 10 – 14 15 – 19 20 – 24 25 – 29 30 – 34 35 – 40

0.01 0.00 0.00 0.00 0.01 0.01 0.01 0.01

0.00 0.00 0.00 0.00 0.00 0.01 0.01 0.01

0.01 0.00 0.00 0.00 0.01 0.01 0.01 0.01

0.01 0.00 0.00 0.00 0.01 0.01 0.01 0.02

Appendix Table 4A Simulated Proportional Effects of Immigration-Induced Labor Supply Shocks Between 1970 and 2005 on Native-Born Weekly Earnings by Education and Experience Level, Assuming Fixed Education and Experience Group Elasticities and Alternative Values of the Elasticity of Substitution Between Immigrants and Natives Native Education-Experience group 5.2

14.9exp

educ

immig

5.2

14.9

33

exp

educ

immig

5.2

14.9

20

exp

educ

immig

5.2

14.9

10

exp

educ

immig

5.2

14.9

5

exp

educ

immig

Less than high school

0 – 4 5 – 9 10 – 14 15 – 19 20 – 24 25 – 29 30 – 34 35 - 40

-0.07 -0.09 -0.09 -0.09 -0.09 -0.08 -0.08 -0.07

-0.05 -0.07 -0.07 -0.07 -0.07 -0.06 -0.06 -0.06

-0.05 -0.06 -0.06 -0.06 -0.06 -0.06 -0.05 -0.05

-0.04 -0.04 -0.04 -0.04 -0.04 -0.04 -0.04 -0.04

-0.02 -0.01 0.00 0.00 -0.01 -0.01 -0.02 -0.02

High school graduates

0 – 4 5 – 9 10 – 14 15 – 19 20 – 24 25 – 29 30 – 34 35 – 40

0.01 0.00 0.00 0.00 0.01 0.01 0.01 0.01

0.01 0.01 0.01 0.01 0.01 0.02 0.02 0.02

0.02 0.01 0.01 0.01 0.01 0.02 0.02 0.02

0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02

0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03

Some college

Table 10 Actual Poverty Rates and Simulated Poverty Rates for 2005 Among Persons in Households Headed by Natives Using Lower Bound Wage

Effects Using Upper Bound Wage

Effects Actual

Poverty Rates Elastic Labor

Supply Inelastic

Labor Supply Elastic Labor

Supply Inelastic

Labor Supply Non-Hispanics

White 0.079 0.079 0.078 0.078 0.079 Black 0.260 0.258 0.258 0.258 0.257 Asian 0.080 0.080 0.079 0.079 0.079 Other

0.196 0.195 0.195 0.195 0.195

Hispanic 0.193 0.190 0.191 0.187 0.190

Summary of findingsSummary of findingsImmigrants are poorer now than in the

past, though this is driven largely by changes in source-country composition

Poverty rates decline quickly with time in the U.S. for most immigrant groups◦ Can’t distinguish between assimilation and

selective return migrationImmigration has increased the national

poverty rate through a compositional effect (by about half a percentage point).

Labor market competition between immigrants and native has had no discernable impact on native poverty rates