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Chutes or Ladders? A Longitudinal Analysis of Immigrant Earnings.

Darren LubotskyJournal of Political Economy vol. 115, no. 5, 2007

Presentation for EC250A, March 4, 2008Susan Johnson

Presentation, March 4, 2008Susan Johnson

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1. OVERVIEW

Objective

To provide empirical evidence concerning

(1) immigrant assimilation(2) skill levels of immigration cohorts

in the United States using longitudinal data from 1951 to 1997.

Compare these results to those obtained from repeated cross-sections of the Census.

Consider the impact of selective permanent out-migration and temporary out-migration on cohort skill and immigrant assimilation.


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Results

Repeated cross-section:

(1) deteriorating quality of more recent arrival cohorts

(2) very rapid assimilation of immigrants into labour market


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Longitudinal:

(1) Downward trend in skill level is slower than in the repeated cross-section results and there is evidence of increasing skill levels in more recent cohorts.

Immigrants that move back and forth to the US – “temporary migrants” are concentrated among low-skill workers.

Repeated cross-section data places these workers in the cohort associated with their most recent arrival and therefore overestimates the deterioration of skills of immigrant cohorts over time.

(2) Much less rapid assimilation of immigrants who remain in the United States.

Selective permanent out-migration of low-skilled workers means the repeated cross-section results overestimate the relative earnings growth among immigrants who remain in the U.S.


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Motivation

Evidence concerning immigrant skill levels and assimilation is important for formulating immigration policy

Deteriorating skill levels??concern about drain on social services –

Welfare reforms 1996 -limited access in first five years

concern about impact on low-skill native earnings and employment

control quality/number of immigrants – – Immigration Act 1990 – increased

number of visas allocated on basis of occupation/skill

– calls for measures to limit illegal immigrants, perhaps adopt ‘point system’

Assimilation??

More rapid assimilation addresses concerns above.


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2. DATA

Match household surveys to Social Security records using social security number.

Household Surveys:

– Survey of Income and Program Participation (SIPP) 1990, 1991

– Current Population Survey (CPS) March 1994

information on: year, place of birthcitizenshipeducational attainmentimmigrant’s year of arrival ‘to stay’

self-reported income (CPS)

Social Security Records – 1951 to 1997covered earningsquarters of covered employment each yearracegenderdate of birth

Immigrant:Presentation, March 4, 2008Susan Johnson

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anyone born outside U.S. -but not if – born to American parent, or in the outlying U.S. (e.g. Puerto Rico), if arrived in U.S. before 18 years old

Sample restricted to:Males, born between 1930 and 1969 (25-60 in 1990)Does not include immigrants whose reported arrival date is after 1990.

Issues:(1) Social Security Earnings censored at taxable

earnings ceiling. The top code changes over time. Proportion of sample affected by top coding varies from 11-53 %. Solution: Use econometric technique to deal with this.

(2) Record only earnings covered by Social Security. To extent that immigrants are in uncovered (domestics, farm workers, self-employed) or informal sector they will not be included. Remains an issue.

(3) Not all respondents in SIPP and CPS matched. Usual reason – refused to provide SSN. The proportion of immigrant matches lower than for natives and lower for more recent cohorts.Solution: develop and use population weights.


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3. VALUE-ADDED OF LONGITUDINAL DATA

Addresses the issue of selective permanent out-migration of low-skill immigrants and provides unbiased estimates of the growth in earnings for each cohort given they remain in the country until the time of a survey. (1990,1991,1994)

Addresses the issue of selective temporary out-migration of low-skill workers. Longitudinal Data allows alternative definitions of cohorts. Can see how sensitive the results on assimilation and skill are to the way immigrants are assigned to arrival cohort.


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Longitudinal Data, Selective Permanent Out-migration and Cohort Earnings Growth

Consider the Cohort that arrived 1965-69 matched to 1990 SIPP.

Data Repeated XS Longitudinal1970

E(w67, 70 | stay 3years) E(w67,70|stay 23 years)

1980

E(w67,80 | stay 13 years) E(w67,80| stay 23 years)

1990

E(w67,90 | stay 23 years) E(w67, 90| stay 23 years)


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Comparing Earnings growth within a cohort over time:

Repeated Cross-Section:

- if permanent selective out-migration of low-skill workers the cross-section estimates will over-estimate the growth in the cohort earnings over time

Longitudinal

- includes only those who remain in the U.S. until 1990

- provides an unbiased estimate of the growth in earnings of immigrants who remain in the U.S. until 1990

previous work 20-40% out-migrationeducation levels of cohorts increase over time (low-skill leave/remaining immigrants acquiring more education) in repeated cross-section data


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OPTIONAL – Comparing across-cohort earnings differences using cross-section/longitudinal data – the impact of permanent selective out-migration

Not possible to compare across-cohort earnings differences using either repeated cross-section or longitudinal data when there is selective permanent out-migration.

Compare average earnings in first three years in U.S of the 1967 cohort to the 1977 cohort:

Repeated Cross-Section

= E( w77,80| stay 3 years) – E(w67,70| stay 3 years)

- meaningful only if out-migration process in first three years is constant across cohorts

- (unlikely since fraction of migrants from nearby/refugees likely to change over time)

- can’t identify if differences due to skill/differential selective out-migration


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Longitudinal

= E( w77,80| stay13 years) – E(w67,70|stay 23 years)

- if selective out-migration of low-skill immigrants then more low skill immigrants will have left the 1967 cohort (ten extra years to leave)

- gives appearance of downward trend in the level of earnings of later cohort

- may be limited if most out-migration occurs in first ten years.


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Longitudinal Data and Selective Temporary Out-Migration

There is a lot of back-and-forth migration. What cohort should the person be considered to belong to?

Census and Surveys – date came ‘to stay’ – usually most recent entry is ‘reported date of arrival’

Longitudinal data has info on date of arrival and date received covered earnings. Permits three definitions of cohorts:

(1) “Reported date of arrival” – drop any earlier reported covered earnings.

(2) “Adjusted date of arrival” - earlier of reported date of arrival or reported covered earnings.

(3) “First year of covered earnings”

If temporary out-migration primarily involves low-skill workers and immigrants are assigned to cohorts based on most recent date of arrival this will bias the earnings of more recent cohorts down (earlier cohorts biased up)


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4. RESULTS

Estimate:

Wi c t = α + βf(Experience) + γf(Year ict) +

k c + m i c + y c t + ε i c t

i= individualt= yearc= index native, cohort immigrated

-ln annual earnings

-constrains the effect of experience and calendar time to be the same across immigrants and natives

-cohort effects (k), potential experience at arrival (m), years in U.S. (y) all indicator variables

Censored Least Absolute Deviation (CLAD)Bootstrapped standard errors.Use population weights.


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FIGURE 2

Assimilation:

Census – repeated cross-section:

More rapid assimilation than in the longitudinal data.(Note: average across cohorts – not cohort specific –does this later in paper.)

Consistent with selective permanent out-migration by low-skill immigrants. XS overestimates the rate of growth of earnings of immigrants who remain in the country.

This is true regardless of cohort definition used in the longitudinal data.

XS- immigrants earnings grow 20 percent in first ten years in U.S. then by an additional 10 percent -20 percent in each successive decade.

Longitudinal – immigrants earnings grow 12-15 percent in first fifteen years and little after that

Differences are statistically significant.


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FIGURE 3 scale – negative—immigrants level of earnings

always below native at entry. XS lower for all cohorts – Longitudinal is more

skilled overall because permanent out-migration of low skilled workers

Clear deterioration in skill in the XS data Longitudinal Data – downward trend but slower

decline Note since 1980 increases in earnings for adjusted

and reported cohorts– first year of covered earnings rises in 85 and 90

Also examines Hispanic subsample and performs analysis that permits differential assimilation across cohorts.


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5. CONCLUSION

Assimilation:

- longitudinal analysis reveals that assimilation of workers who remain in the country occurs at a much slower pace than repeated cross-section analysis suggests- the most rapid narrowing of the native-immigrant wage gap occurs in the first 15 years in the U.S.

- the reason repeated cross-section analysis over-estimates the degree of assimilation is because it does not take into account the permanent selective out-migration of low-skill workers

Skill levels of recent Cohorts:

- are higher in the longitudinal data – - fall over time but more slowly in the

longitudinal data- longitudinal data reveals increases in skill

levels in more recent arrival cohorts- temporary out-migration is an issue when

assigning worker to appropriate arrival cohorts


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6. COMMENTS

-improvement on earlier literature-better data than earlier longitudinal studies

(larger, more representative dataset)

-data is still problematic:

1. Only includes covered workers -excludes farm workers, domestics -informal sector/ ‘under the table’ 2. Earnings not well measured at the top end of

the distribution

3. No direct data on flows of migrants in/out of country and their characteristics.

Perhaps could use the information on employment in the Social Security records to look at another margin of assimilation?


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-I have more problems with skill level comparisons across cohorts than the assimilation results

-many difficulties involved in comparing skill levels across cohorts both in repeated XS and longitudinal data (math in paper)

- the comparison of earning levels across cohorts is likely to be biased down when using longitudinal data –overestimates the decline in skill level

-relevance of results for policy?-reassigning immigrants to initial arrival date rather than reported arrival date does not address policy concerns associated with deteriorating skill of more recent arrivals if the fact remains that there are more low-skill immigrants in the U.S. in more recent years these immigrants will affect the labour market at that time this may still be a policy concern.


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Chutes or Ladders - Home - UCSB Department of …econ.ucsb.edu/~pjkuhn/Ec250A/Class Notes/Other Materials... · Web viewConsider the impact of selective permanent out-migration and