Impact of Immigration on the Distribution of Well-Being

by

Gary BurtlessThe Brookings Institution

August 11, 2009

Social Security Administration and Retirement Research Consortium Conference

Number (millions) and percent foreign born, 1850-2007

0

5

10

15

20

25

30

35

40

1850

1860

1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2007

Millions

0%

2%

4%

6%

8%

10%

12%

14%

16%

Percent foreign born

Foreign-born population (left axis)

% of population that is foreign born(right axis)

Source: Census Bureau.

Immigration and the income and wage distributions

Historically high rates of immigration

Major differences between immigrants and current residents Age distribution Skill mix

Direct impact on distribution of well-being Average wage Average income Age-profile of income

Immigration and the income and wage distributions

Ignore feedback effects on natives’ wages

Use March CPS / ASEC files to estimate trends in wages, incomes if there were fewer immigrants Identification of immigrants, year of entry YEARS: 1993-2007 POLICY CHANGE: 1980

Doubtful identification of adult children of post-1979 immigrants

Post-1979 immigrants in the U.S. wage distribution, 1993-2007

Percent in centile who are post-1979 immigrants

0

5

10

15

20

25

0 20 40 60 80 100

Centile of annual wage distribution

2007

2000

1993

Share = 13.3%

Share = 10.6%

Share = 5.8%

Source: Tabulations of 1994, 2001, and 2008 ASEC files.

Average Annual Wage by Immigrant Status and Year of Entry into the U.S., 1993 - 2007

20

25

30

35

40

45

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Natives and pre-1980 immigrants*

All wage earners

Post-1979 immigrants **

Thousands of 2007 dollars

Source: Tabulations of 1994 - 2008 ASEC files.

19%

26%

Impact of Reduced Immigration after 1979 on Level of Economy-Wide Average U.S. Wage, 1980-2007

Predicted or estimated effect(percent increase over actual historical wage)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1980 1985 1990 1995 2000 2005 2010

Predicted

Estimated with 1994-2008 ASEC files

1.53%

2.57%

Source: Tabulations of 1994 - 2008 ASEC files.

Impact of Post-1979 Immigration on Average Size-Adjusted Personal Income, 1993 - 2007

Percent of average income

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

1993 1995 1997 1999 2001 2003 2005 2007

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

Simulation 1

Average

Simulation 2

Source: Tabulations of 1994 - 2008 ASEC files.

-2.0%

-3.2%

Impact of selected changes in immigration policy on median size-adjusted personal income, 1993-2007

Source: Tabulations of 1994, 2001, and 2008 ASEC files.

Percent of median size-adjusted Percent of median size-adjusted income in indicated yearincome in indicated year

+1.8%+1.7%

+1.0%+1.1%

Increase in size-adjusted average income resulting from 20% cut in immigration after 1979: IMPACT ON AGE PROFILE OF INCOME (2006)

Percentage change in income

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

15-24 25-34 35-44 45-54 55-64 65-74 75+

Age of household head

Percentage change in income

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

15-24 25-34 35-44 45-54 55-64 65-74 75+

Age of household head

Percentage change in income

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

15-24 25-34 35-44 45-54 55-64 65-74 75+

Age of household head

Increase in size-adjusted average income resulting from reduced immigration after 1979: IMPACT of ALTERNATIVE POLICIES (2006)

20% OVERALL CUT

50% CUT IN DROPOUTS

50% CUT IN MEXICAN IMMIGRATION

Immigration and well-being

Reduced immigration would --

Raise average wage of remaining population

Produce faster growth in initial social security benefits

Increase residents’ average income Boost the relativerelative incomes of residents who are

members of households headed by younger adults

These conclusions ignore spillover effects of lower immigrant labor supply on prices and on natives’ employment and wages