How Immigrants Fit Into America's Economy, Now and 100 Years Ago

Compared to 19th-century arrivals, today's new arrivals are much more likely to be at the extreme ends of the earnings spectrum.

Immigrants line up at Ellis Island (Library of Congress)

Immigration isn’t exactly a new occurrence in the United States. Still, despite a rich history of welcoming strangers into the country, it seems that the voices of critics calling for stricter immigration policy only get louder and fears over the negative economic impact immigrants might have continue to grow. It’s worth asking, in a country where nearly everyone’s ancestral line includes an immigration story, how things got that way.

A new paper from the National Bureau of Economic Research compares immigrant pools in the past to the present to determine what has changed about the groups of people destined for a new life in the U.S., and what happens once they arrive.

The study’s authors, Ran Abramitzky of Stanford University and Leah Platt Boustan of UCLA, focus on two specific waves of immigrants: Those who arrived in the U.S. between 1850 and 1920, and those who have arrived in the past few decades. First, they found significant differences in country of origin: The historical group is primarily composed of Europeans while current immigrants are much more likely to hail from Asia and Latin America. That difference is important for many reasons.

Countries in western Europe shared similar developmental trajectories and backgrounds as the United States. Even though some countries were poorer, their economies often had familiar structures and labor markets included similar industries and jobs.  That familiarity could help make assimilation somewhat easier for immigrants around the turn of the 20th century, especially when it came to finding and starting jobs.

Workers from western Europe could come to the U.S. and find jobs that were about on par with the average American, like factory work. Because they had similar jobs and skill levels, immigrants made similar wages to their American counterparts. Within a single generation, immigrants could be caught up economically to the native born population.

But that fast, sure path to the American dream doesn’t exist for many of today’s immigrants. In the current economy, the skill level of the average American worker has shifted and lower-skilled trades, like those found in manufacturing, have declined. That means that workers who immigrate in recent decades with low-skill levels face a much more significant economic gap than immigrants a century ago. Today, low-skilled immigrants earn less and that means it takes them, and their children, much longer to catch up.

Another finding of the paper is that it’s much harder for some immigrants to get into the country at all nowadays. The researchers note that around the turn of the 20th century, when eastern European countries started sending more immigrants to the U.S., policy became more strict. The same thing happened as countries, such as Mexico and China, upped their rate of immigration to the U.S.. Immigration is a self-selecting process, requiring people to pick up and move themselves (and often their families) to a strange new place. The incentive to do so has to be a pretty good one, but the mechanisms in place to allow it also have to be amenable to a particular immigrant’s characteristics.

The paper analyzes immigrant selectivity by sorting out  two main groups. Positive selection happens when immigrants entering the U.S. from a particular country are generally those with high levels of skill and education. They leave because they are in high-demand in America, and can easily find jobs and earn a good wage. Negative selection happens when immigrants with low-skill levels are the primary groups leaving a country. In the historic group, there was a greater mix of positive and negative selection. Irish, Norwegian, and Italian immigrants who arrived around the start of the twentieth century, for instance, were likely to be negatively selected—poor, unskilled, low-wage immigrants headed to U.S. shores for more professional opportunities and a better quality of life.

In the present day, a higher proportion of immigrants are positively selected. That points to systematically-provided incentives mainly targeted at wealthier, more educated workers, the paper finds. Getting into the U.S. is much easier for well-educated, highly-skilled immigrants who either have the means to pay the price for immigration or are appealing enough to U.S. companies to qualify for sponsorship. For everyone else though, the price of immigration (through both legal and illegal channels) is incredibly high, and often prohibitive.

As far as the deleterious impacts on wages and the U.S. economy that immigration critics are so afraid of, there’s little evidence to support the theory that overall, immigration is harmful to U.S. workers. The researchers suggest that immigration may result in lower wages for some native-born workers with lower skill levels, which could result in them moving away from cities that are immigrant heavy. But in other instances, it can help create demand and productivity, and overall boost GDP.

The research shows that though some facets of immigration have changed greatly since the turn of the 20th century, the desire of people to make a new life in the U.S. hasn’t.