Immigrant Earnings Assimilation, 1981–2021

A recent study published in a new NBER working paper explores the earnings trends of immigrant workers in the United States from 1981 to 2021. Researchers analyzed administrative data of workers, including those who eventually left the country (known as return migrants) and those who remained. This allowed for the examination of earnings assimilation over a 41-year period, with separate analysis for return migrants and permanent residents.

One key finding is that roughly one-fifth to one-third of immigrants return to their home countries within ten years of arrival in the United States. Additionally, return migrants typically have entry earnings similar to those of permanent migrants but experience slower rates of earnings growth. The study also highlights that the assimilation process varies among different arrival cohorts.

Immigrants who arrived since the mid-1990s see their earnings closely converge with those of native-born individuals within a decade after arrival. However, earlier arrival cohorts may experience significant earnings growth but generally do not reach the earnings levels of native-born workers.

The paper delves into the factors influencing earnings assimilation. It suggests that changes in the labor market quality of immigrant cohorts, as measured by their relative earnings upon entry, and selective return migration play crucial roles in determining whether cross-sectional data over- or underestimate the true earnings assimilation rates.

The authors argue that current cross-sectional data may either overestimate or underestimate earnings assimilation. The authors note that during this administration, it has become apparent that it is challenging to simply "turn off the tap" on certain types of immigrants, given the open borders policy as untenable, but a more liberal immigration policy overall may be beneficial for the United States.