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Immigration and Poverty in the United States. Steven Raphael and Eugene Smolensky Goldman School of Public Policy University of California, Berkeley. Chapter outline. Document poverty trends among the native and foreign born

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immigration and poverty in the united states

Immigration and Poverty in the United States

Steven Raphael and Eugene Smolensky

Goldman School of Public Policy

University of California, Berkeley

chapter outline
Chapter outline
  • Document poverty trends among the native and foreign born
  • Examine 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 trends
Basic Poverty Trends
  • Overall 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
immigrant poverty trends
Immigrant poverty trends
  • Poverty 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
the distribution of the immigrant population has shifted to higher poverty groups

Distribution of Immigrants by Region of Origin, 1970 and 2005

45.0

40.9

40.0

35.0

30.0

27.5

25.0

1970

Percent of Resident Immigrant Population

2005

20.0

15.0

11.4

10.4

9.8

9.8

9.6

10.0

8.2

8.3

7.1

6.6

6.6

6.1

4.3

5.0

3.5

3.0

2.7

1.7

1.2

0.9

0.0

0.0

Mexican

East Asia

Caribbean

Southeast Asia

North American

Eastern Europe

Western Europe

South American

Central American

India/Southwest Asian

The Distribution of the immigrant population has shifted to higher poverty groups
immigrant poverty and time in the u s constructing synthetic cohorts
Immigrant poverty and time in the U.S.: constructing synthetic cohorts
  • Calculate 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
qualifications to these synthetic cohort results lubotsky 2007
Qualifications to these synthetic cohort results (Lubotsky 2007)
  • Selective return migration
  • Measurement error pertaining to year of arrival
contribution of immigration to poverty compositional impact
Contribution of immigration to poverty: compositional impact
  • wit – proportion of the U.S. population at time t accounted for by group i
  • povertyit – poverty rate for group i in time t
contribution of immigration to poverty labor market competition with natives
Contribution of immigration to poverty: labor market competition with natives

Assume

  • Immigrants and natives are perfect substitutes
  • Capital is fixed
slide23

Wages

S0

S1

W0

W1

D0

Employment

E2 E0 E3

are immigrants and natives perfect substitutes
Are immigrants and natives 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
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
slide28

Wages

S0

S1

W0

W2

W1

D0 D1

Employment

E2 E0 E3

simulating the effects of immigration between 1970 and 2005 on native poverty rates
Simulating the effects of immigration between 1970 and 2005 on native poverty 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 elasticities and poverty rates
Relationships between substitution elasticities and poverty rates

The 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
slide31

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

summary of findings
Summary of findings
  • Immigrants 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 migration
  • Immigration 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
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