1. Immigration and Poverty in the United States Steven Raphael and Eugene Smolensky Goldman School of Public Policy University of California, Berkeley

2. 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

3. 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

6. 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

9. The Distribution of the immigrant population has shifted to higher poverty groups

10. 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

11. Table 5 Synthetic Cohort Analysis of Immigrant Poverty Rates by Census Year and by Year of Arrival Census Year Year of First Arrival 19701980199020002005 Immigrants 18 to 34 in Census Year Immediately Following Arrival 1965-19700.1680.1040.095 0.086 1975-1980-0.2700.1480.1200.093 1985-1990--0.2960.1750.136 1995-2000---0.2850.168

12. Mexican Immigrants Census Year Year of First Arrival 19701980199020002005 1965-19700.2920.2090.2220.1630.142 1975-1980-0.2980.2720.2640.153 1985-1990--0.3500.2640.222 1995-2000---0.3250.273

13. Central American Immigrants Census Year Year of First Arrival 19701980199020002005 1965-19700.2200.1470.0940.1250.113 1975-1980-0.3030.1610.1260.105 1985-1990--0.3030.1930.153 1995-2000---0.2670.181

14. South American Immigrants Census Year Year of First Arrival 19701980199020002005 19700.2000.0890.0870.0730.087 1980-0.2590.1120.0980.065 1990--0.2230.1030.074 2000---0.2570.102

15. East Asian Immigrants Census Year Year of First Arrival 19701980199020002005 19700.2130.0460.0480.0570.079 1980-0.2290.0540.0570.068 1990--0.3170.0980.071 2000---0.3570.132

16. Southeast Asian Immigrants Census Year Year of First Arrival 19701980199020002005 19700.1570.0370.0240.0560.039 1980-0.2840.0780.0750.058 1990--0.2640.1060.076 2000---0.2150.079

18. Qualifications to these synthetic cohort results (Lubotsky 2007) Selective return migration Measurement error pertaining to year of arrival

19. Contribution of immigration to poverty: compositional impact w it – proportion of the U.S. population at time t accounted for by group i poverty it – poverty rate for group i in time t

20. Decomposing the change in the national poverty rate

22. Contribution of immigration to poverty: labor market competition with natives Assume Immigrants and natives are perfect substitutes Capital is fixed

23. Wages Employment D0 S0 S1 W0 W1 E2 E0 E3

24. 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

25. Table 8 Distribution of Educational Attainment by Immigration States and by Race/Ethnicity for Adults, 18 to 64 Years of Age, 2000 Foreign-BornNative-Born American Citizens Non-Hispanic White Non-Hispanic BlackNon-Hispanic AsianHispanic Education level MenWomenMenWomenMenWomenMenWomenMenWomen < 9 year21.61%19.57%2.3151.63%4.18%2.93%2.09%1.63%8.15%7.22% 9 to 12, no diploma 17.4815.7010.028.4723.1418.737.726.0023.2919.56 High school grad 19.0220.7629.0428.9933.9030.1818.6717.4329.8028.70 Some college 18.4322.0531.3734.6628.1633.8136.6036.9428.1032.37 Bachelors degree 12.6214.0917.8017.817.609.8924.1827.047.458.78 Masters or higher 10.847.839.458.433.024.4710.7410.963.213.37

27. 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

28. Wages Employment D0 D1 S0 S1 W0 W2 W1 E2 E0 E3

29. 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

30. 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

31. 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

36. 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