Immigration and the Earnings Distribution

by Reihan Salam

One of the central arguments made by advocates of less-skilled immigration is that earlier waves of less-skilled immigrants assimilated without great difficulty in the first decades of the last century, and that this pattern is sure to repeat itself, despite dramatic changes in U.S. political economy, urbanization, and demand for skill. There is at least one glaring problem with this line of analysis, which is that the gap between the skill levels of immigrants from Ireland and southern Europe and native-born Americans was not nearly as large in 1900 as the gap between the skill levels of contemporary less-skilled immigrants and native-born Americans, and so this particular barrier to assimilation was much lower in that era. And the U.S. earnings distribution was markedly different during this period as well, as Ran Abramitzky, Leah Platt Boustan, and Katherine Eriksson observe in a 2012 paper on Norwegian immigrants to the U.S.:

In the modern context, the Scandinavian countries are more equal than the United States. In the late nineteenth and early twentieth century, however, the opposite was true. Figure 1 compares the occupation-based cumulative earnings distribution functions in the United States and Norway in 1900. We array individuals from lowest- to highest-paid with earnings represented in US dollars and the Norwegian distribution rescaled to share the US mean (the earnings data are described in more detail in Section II). United States workers below the fiftieth percentile of the earnings distribution out-earned similar Norwegians, while Norwegians above the ninetieth percentile commanded higher earnings than their US counterparts. These occupation-based earnings distributions suggest that Norway offered a higher return to skill than did the United States circa 1900, which is consistent with the historical evidence on 90-50 ratios in the two countries (Soltow 1965; Goldin and Katz 1999).

Not only was the occupation-based earnings distribution in the United States more compressed at a point in time, but the US economy also offered the opportunity for substantial occupational upgrading over the life cycle. Long and Ferrie (forthcoming) document that only 18 percent of men in the United States who held an unskilled, blue-collar job in 1850 remained unskilled workers by 1880. By comparison, 47 percent of men in unskilled, blue-collar occupations in Norway in 1875 remained unskilled workers in 1900. Men who started their careers in unskilled occupations were twice as likely to move up the occupational ladder in the United States than in Norway over their lifetimes; much of this mobility was accomplished by moving into owner-occupier farming.

Unfortunately, the economic status of less-skilled workers in the contemporary U.S. is much “stickier” than it had been a century ago, and this has important implications for labor market outcomes for less-skilled immigrants over the life cycle. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.