3026 migration and the labor force

A third stream of papers by Duleep and
Regets highlighted two overlooked aspects of
immigrant skill transferability. (1) Immigrants
whose home country skills transfer poorly to the
new labor market will, by virtue of their lower
wages, have a lower opportunity cost of human
capital investment than natives or immigrants
with high skill transferability. (2) Home country
skills that are not fully valued in the host coun
try labor market are still useful for learning
new skills. Combined, these factors imply that
low skill transferability immigrants will invest
more in human capital and will do so over a
longer period than high skill transferability
immigrants or natives with similar levels of edu
cation and experience. A crucial prediction from
the immigrant human capital investment (IHCI)
model is that the higher incentive to invest in
human capital pertains not only to human capi
tal that restores the value of specific source
country human capital, but also to new human
capital investment in general. Empirical obser
vations bolster this perspective. For instance, a
Canadian study by Green (1999) finds higher
rates of occupational change, and at older ages,
for immigrants than for natives.
Because immigrants will invest more in
human capital than natives, and low skill
transferability immigrants will invest more than
high skill transferability immigrants (holding
initial human capital levels constant), immi
grants will experience higher earnings growth
than natives, and among immigrants there will
be an inverse relationship between entry earn
ings and earnings growth. These expectations
emerge in empirical analyses that follow cohorts
and individuals: across groups, the lower the
entry earnings, the higher the earnings growth;
over time, as entry earnings have fallen, earnings
growth has increased. Studies that use longitu
dinal data on individuals show high earnings or
occupational mobility of recent immigrants, in
the US (Duleep & Dowhan 2002), in Australia
(Chiswick et al. 2002), and in Denmark (Husted
et al. 2000). Further confirmation of the IHCI
model comes from the earnings convergence
that occurs among immigrant groups charac
terized by low and high skill transferability,
as for instance immigrants who enter the US
via family admissions versus employer based
requests for specific employment skills. Immi
grant entry earnings are thus poor predictors
of immigrant economic success. Methodologi
cally, the inverse relationship invalidates the
popular approach of controlling for cohort
effects by including a zero one variable for each
cohort in analyses that pool more than one cross
section to measure immigrant earnings growth.

While much sociological research has followed
in the footsteps of the Chicago School assimila
tion model and emphasizes the importance of
human capital in determining labor market out
comes, sociologists also explore how predictors
of immigrant economic assimilation and success
are affected by a variety of contexts not neces
sarily captured by individual traits. Sociological
studies highlight heterogeneity across immi
grant groups in assimilation, unique social
capital and networking patterns of various
immigrant groups, geographic dispersion and
concentration patterns, the importance of local
labor market structures, and differences in the
treatment of specific immigrant groups based
on societal perception and government policy.
The structure of the host countrys labor
market is of course a key context that affects
immigrant earnings and earnings growth. One
conceptualization of the labor market stems
from human capital theory. Another postulates
that two types of demand determine the char
acteristics of jobs. Jobs in the primary sector
(responding to the stable component of demand)
are good jobs with security, responsibility,
and career lines; jobs in the secondary sector
(responding to highly variable demand) are
dead end jobs. A third sector is the enclave
economy, which may help immigrants lacking
access to primary sector jobs escape the confines
of the secondary sector.
Case studies of the enclave economy docu
ment an immigrant sector in various industries
characterized by mutually beneficial arrange
ments between recent and longer term immi
grants in which recent immigrants working as
unskilled laborers at low wages (or even no wages)
in immigrant run businesses are provided train
ing and other forms of support eventually leading
to more skilled positions or self employment.
Close knit communities, nurtured by kinship