Why is the payoff to schooling smaller for immigrants?

Abstract

This paper is concerned with why immigrants appear to have consistently lower partial effects of schooling on earnings than the native born, both across destinations and in different time periods within countries. It uses the Over-Required-Under education approach to occupations, a new decomposition technique developed especially for this approach, and data from the 2000 Census of Population of the United States.Based on the average (mode or mean) level of schooling in their occupation, the schooling of the native and foreign born adult men is divided into the "required" (average) level, and years of under-or over-education. Immigrants have a wider variance in schooling, with an especially large proportion undereducated given the average schooling level in their occupation.Immigrants are shown to receive approximately the same rate of return to the "required" (occupational norm) level of education, but experience a smaller negative effect of years of undereducation, and to a lesser extent a smaller positive effect of overeducation.About two-thirds of the smaller effect of schooling on earnings for immigrants is due to their different payoffs to undereducation and overeducation. The remainder is largely due to their different distribution of years of schooling. The country-of-origin differences in the returns to under-and over-education are consistent with country differences in the international transferability of skills to the US and the favorable selectivity of economic migrants, especially those from countries other than the English-speaking developed countries. The decomposition developed is used to quantify the contribution of favorable selection in immigration and the less-than-perfect international transferability of skills. The results suggest that favorable selection is the more important contributor to the smaller payoff to schooling for immigrants. Moreover, the strong patterns found across countries of origin suggest that the decomposition proposed is robust.

Income Advantages of Poorly Qualified Immigrant Minorities: Why School Dropouts of Turkish Origin Earn More in Germany

“…Rather than earning higher wages as compensation, their excess non-cognitive skills might result in access to jobs for which poorly-educated immigrants would usually seem formally unqualified. According to Chiswick and Miller's (2008;2010) (Kalter and Granato, 2007). In response to the economic recession after the OPEC oil embargo all guest-worker recruitment was stopped, and Germany introduced incentives for guest workers to return to their home countries.…”

Does the choice of reference levels of education matter in the ORU earnings equation?

“…For example, Chiswick and Miller (2008) conduct separate analyses for foreign-born and native-born male workers. Rumberger (1987) reported findings from estimations undertaken on separate samples of men and women.…”

“…Hartog (2000, p. 135). These earnings effects, however, have been shown to vary by gender, nativity, occupation and skill level (see Rumberger, 1987;Hartog, 2000;Vahey, 2000;Chiswick and Miller, 2008 Kler (2005) used both the RM and JA procedures in an analysis of the earnings of native-born graduates in the Australian labor market in 1996. He reports that the findings are sensitive to the method used for the reference level of education.…”

“…As the literature has not settled on the specific terminology these terms are used interchangeably in this paper as well. Hartog (2000) and Chiswick and Miller (2008). Importantly, Hartog (2000, p.135), having reviewed the empirical evidence on earnings effects from a wide range of studies, and offering three summary conclusions 2 , stated:…”

Raining stones?: Female immigrants in the Spanish labour market

“…It is reasonable 1 The existence of such disadvantages for female foreign workers can be explained by several theories. The main source of these differentials might be associated to the limited transferability of immigrants' skills, which result in occupational segregation and higher levels of over-education among foreign workers than among natives Miller, 2008 and. In addition, the mentioned gaps can also be explained by discrimination theories, whether they have to do with employers' preferences (Becker, 1957), imperfect information (Arrow, 1972) or even imperfect competition (Manning, 2003).…”