Human capital accumulation: Evidence from immigrants in low-income countries

This paper offers new evidence on the theory of human capital accumulation. The current findings in developed countries have documented that immigrants' earnings growth exceeds that of natives and that immigrants upgrade their occupations over time. Three possible explanations for these observations are suggested in the literature: 1) immigrants accumulate more human capital than natives, 2) immigrants are not able to fully transfer their skills, so over time, they restore the value of source-country human capital, and 3) immigrants are more productive than natives because they are positively selected on ability. This study investigates the labor market outcomes of immigrants in low-income countries and finds that immigrants earn more than comparable natives and work in better-paid occupations. Over time the gap in earnings and occupational distribution between immigrants and natives narrows. This observation is more consistent with the predictions of human capital accumulation theory than with skill transferability and selection theories.     

Occupational Attainment and Immigrant Economic Progress in Australia*

Using data from the 2001 Australian Census of Population and Housing, on adult men in full‐time employment, this paper augments a conventional human capital earnings function with information on occupations. It also estimates models of occupational attainment. The results from both the earnings function and model of occupational attainment indicate that the limited international transferability of human capital skills results in immigrants entering into relatively low status occupations when they first enter the Australian labour market. Comparison with similar research for the USA suggests that the different immigrant selection regimes (primarily family reunion in the USA, skill‐based immigration in Australia) do not impact on the negative association between current occupational status and pre‐immigration labour market experience.     

SEGREGATION IN THE AUSTRALIAN LABOUR MARKET*

An important measure of the success of immigration is the assimilation of immigrants into the labour force of the host country. This criterion is important from both the perspective of immigrants themselves and that of the host country. Conversely, concentration of migrants in a few sectors is undesirable because of its adverse socio‐economic consequences. Since the pattern of distribution of migrant employment influences the structure and outcomes in the labour market in various ways, it attracts public, academic and policymakers’ attention. The present paper employs various numerical measures to estimate the degree of immigrant segregation across occupations and industries in Australia. The results indicate that the occupational distribution of immigrants is very similar to the proportion of native workers employed in the various occupations. This similarity also characterises the industrial distribution of immigrant employment. Thus, contrary to popular perception and findings for the United States, evidence from the Australian labour market does not indicate the existence of widespread immigrant segregation.     

From engineer to taxi driver? Language proficiency and the occupational skills of immigrants

We examine the ability of immigrants to transfer the occupational human capital they acquired prior to immigration. We first augment a model of occupational choice to study the implications of language proficiency on the cross‐border transferability of occupational human capital. We then explore the empirical predictions using information about the skill requirements from O^*NET and a unique dataset that includes both the last source country occupation and the first four years of occupations in Canada. We supplement the analysis using Census estimates for the same cohort with source country occupational skill requirements predicted using detailed human capital related information such as field of study. We find that male immigrants to Canada were employed in source country occupations that typically require high levels of cognitive skills, but rely less intently on manual skills. Following immigration, they find initial employment in occupations that require the opposite. Consistent with the hypothesized asymmetric role of language in the transferability of previously acquired cognitive and manual skills, these discrepancies are larger among immigrants with limited language fluency.     

Occupational attainment and stratification in China: The interactive effects of social networks and the hukou system

This paper examines the effects of social networks and hukou status on worker’s occupational attainment in China. To identify the potential ranking of different occupations, we consider the use of the stereotype ordered regression model to estimate individual occupational choice. Our results show that social networks play different roles in shaping occupational outcomes for urban and rural workers. In particular, friendship ties significantly improve urban workers’ opportunities in obtaining higher‐ranked occupations; in contrast, kinship ties appear to be more influential for rural migrants, but the effects are limited to the attainment of lower‐ranked occupations. While social contacts from government organizations or state‐owned sectors facilitate urban workers’ attainment of higher‐ranked occupations, similar patterns are not observed among rural workers. We further find that the beneficial effects of social networks or urban hukou identity are stronger for workers who are from less‐developed regions, who work in state‐owned enterprises, or who have a college degree. Decomposition of the wage gap between urban and rural workers suggests that differences in social networks and occupation types, together with hukou discrimination, account for the majority of the current wage inequality.     

IMMIGRANT WAGE GROWTH IN THE UNITED STATES: THE ROLE OF OCCUPATIONAL UPGRADING

Immigrants to the United States routinely take jobs below their skill qualifications because of barriers to entering occupations. We use a structural model of immigrant job choice to quantify the benefits of potential policies to promote entry into suitable occupations. We estimate the model using longitudinal labor market data on immigrants to the United States. Our counterfactual results show that eliminating barriers to occupational entry would lead to only a small earnings increase for the average immigrant in our sample, but a substantial earnings increase for the most highly skilled immigrants.     

Life satisfaction and self-employment in different types of occupations

In this research, we investigate whether a positive relationship between life satisfaction and self-employment (versus paid employment) exists while simultaneously considering two occupational dimensions: white-collar versus blue-collar work and high-skilled versus low-skilled work. Using Eurobarometer data for a large number of European countries (2008–2012), our findings confirm that self-employed workers are more satisfied with their lives than paid employees are. A life satisfaction premium is also found when the self-employed and paid employees are compared within similar occupations in terms of collar type and skill level. Finally, self-employment can help to overcome low life satisfaction scores associated with blue-collar and low-skilled work.     

Employment, wages, and the economic cycle: Differences between immigrants and natives

In this paper, we analyse differences in the cyclical pattern of employment and wages of immigrants and natives for two large immigrant receiving countries, Germany and the UK. We show that, despite large differences in their immigrant populations, there are similar and significant differences in cyclical responses between immigrants and natives in both countries, even conditional on education, age, and location. We decompose changes in outcomes into a secular trend and a business cycle component. We find significantly larger unemployment responses to economic shocks for low-skilled workers relative to high-skilled workers and for immigrants relative to natives within the same skill group. There is little evidence for differential wage responses to economic shocks. We offer three explanations for these findings: an equilibrium search model, where immigrants experience higher job separation rates, a model of dual labour markets, and differences in the complementarity of immigrants and natives to capital.     

Immigration Policy,Self‐selection,and the Quality of Immigrants*

This paper investigates the effects of immigration quotas on the average quality of immigrants by developing a human capital migration model where efficiency in migration depends on skills and emigration rates are higher among skilled workers. Studying the joint determination of the domestic level of wages and immigrants' self‐selection, we find a negative relationship between the wage level and the percentage of educated workers among immigrants, which results in a nonstandard downward‐sloping labor supply. In our framework, a higher quota increases the skill mix of immigrants through its negative effect on wages and raises aggregate national income.     

Job autonomy and education-skill matches of immigrant workers in Germany

This letter examines the determinants of occupational autonomy and education-skill matches of immigrant workers in Germany. Their jobs are characterized by much lower autonomy than those of comparable natives and the immigrant penalty decreases only minimally over time. In contrast to wages, the difference between immigrants from advanced and non-advanced countries is small. But immigrants from advanced countries are much more likely to have a job matching their qualification. The probability of a match does not increase over time for highly educated immigrants, but does for others. Highly educated immigrant women have an additional disadvantage. In some industries low autonomy and skill downgrading of immigrant workers are particularly common.     

Capital–skill complementarity and the immigration surplus

We build a neoclassical growth model with overlapping dynasties and capital–skill complementarities to evaluate changes in immigration policy. Calibrating the model using US data, we quantify the differential effects of skilled and unskilled immigration on factor returns and on the welfare of different sectors of the population. An influx of high-skilled immigrants lowers the wages of skilled workers, raises the wages of unskilled workers, and because of the relative complementarity between capital and skilled labor, substantially raises the rate of return to native-owned capital. By contrast, an influx of unskilled immigrants produces an opposite effect on wages, and has only a negligible effect on the return to capital. Because of capital–skill complementarity, an increase in the number of skilled immigrants generates an immigration surplus—the overall welfare benefit accruing to the native population—that is approximately ten times larger than the immigration surplus generated by an identical increase in the number of unskilled immigrants. This differential welfare effect is far higher than can be accounted for by the disparity between the productivities of each type of worker.     

Does Occupational Training by the Trade Adjustment Assistance Program Really Help Reemployment? Success Measured as Occupation Matching

The Trade Adjustment Assistance Program provides various retraining opportunities to workers displaced due to import competition. This paper investigates whether successful skill acquisition through training—as opposed to general exposure to federal assistance—improves the post‐participation outcomes using the Trade Act Participant Report. Success in skill acquisition is indicated by a match between occupations of training and entered employment. The average matching rate for the sample is 37.53%. Trainees with a match display wage replacement rates that are 2 to 3 percentage points higher than those without one, while they display very similar post‐participation earnings that are inferior to that of non‐trainees. This generally indicates that participants with limited skill sets with lower pre‐participation earnings select into training, and successful skill acquisition offsets the negative impacts of their lack of marketable skills. Matching itself does not improve the retention at the job. However, participation in various training programs improves retention.     

Wages in Managed Markets: An Explanation of the Gender Wage Gap?

Over the last decade or so in Australia, relative wages have declined in some female‐dominated occupations, notably in the care industries. This article argues that the strong growth in labour force participation of mature‐aged women has allowed wages to remain low in these ‘managed’ industries. Limited mobility across industries and occupations, at least in part due to preferences for part‐time work, and an institutional wage‐setting mechanism also play a role. Growing demand for workers in the care industries, rising skill levels of women, and slowing growth in participation as rates converge with those of men will contribute to stronger wage growth in the future.     

Are low-skill public sector workers really overpaid? A quasi-differenced panel data analysis

Public–private sectoral wage differentials have been studied extensively using quantile regression techniques. These typically find large public sector premiums at the bottom of the wage distribution. This may imply that low skill workers are ‘overpaid’, prompting concerns over efficiency. We note several other potential explanations for this result and explicitly test whether the premium varies with skill, using Australian data. We use a quasi-differenced Generalized Method of Moments (GMM) panel data model which has not been previously applied to this topic, internationally. Unlike other available methods, this technique identifies sectoral differences in returns to unobserved skill. It also facilitates a decomposition of the wage gap into components explained by differences in returns to all (observed and unobserved) skills and by differences in their stock. We find no evidence to suggest that the premium varies with skill. One interpretation is that the compressed wage profile of the public sector induces the best workers (on unobserved skills) to join the public sector in low wage occupations, vice versa in high wage occupations. We also estimate the average public sector premium to be 6% for women and statistically insignificant (4%) for men.     

Immigrants,occupations and firm export performance

This paper investigates the export‐enhancing effect of immigrant workers and how this effect varies across occupations. We use a dataset made of French manufacturing firms from 1997 to 2009 and address the problem of endogenous employment choice using an instrumental variable‐two‐stage least squares (IV‐2SLS) strategy and a doubly robust estimator. Our results show that immigrants in both low‐ and high‐skilled occupations foster exports at both the intensive and the extensive margins. In addition, we show that this effect is spread across all export destinations.     

Occupational Upgrading and Changes In Capital Usage In U.S. Manufacturing Industries, 1989–98

Proposed explanations of the role of microprocessor technology in the shifts toward relatively highly skilled workers that have occurred within industries since the mid 1970s have implications for the types of occupations that should be most affected by computerization. In this study, I measure the effects of changes in capital usage, and of the level of high-tech capital usage in particular, on skill change caused by employment shifts among detailed occupations within industries over the 1989–98 period. The study utilizes data collected by the Bureau of Labor Statistics Occupational Employment Statistics (OES) survey, which produces data on employment and wages for over 700 occupations in non-farm establishments, by industry. These data provide an unprecedented opportunity to determine the types of occupations and skills that are most affected by changes in capital and technology usage, by making it possible to measure skill change within relatively narrowly defined occupational groups.     

Occupational Status: Why do some Workers Miss Out?

The difference in socioeconomic status between the 'haves' and 'have-nots' is widening in the Australian labour market. This is reflected in the data on both earnings and occupational status. This paper assesses the factors contributing to differences in the occupational attainment of workers with a marginal attachment to the labour market and workers who are part of mainstream Australia. Overall, 94 per cent of the occupational status differential is attributable to the inferior endowments possessed by workers with a marginal attachment to the labour market. Until the disadvantaged workers improve their skills they will not be able to gain access to high status occupations.     

The Return to Caring Skills: Gender,Class, and Occupational Wages in the US

Feminist economics has contributed to the understanding of the economic importance of care work. Most studies find a wage penalty associated with caring occupations. This study extends the feminist research on care work beyond caring occupations by identifying specific caring skills and activities derived from the 2014 O*NET job-evaluation data. Four caring skills – (1) Assisting and Caring for Others, (2) Establishing and Maintaining Interpersonal Relationships, (3) Service Orientation, and (4) Social Perceptiveness – were used in ordinary least-squares and quantile wage regressions for 623 occupations in the United States. Findings indicate that the return to caring and assisting skills results in a wage penalty for low-wage workers but a wage premium for workers in high-wage and male occupations. By identifying the impact of gender and class on the economic return to particular caring skills, the study broadens the understanding of care work, especially in relation to US wage inequality.     

A SEARCH‐EQUILIBRIUM APPROACH TO THE EFFECTS OF IMMIGRATION ON LABOR MARKET OUTCOMES

We analyze the impact of the U.S. skill‐biased immigration influx that took place between 2000 and 2009 within a search and matching model that allows for skill heterogeneity, differential search cost, and capital‐skill complementarity. We find that although the skill‐biased immigration raised the overall net income to natives, it had distributional effects. Specifically, unskilled native workers gained in terms of both employment and wages. Skilled native workers, however, gained in terms of employment but lost in terms of wages. Nevertheless, in an extension where skilled natives and immigrants are imperfect substitutes, even the skilled wage rises.     

Globalization,Skill Accumulation and the Skill Premium

We analyze the impact of globalization upon the skill premium (inequality) in advanced countries from a two‐goods North–South model with skill accumulation. Globalization consists of an increase in the size of the South. Its impact on inequality depends on its intensity and on the pre‐globalization proportion of skilled workers. The post‐globalization inequality is a non‐monotonic function of the pre‐globalization proportion of skilled workers and of the globalization intensity. The impact is different for the generation in work and for the following generations. There is a threshold value of the skill endowment under (above) which inequality is lower (higher) after than before globalization.