A new Institute of Labor Economics (IZA) World of Labor paper by Harriet Duleep and Mark Regets details an interesting finding about the earnings growth rate of family-based immigrants relative to that of employment-based immigrants: despite starting out with lower initial earnings than employment-based immigrants, family-based immigrants experience faster earnings growth over time because they invest in human capital at higher rates. Earnings growth refers to the rate at which an individual’s earnings rise over time. Considering earnings growth is important, because it shows that when immigrants invest in their own skills, the economy becomes more productive. There is no evidence to support cutting levels of family-based migration as a method of improving the economic well-being of native workers, and this paper furthers that finding.
It makes sense that family-based immigrants have higher earnings growth because they are more likely to have to adapt to the changing economy of the country, whereas employment-based immigrants have more secure and immediate employment prospects. The chart below shows the difference in predicted earnings of both classes of immigrants over a 20 year period. After about 10 years in the country, earnings for family-based immigrants overtakes earnings for other immigrants.
Recent attempts to curtail family-based immigration, like Arkansas Senator Tom Cotton’s RAISE Act, are based in part around the argument that increased family-based immigration is bad for U.S. workers and the economy. While the talking points in favor of such legislation are grossly deceptive, as Alex Nowrasteh of the Cato Institute writes, they’re pervasive in the debate about legal immigration.
A principal objection against Duleep and Regets’ finding could be that despite the earnings growth acceleration experienced by family-based immigrants over time, the introduction of additional workers to the labor market hurts native workers’ employment opportunities and wages in the short run. However, the academic literature on the employment and wage impacts of immigration is broadly dismissive of the claim that immigration negatively affects employment and wages for native workers.
These findings have important considerations for policy, especially with respect to “merit-based” immigration systems. As Duleep and Regets note, scholars and policymakers tend to focus on the initial earnings of immigrants, but neglect to consider earnings growth. Because of the propensity for family-based immigrants to invest in human capital, they can flexibly respond to meet the needs of the labor market and help drive innovation. Family-based immigrants are more willing than natives or employment-based immigrants to pursue new education, regardless of age. A 25-year old family-based immigrant is two and a half times more likely than an employment-based immigrant to pursue education. At age 50, the family-based immigrant is still one and a half times more likely than the employment-based immigrant to pursue education. This willingness to acquire new knowledge and skills explains how family-based immigrants develop higher earnings growth.
Targeting immigration policy solely around employment introduces the potential to exclude a large class of economically valuable immigrants, whose acceleration of earnings growth over time demonstrates economic value. Prioritizing employment-based immigration in a merit-based system because their immediate contributions may be more attractive in the short term, fails to account for the long run economic outcomes of family-based immigrants.
Even if family-based immigrants have lower earnings upon arrival than employment-based immigrants do, there is little reason for concern about negative consequences arising for native workers. Rather, the fact that family-based immigrants invest in human capital at a level that drives wage growth this significantly should serve as a signal that they’re the people we want immigrating to the United States.