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September 1998, Volume 5, Number 9

Research Papers

In "The Economic Progress of Immigrants," George J. Borjas develops a model in which the relationship between the entry wage of immigrants and the subsequent rate of wage growth. Between 1970 and 1990, the model suggests that those with the highest entry-level wages also had the fastest wage growth in the U.S.

"Social Security Benefits of Immigrants and U.S. Born" by Alan L. Gustman and Thomas L. Steinmeier argues that immigrants receive a higher return on their Social Security contributions than US-born workers because the years that immigrants are not in the US are treated as years of zero income, lowering the average US earnings of immigrants for the purpose of calculating Social Security benefits. Since Social Security redistributes toward lower income earners, this increases payments to immigrants. An immigrant who entered the US at 40, and earned $30,000 a year would, at age 60, be considered to have earned $15,000 a year over the past 40 years, since years outside the US count as zero earning years. The paper concludes that it "is difficult to justify the current procedures determining benefits for immigrants."

In 1997, about 145 million US residents and their employers paid an average $1,671 of Social Security taxes (excluding Medicare payments); the maximum payment was $8,110.

An article by Joel Perlmann and Roger Waldinger in the summer 1998 issue of The Public Interest compares the immigrants who arrived between 1890 and 1920 with those who arrived between 1965 and 1995. It concludes that the children of today's immigrants are as likely to succeed as earlier immigrants despite differences in ethnicity and race and a different economic environment. The coming success of that second and third generation will be due to the fact that a higher proportion than previously have parents who are well educated and that the US is more open to immigration--the article contrasts the exclusion of Jews from leading universities in the 1920s and 1930s with the ability of Asians in the 1980s and 1990s to change admission policies.

One group of immigrants is different--Mexicans. Mexicans are about 30 percent of the 26 million immigrants in the US and they have the least education of any major group. The poor prospects of many Mexican immigrants should not, the article concludes, dim the generally bright outlook for the integration of other immigrant children and grandchildren.

Using census data since 1940, James Smith and Barry Edmonston identify three categories of Hispanics: immigrants, second generation, and third and later generations, and finds that there was upward mobility--second- and third-generation sons of immigrants closed the gap in schooling and earnings with US-born men. They concluded that there is no reason to believe that Hispanics will not achieve the American dream as did earlier waves of European immigrants. What is unique, Smith argues, is that Mexican immigrants have achieved upward mobility and preserved much of their culture.

A "Fiscal Portrait of the Newest Americans" reviews other studies to conclude that naturalized US citizens are a "fiscal bargain" for US taxpayers, primarily because another country paid for their education and because naturalized US citizens have higher adjusted gross incomes than families headed by US-born persons. Residents with higher earnings, regardless of immigration status, are more economically valuable, since they pay more in taxes and consume less in government welfare services.

The study mixes cumulative and cross-section data. It argues that, because 18 million or 70 percent of 26 million immigrants are 18 or older, the US "saved" $1.4 trillion in schooling costs, a cumulative savings. At the same time, it cites the fact that three percent of immigrants and 12 percent of US-born residents are over 65 to argue that working immigrants subsidize retired Americans, a cross-section finding.

Gustman, Alan L. and Thomas L. Steinmeier. 1998. Social Security Benefits of Immigrants and U.S. Born. NBER Working Paper No. 6478. March 1. Borjas, George J. 1998. The Economic Progress of Immigrants. NBER Working Paper No. 6506. Smith, James P. and Barry Edmonston. Eds. The Immigration Debate: Studies in Economic, Demographic and Fiscal Effects of Immigration. Washington. National Academy Press. (800) 624-6242. Perlmann, Joel and Roger Waldinger. 1998. "Are the Children of Today's Immigrants Making It?" The Public Interest. No. 132. Summer. 73-96. Moore, Stephen. 1998. A Fiscal Portrait of the Newest Americans. Washington. Cato Institute.