The past thirty years have seen a dramatic rise in income inequality in the US. While many economists have pointed to the rise of low-skilled immigration as a contributor to income inequality in developed countries, there has been little evidence from the US. In new research, Ping Xu, James C. Garand, Ling Zhu, find that the low-skilled immigration in the US does increase income inequality due to the downward pressure it puts on wages, and immigrants’ lack of access to federal welfare benefits. They write that to reduce inequality, US immigration policy should shift towards admitting more high-skilled immigrants or incorporating existing immigrants into the social welfare system

Garand, James C.

Xu, Ping

Zhu, Ling

LSE Research Online

blogs.lse.ac.uk http://blogs.lse.ac.uk/usappblog/2015/10/14/how-immigration-makes-income-inequality-worse-in-the-us/How immigration makes income inequality worse in the US.The past thirty years have seen a dramatic rise in income inequality in the US. While manyeconomists have pointed to the rise of low-skilled immigration as a contributor to incomeinequality in developed countries, there has been little evidence from the US. In new research,Ping Xu, James C. Garand, Ling Zhu, find that the low-skilled immigration in the US doesincrease income inequality due to the downward pressure it puts on wages, and immigrants’ lackof access to federal welfare benefits. They write that to reduce inequality, US immigration policyshould shift towards admitting more high-skilled immigrants or incorporating existing immigrantsinto the social welfare system.The past three decades have seen a substantial rise in income inequality in the United States.Since the 1970s, the income gap between the rich and the poor has escalated rapidly andexceeded that of most other industrial democracies. Among the political and economicdeterminants of inequality, immigration has been one of the most controversial. Previously,economists have found that low-skill immigrants in developed countries tend to increase thesecountries’ low-skill labor supply and consequently increase wage inequality. Despite the evidencedocumented at the individual level, to date relatively little is known about whether or not and howimmigration influences income inequality in the United States.In new research, we argue that immigrants could potentially increase income inequality in theUnited States for two reasons. First, in the past four decades a disproportionate share ofimmigrants have had relatively low education, limited English proficiency, and other attributes thatput them at a competitive disadvantage in the labor market when compared to native-bornAmericans. Many immigrants tend to concentrate in low-wage occupations such as construction, seasonalagricultural work, meatpacking, yard service, gardening, and household work. The presence of low-skillimmigrants increases competition in the lower-wage labor market and alters the supply-demand dynamics oflabor. As a result, the influx of low-skill immigrants could depress wages and reduce job opportunities for domesticworkers in the low-wage labor market and eventually increase income inequality from the bottom (of the incomedistribution) up.Second, immigrants face additional constraints in terms of lawful employment practices and eligibility forgovernment-funded welfare programs in the United States, and these constraints further depress the economicstatus of immigrants in comparison with native-born citizens and hence contribute to higher levels of incomeinequality. In the face of the current wave of immigration, many states have adopted strict regulations requiringemployers to check the legal status of immigrants in the work force. For instance, Arizona, Mississippi, SouthCarolina, Alabama, Georgia and North Carolina have passed laws that require almost all of their businesses touse the E-verify system to check on employment eligibility for prospective employees, and since the passage ofsuch laws other states have followed suit. In states where employment eligibility is checked, undocumentedimmigrants face greater constraints on both their employability and, if employed, their wages, and this coulddirectly result in diminished economic status for immigrants when compared to their native-born counterparts.In addition, for many Americans, unearned income derived from public assistance and other benefits receivedfrom the federal and state governments is an important supplement for earned income. This income component isespecially important for those with low income because it provides them with a social safety net which couldsupport them during difficult economic times. However, in 1996 the US Congress passed the PersonalResponsibility and Work Opportunity Act (PRWORA), which barred immigrants from all federal-funded welfarebenefits in the first five years after their arrival. As a result, immigrants are ineligible to receive financial assistancesuch as Temporary Assistance for Needy Families (TANF) in the first five years, although there were exceptionswritten into the law and states could use state funds to support immigrant families. The fact that many immigrantsare ineligible to receive federal welfare benefits means that they may not be as financially stable as similarly-situated native-born citizens, and this could result in lower post-redistribution income and, subsequently, higherlevels of income inequality.For these reasons we contend that immigration could very possibly have led to rising income inequality in the US. In order to test this contention, we begin by calculating national-level income inequality for each year using theGini coefficient, a commonly used measure of income inequality. We use data from the CPS March Survey tocalculate US national level income inequality levels from 1996 to 2008 with and without the immigrant population.In Figure 1 we present a comparison of these two trends. As you can see, the level of income inequality is alwayshigher when we include immigrants in the population. This figure shows that income inequality in the US over thepast two decades is indeed marginally higher due to immigration. To be sure, the gap in income inequality withand without immigrants is modest, but there is at least a small upward shift when immigrants are included in thepopulation used to calculate income inequality.Figure 1 – Gini coefficients with and without immigrants in the United StatesWe then use rigorous statistical analyses to see if both general immigration and specific types of immigrants (low-skill immigrants, high-skill immigrants, permanent residents) have an effect on income inequality after controllingfor a series of political, economic, and demographic factors. We find consistent evidence that the general foreign-born population has a strong, positive effect on inequality, though there is little evidence that newly admitted legalpermanent residents have an additional effect that goes beyond that of the general foreign-born population. Ourevidence also shows that it is low-skill immigrants (i.e., those with less than a high-school degree) that have asizable positive effect on income inequality. High-skill immigrants (i.e., those with a college degree or higher) donot have an effect on general income inequality, but they do have a much more selective effect, lowering incomegaps between the highest income group (90th percentile) and those at or below the median. Overall, we see astrong positive effect of the general foreign-born population and, more specifically, of low-skill immigrants onincome inequality. In state-year cases with relatively large immigrant populations—especially large low-skillimmigrant population—income inequality is higher, controlling for the effects of political and social demographiccontrol variables.Our findings suggest that immigration contributes to the increasing economic disparity among members of societyand that this is a non- trivial effect. Such an effect is a result of relative disadvantages that immigrants have inmarketable skills, as well as laws, politics, and policies that differentiate immigrants from native-born Americans.State policies that create and maintain a strong social safety net for the foreign-born population may help tomitigate immigrants’ economic disadvantage, since immigrants in the low-wage labor market may be more likely tobenefit from such redistributive policies. The adoption of a wider-range of social safety net policies benefitingimmigrants may help to close the income gap between immigrants and their native-born counterparts and henceresult in a reduced effect of immigration on state-level income inequality. Moreover, our findings that low-skillimmigrants raise income inequality while high-skill immigrants lower income inequality for certain selective incomepairings point to the importance of considering the values that undergird American immigration policy. Onepossible way to mitigate the effects of immigration on income inequality is to see changes in immigration policythat result in a change in the mix of immigrants admitted to the United States. An immigration policy that shifts thefocus toward admitting more high-skill immigrants and fewer low-skill immigrants may reduce the effect ofimmigration on income inequality.This article is based on the paper, ‘Imported Inequality? Immigration and Income Inequality in the AmericanStates’, in State Politics & Policy Quarterly.Featured image credit: Thomas Hawk (Flickr, CC-BY-NC-2.0)Please read our comments policy before commenting.            Note:  This article gives the views of the author, and not the position of USAPP – American Politics and Policy, northe London School of Economics.Shortened URL for this post: http://bit.ly/1QsBRe2 _________________________________ About the authorsPing Xu – University of Rhode IslandPing Xu is an Assistant Professor of Political Science at the University of Rhode Island. Herresearch interests include political economy, inequality, globalization, the welfare state, andChinese politics. James C. Garand-–Louisiana State UniversityJames C. Garand is the Emogene Pliner Distinguished Professor of Political Science at LouisianaState University. He is former editor of American Politics Quarterly, former President of theSouthern Political Science Association, and a 2006 recipient of the LSU Distinguished ResearchMaster Award. His research interests are widely dispersed throughout the field of Americanpolitics.Ling Zhu—University of HoustonLing Zhu is an Assistant Professor of Political Science at the University of Houston. Her researchinterests include public management, health disparities, social equity in healthcare access, aswell as implementation of public health policies at the state and local level.CC BY-NC 3.0 2015 LSE USAPP

How immigration makes income inequality worse in the US

Abstract

Similar works

Full text

Available Versions

LSE Research Online