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Businessweek Archives

Immigrants' Economic Woes

Economic Trends

Immigrants' Economic Woes

The low-skilled are in a jobs bind

For the past two decades, economists and social observers have bemoaned the rapid growth in income inequality in the U.S. Pointing to the widening gap between the wages of high school graduates and those with college degrees, some critics have claimed that the nation is in danger of developing a rigid class system out of sync with traditional American democratic values.

Lately, such concerns have abated. For one thing, there has been a general upgrading of the labor force as more and more Americans have graduated from high school and gone on to college. For another, low unemployment has finally begun to lift the wages of those at the bottom of the income ladder. Still, as a recent study by economist Maria E. Enchautegui of the University of Puerto Rico suggests, there is one group whose economic status may actually deteriorate in the years ahead despite their adherence to the work ethic: low-skilled immigrants.

Between 1980 and 1994, notes Enchautegui, the number of working-age immigrants in the U.S. without a high school degree jumped from 2.8 million to 5.1 million--as the number of U.S.-born high school dropouts fell sharply from 20 million to 13 million. Thus, by the mid-1990s, low-skilled immigrants--both legal and illegal--made up 30% of all U.S. workers without a high school diploma.

If these trends continue, says Enchautegui, foreign-born workers will soon make up the majority of low-skilled labor in the U.S. (Some 36% of immigrant men had less than a high school education in 1996, compared with 10% of native men.) Indeed, in many high-immigration metro areas--on the East and West Coasts and in Florida and Texas--immigrants already comprise 75% of the low-skilled workforce.

Such poorly educated workers are highly disadvantaged in a number of respects. Two-thirds have never attended high school at all, and 20% don't speak English. Yet their unemployment rates, while high, are significantly below those of poorly educated U.S.-born workers.

The problem is that their very numbers, combined with declining demand for low-skilled workers, are driving their wages down. Between 1979 and 1997, according to the Economic Policy Institute, average hourly wages of high school dropouts, adjusted for inflation, fell by 26%--and those of the foreign-born in this group are down even more. As a result, poverty among working-age immigrants has been soaring, from 14.7% in 1980 to 21.3% in 1994--and 36% among the less educated.

Even with a strong economy, this situation may not improve. Despite some changes in immigration policy, low-skilled workers continue to enter the U.S., both legally and illegally. While many take the most menial jobs, Labor Dept. projections indicate that such jobs are not expanding--suggesting continued downward pressure on their wages. Sooner or later, says Enchautegui, policymakers will have to address the growing plight of poorly educated immigrants.BY GENE KORETZReturn to top

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Are Windfalls Spent or Saved?

A lottery study offers some clues

In a recent book, The Stakeholder Society, Yale University law professors Bruce A. Ackerman and Anne Alstott suggest providing all high school graduates with $80,000--either to finance college, or in four annual payments of $20,000 starting at age 21 to save, buy a house, start a business, or whatever.

Such a stake, they say, would not only equalize opportunity in American society but also have a positive effect on young people's behavior. But would it? While not entirely comparable, a recent National Bureau of Economic Research study of the behavior of lottery winners in Massachusetts suggests that many of those who opt for the four $20,000 annual checks a year might simply choose to spend the extra cash.

In the study, researchers Guido W. Imbens, Donald B. Rubin, and Bruce Sacerdote analyzed the economic behavior of lottery winners who won either about $80,000 a year for 20 years or about $15,000 a year for 20 years. Predictably, they found that some of the $80,000-a-year winners used their windfalls to stop working. Big winners also boosted both their savings and their spending on cars and new homes.

By contrast, $15,000-a-year prizes actually tended to enhance the work efforts of winners a bit, inducing some who had been out of the labor force to find jobs. Since overall savings among $15,000 winners fell, however, it also appears that such prizes tended to stimulate consumption and to temper thrift.

One other noteworthy finding: The divorce rates of both big and small lottery winners tended to rise in the years after they hit the jackpot.BY GENE KORETZReturn to top

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