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MPI Report Finds Immigrants Hit Harder During Economic Downturn than Native-Born Workers

Press Release
Wednesday, November 18, 2009

MPI Report Finds Immigrants Hit Harder During Economic Downturn than Native-Born Workers

WASHINGTON — Immigrants surpassed native-born workers in several key labor market outcomes from the mid-1990s through 2007, recording higher employment and lower jobless rates — but the trend was reversed with the onset of the current recession, according to a report released today by the Migration Policy Institute (MPI).

The report, Tied to the Business Cycle: How Immigrants Fare in Good and Bad Economic Times, analyzes employment and unemployment patterns over the past 15 years and two recessions, showing that immigrant economic outcomes began deteriorating before the current recession officially began in December 2007.

The authors, Federal Reserve Bank of Dallas Senior Economist Pia Orrenius and Agnes Scott College Economics Professor Madeline Zavodny, trace immigrants' declining fortunes largely to the housing bust which began in spring 2006. As residential construction employment slumped, the immigrant unemployment rate began rising toward the end of 2006, and immigrants since have recorded higher unemployment rates and bigger declines in employment than native-born workers. The analysis tracks MPI's own research, dating back to January, into how the recession has affected immigrants here and around the globe.

"Despite the longer-term trend of rising employment and falling unemployment rates for foreign-born workers, the current recession offers new evidence that economic outcomes for immigrants in the short run are more strongly tied to the business cycle than for natives," Ms. Orrenius said.

The report offers a number of possible explanations for why labor market outcomes for immigrants, who represent more than 15 percent of the workforce, are more cyclical. Among them: Immigrants are overrepresented in less-educated groups that have experienced the greatest job losses; and are more likely to work in cyclical occupations and sectors that suffer the largest job losses during downturns, such as construction and manufacturing.

Other key findings:

  • During the 15-year period surveyed, the immigrant employment rate peaked at 66 percent in 2007, compared to about 63 percent for natives.
  • Propelled by the housing boom, the immigrant jobless rate fell below that of natives in 2005-2007, hitting a low of 3.4 percent in 2006, versus 4.5 percent for natives.
  • By the first quarter 2009, the unemployment rate for immigrants stood at 9.2 percent and their employment rate had dropped by 4.6 percentage points from two years earlier. This compares to 7.8 percent unemployment and a 2.6 percentage point drop in employment rates for native workers in the same period.
  • The immigrant-native earnings gap has remained largely unchanged since the mid-1990s, with foreign-born workers earning about 20 percent less than their U.S.-born counterparts ($528 in median weekly earnings in the second quarter of 2009 compared to $646).
  • Economic outcomes tend to differ by region of origin. Immigrants from Latin America and Asia recorded employment rates over 10 percentage points higher than immigrants from Western Europe and Canada. On the other hand, Latin American immigrants (more of whom are likely to be unauthorized and less educated) have the greatest sensitivity to the business cycle and are more likely to be unemployed.

"These findings offer further evidence that policymakers should consider creating a more flexible immigration system that would allow employment-based immigration flows to track the economy more closely, rising in times of expansion and falling during recessions," said MPI President Demetrios Papademetriou.

MPI has recommended creation of a permanent, independent executive-branch agency that would make regular recommendations to the president and Congress for adjusting employment-based immigration levels. The Standing Commission on Labor Markets, Economic Competitiveness and Immigration — staffed by a professional corps of career economists, demographers and social scientists — would provide evidence-based and impartial analysis of labor market immigration circumstances and needs.

The report also notes that the poverty rate is higher among immigrants than natives. In 2008, the most recent year for which poverty data are available, 19.9 percent of people in immigrant-headed households lived in poverty, compared to 12.1 percent of those in native-headed households. Given the drop in employment rates, poverty likely became even more prevalent for both immigrant and native families in 2009.

"The report suggests a policy question for legislators: Whether to assist low-income immigrant families during the downturn," said MPI Senior Vice President Michael Fix. "Many legal immigrant families are ineligible for government assistance such as food stamps and cash welfare because of their relatively recent arrival in the United States."

The report is available here.

This research is done under the auspices of MPI's Labor Markets Initiative, which is conducting a comprehensive, policy-focused review of the role of immigration in the labor market. The Initiative's next report, examining the role of illegal immigration in the labor market, will be released at an MPI event at 9:30 a.m. EST on December 2nd, 2009. For event details, visit www.migrationpolicy.org.

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The Migration Policy Institute is an independent, non-partisan, non-profit think tank in Washington, DC dedicated to analysis of the movement of people worldwide. MPI provides analysis, development and evaluation of migration and refugee policies at the local, national and international levels.