CBO 

TESTIMONY 

Statement of 

Peter R. Orszag 

Director

The Role of Immigrants in the U.S. Labor Market 

before the 

Subcommittee on Immigration, Citizenship, Refugees, 

Border Security, and International Law 

Committee on the Judiciary 

U.S. House of Representatives

May 3, 2007 

This document is embargoed until it is delivered at 

3:00 p.m.(EDT), Thursday, May 3, 2007. The contents 

may not be published, transmitted, or otherwise 

communicated by any print, broadcast, or electronic 

media before that time. 

CONGRESSIONAL BUDGET OFFICE 

SECOND AND D STREETS, S.W. 

WASHINGTON, D.C. 20515

Madam Chair and Members of the Committee, I am pleased to appear before you

today to discuss the role of immigrants in the U.S. labor market. My testimony

draws from a paper that the Congressional Budget Office (CBO) issued in 2005.1

At your staff’s request, CBO has updated key findings from that study to

incorporate recent data from the Census Bureau.

The United States is known as a nation of immigrants—a characterization that is

more appropriate today than at any time since the 1930s. People immigrate to the

United States for many reasons: to join family members, to seek better economic

opportunities, to escape persecution, or simply to get a fresh start. The presence of

so many people from other countries necessarily has important consequences for

U.S. society. This testimony concentrates on one aspect of their presence that is of

particular importance for the nation’s economy: their role in the U.S. labor

market.

The testimony addresses three topics, which are covered in more depth in the

2005 CBO report:

 The growth, characteristics, and earnings of the foreign-born workforce;

 The impact of foreign-born workers on the labor market; and

 Implications for the future as the baby boomers exit the labor force.

Foreign-Born Workers

Immigrants are a substantial and growing segment of the U.S. labor force. In

2006, 23 million workers—one in seven workers in the United States—were

foreign born, and half had arrived since 1990. During the past decade, foreignborn workers accounted for half of the growth of the U.S. labor force.

In 2006, about 40 percent of foreign-born workers were from Mexico and Central

America, and 25 percent were from Asia. To a considerable extent, educational

attainment determines the role of immigrants in the labor market. Even as the

number of native-born workers without a high school diploma is shrinking, the

number of foreign-born workers without a diploma continues to increase. In 2006,

among workers age 25 and older who lacked a diploma, nearly half were foreign

born, and most were from Mexico and Central America. At the same time, many

other immigrant groups were highly educated. The educational attainment of

foreign-born workers from other regions was slightly higher than that of workers

1. Congressional Budget Office, The Role of Immigrants in the U.S. Labor Market (November 2005).

CBO has issued a number of other reports on immigration, available at www.cbo.gov/publications/

collections/immigration.cfm.
2

born in the United States; in particular, a higher percentage of those immigrants

had taken graduate courses. Those differences in average educational attainment

among immigrants by country of origin appear to reflect the basis on which

foreign-born workers were admitted to the United States, rather than differences

in educational levels in their home countries. For example, the average

educational attainment among workers who came from India is roughly 16 years,

even though the average educational attainment of the adult population in that

country is well below the high school level; many workers from India were

admitted to the United States because they had skills that were in demand.

Many workers from Mexico and Central America were employed in jobs that

required little formal education. Workers from that region earned much less, on

average, than did the typical native worker. In 2006, three-quarters of workers

born in Mexico and Central America were employed in occupations that have

minimal educational requirements, such as construction laborer and dishwasher;

only one-quarter of native workers held such jobs. On average, the weekly

earnings of men from Mexico and Central America who worked full time were 55

percent those of native-born men; women from Mexico and Central America

earned about 60 percent of the average weekly earnings of native-born women.

Other foreign-born workers—that is, those who immigrated to the United States

from places other than Mexico and Central America—were employed in a much

broader range of occupations. A notable exception is their concentration in fields

such as computer and mathematical sciences, which generally require at least a

college education. For workers from the rest of the world, the average weekly

earnings of men and women were similar to those of native-born men and women.

Impact on the Labor Market

The arrival of large numbers of immigrants with little education probably slows

the growth of the wages of native-born high school dropouts, at least initially, but

the ultimate impact on wages is likely to be modest. Recent estimates of the effect

of two decades of growth in the foreign-born workforce on the average earnings

of native high school dropouts have ranged from negligible to a reduction of

almost 10 percent. The range of those estimates reflects, in part, the uncertainty

surrounding what employers and native workers would have done if those

foreign-born workers had not been present, either initially or after employers and

workers had adjusted to the changes in opportunities that the influx of immigrants

produced.

A flexible labor market will adjust over time to the presence of more foreign-born

workers. An increased supply of labor should raise the return to investment in the

United States, and increased investment, in turn, will tend to raise workers’

productivity and earnings. Over time, that effect attenuates the downward

pressure on wages for native-born workers. Over even longer time periods, some
 

3

of those workers may be motivated to obtain additional education to receive the

associated increase in pay.

Implications for the Future

Immigrants have been—and in all likelihood will continue to be—a major source

of new workers in the United States. Barring substantial shifts in demographic

trends, immigrants and their descendants are expected to provide the majority of

the nation’s population growth during the next half century. Who immigrates to

the United States and what those immigrants and their descendants do after their

arrival will increasingly determine the size and skill composition of the U.S. labor

force.

Appendix:

Charts Presented at the Hearing

Congressional Budget Office

The Role of Immigrants 

U.S. Labor Mark

Peter R. Orszag

Director
Three Topics

• Foreign-Born Workers• Their Impact on the Labor Marke• Implications for the Future as th

Boomers Exit the Labor Force
Size and Growth of the U.S. Labor Fo

(Workers age 16 or older), by Nativit

Number

(Millions)

1

Mexico and Central America

1994 2006

Rest of World

In Milli

Total 131.1 151.4 20.4 

Native 118.1 128.3 10.2

Foreign Born 12.9 23.1 10.2 

4.6 9.2 4.5 8.3 13.9 5.6 
Composition and Educational Attainme

U.S. Labor Force (Workers age 16 or oldby Nativity, 2006

Percentage of

Labor Force

Ave

Total 100.0 Native 84.8 

Foreign Born 15.2 

Mexico and Central America 6.1 

Rest of World 9.2 
Geographic Distribution of Native- a

Workers Age 16 or Older, 1994 and 2

CA

NY, FL, TX, 

NJ, IL

Res

Cou

Distribution in 20

Rest of World 15.0 14.9 5

Distribution in 19

Total 100.0 100.0 100Native 72.5 84.8 95

Foreign Born 27.5 15.2 4

Mexico and Central America 16.0 4.3 0Rest of World 11.5 10.8 3Mexico and Central America

Total 100.0 100.0 100

Native 66.1 78.0 91

Foreign Born 33.9 22.0 8

19.0 7.1 3

Percent
Educational Attainment of the U.S. L

(Workers age 25 or older), by Nativit

All Levels of 

Educational 

Attainment

8th

Grade 

or 

Less

100 4

1

1736

100

5

100100100

9th to 12th

Grade and 

No 

Diploma

65

1121

6

Mexico and Central AmericaRest of World 24 20 

High 

School 

Diploma or 

GED

Some 

College 

Associat

Degree

Total 30 28 

Native 31 30 

Foreign Born 24 16 

26 11

Percent
Occupational Distribution of Worker

Ages 25 to 64, by Nativity, 2006

Foreign-B

Occupation Group

Native 

Workers Total

Mexi

Ce

Am

Construction, Production, Cleaning, and Maintenance 14.8 29.4 Other Occupations 85.2 70.6 

Total 100.0 100.0 1

Percent
Average Weekly Earnings of Full-Tim

Ages 25 to 64, by Educational Attain

Dollars per Week

8th Grade

or Less

9th to 12th

Grade and

No Diploma

High School

Diploma or GED

Some College or

Associate's Degree

Ba

0

200400600800

1,0001,2001,4001,600

Native Born

From Mexico or Central America
Differences in Average Weekly Earnings Be

Native-Born Full-Time Male Workers Ages 2

Unadjusted

Adjusted 

Education

Attainme

Workers from Mexico and Central America -45 -26 Workers from Rest of World 0 -8 

Percentage Difference from Native-Born Workers with Native-Born P
Projected Effect of Immigration on 

Population Growth, 2000 to 2050Millions of People

Projected Growth in

Total Population

Projected 

Population A

0

20406080

100120140

WW