CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

A

PAPER

CBO

The Role of Immigrants

in the U.S. Labor Market

NOVEMBER 2005

A Series on Immigration


The Congress of the United States O Congressional Budget Office

CBO

The Role of Immigrants

in the U.S. Labor Market

November 2005

A

PAPER
Note

Numbers in the text and tables of this paper may not add up to totals because of rounding.
Preface

Foreign-born workers are a growing presence in the U.S. labor force. One of every seven 

people working in the United States in 2004 was born elsewhere; a decade earlier, only one in 

ten workers was foreign born. With the projected slowdown in the growth of the native workforce as the baby-boom generation reaches retirement age, immigrants are likely to hold an 

even greater share of jobs in the future. 

This paper, requested by the Chairman and Ranking Member of the Senate Finance Committee, is the third of several reports by the Congressional Budget Office (CBO) that present facts 

and research on immigration to help inform the agency’s projections of the federal budget and 

the economy. The paper focuses on the role of immigrants in the labor market—the skills they 

bring to that market; the types of jobs they hold; their compensation; and their impact on the 

native-born workforce. In keeping with CBO’s mandate to provide objective, nonpartisan 

analysis, this paper makes no recommendations.

Nabeel A. Alsalam and Ralph E. Smith of CBO’s Health and Human Resources Division 

wrote the paper. Meena Fernandes provided research assistance. The paper benefited from the 

comments of David Brauer, Paul Cullinan, Molly Dahl, Thomas DeLeire, Douglas Hamilton, 

Arlene Holen, Noah Meyerson, Bruce Vavrichek, and Alshadye Yemane of CBO, as well as 

Lawrence Katz of Harvard University. (The assistance of an external reviewer implies no 

responsibility for the final product, which rests solely with CBO.)

Juyne Linger edited the paper, and Loretta Lettner proofread it. Leah Mazade and Christian 

Spoor prepared the paper for publication, and Maureen Costantino designed the cover. Lenny 

Skutnik produced the printed copies. Simone Thomas produced the electronic version for 

CBO’s Web site (www.cbo. gov). 

Douglas Holtz-Eakin

Director

November 2005

Introduction and Summary 1

Foreign-Born Workers 1

Impact on the Labor Market 2

Implications for the Future 2

Foreign-Born Workers 2

Growth in the Foreign-Born Labor Force 2

What the Foreign Born Bring to the Labor Market 7

Labor Market Outcomes 9

The Next Generation 19

The Impact of Foreign-Born Workers on the U.S. Labor Market 19

Analytic Framework 20

A Review of the Empirical Literature 22

Implications for the Future as the Baby Boomers Exit the Labor Force 25

CONTENTS
vi THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

Tables

1. Size and Growth of the U.S. Labor Force Age 16 and Older, 

by Nativity, 1994 and 2004 3

2. Composition and Educational Attainment of the U.S. Labor 

Force Age 16 and Older, by Nativity, 2004 6

3. Geographic Distribution of Native- and Foreign-Born Workers, 

1994 and 2004 7

4. Educational Attainment of the U.S. Labor Force Age 25 

and Older, by Nativity, 2004 8

5. Selected Characteristics of the U.S. Population and Labor 

Force, by Nativity, 2004 9

6. Labor Force Status of the Population Age 16 and Older, 2004 10

7. Occupational Distribution of Workers Ages 25 to 64, by 

Nativity, 2004 12

8. Distribution of Workers Ages 25 to 64 Across Occupations, 

by Education Level of Occupation, 2004 13

9. Distribution of Workers Ages 25 to 64 Across Major Industry 

Groups and Selected Subgroups, by Nativity, 2004 14

10. Average Weekly Earnings of Full-Time Workers Ages 25 to 64, 

by Educational Attainment, 2004 16

11. Differences in Average Weekly Earnings Between Foreign- and 

Native-Born Full-Time Workers Ages 25 to 64, Adjusted 

for Educational Attainment and Experience, 2004 17

12. Selected Characteristics of Workers Ages 25 to 64, by Nativity 

and Parents’ Nativity, 2004 19

Figures

1. Employment Status of the Population Ages 25 to 64, by 

Educational Attainment, 2004 11

2. Average Weekly Earnings of Full-Time, Foreign-Born 

Workers Ages 25 to 64 in 2004, by the Year They 

Came to the United States to Stay 18

Boxes

1. Measuring the Number of Unauthorized Immigrants 4

2. How an Increase in Foreign-Born Workers Can Affect 

Average Earnings Growth 21
The Role of Immigrants

in the U.S. Labor Market

Introduction and Summary 

The role of immigrants in the U.S. labor market has long 

generated substantial interest among policymakers. Lawmakers have considered a broad range of issues concerning foreign-born workers, from the number of immigrants permitted to enter the United States and the 

criteria for determining who is admitted to the rules governing their employment and myriad questions related to 

undocumented workers.1

 Bills introduced in the 109th 

Congress, for example, would alter the laws governing the 

admission of temporary workers under the H-2A program for agricultural workers and the H-2B program for 

other workers; change the requirements for gaining permanent admission to the United States; and take steps to 

reduce illegal immigration. President George W. Bush has 

called for a new temporary guest worker program that 

would provide temporary legal status to certain foreignborn workers who are working in the United States without authorization.

The United States is known as a nation of immigrants—

a characterization that is more appropriate today than at 

any time since the 1930s. Census Bureau data for 2004 

indicate that 34 million of the nation’s 288 million people—12 percent of the U.S. population—were foreign 

born. That was the highest percentage of foreign-born 

people the Census Bureau had recorded in 70 years.

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 paper 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. 

Foreign-Born Workers

Immigrants are a substantial and growing segment of the 

U.S. labor force. In 2004, more than 21 million workers—one in seven workers in the United States—were 

foreign born, and half had arrived since 1990. Almost 40 

percent of foreign-born workers were from Mexico and 

Central America, and 25 percent were from Asia.2

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 2004, 

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 natives; in particular, a 

higher percentage of those immigrants had taken graduate courses.

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 2004, threequarters 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 

about half those of native-born men; women from Mexico and Central America earned about three-fifths of the 

average weekly earnings of native-born women. 

1. The terms “immigrant” and “foreign born” are used interchangeably throughout this paper.

2. For a general description of the foreign-born population, see 

Congressional Budget Office, A Description of the Immigrant 

Population (November 2004).
2 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

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 difficult to quantify. 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 an earnings reduction of almost 10 percent. The wide 

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. The U.S. economy 

should attract more capital as investors see opportunities 

to increase their returns. Increased investment, in turn, 

will tend to raise workers’ productivity and earnings. 

Ultimately, lower production costs should increase employers’ profits and lower prices for consumers. Even after 

such adjustments occur, however, the earnings of native 

workers whose education and skills are most like those of 

immigrants could be adversely affected by the increased 

competition. Over even longer time periods, some of 

those workers may be motivated to obtain additional 

education to receive the increased labor market payoffs 

associated with greater education.

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.

Foreign-Born Workers

Although immigrant workers can be found in virtually 

every industry and occupation, they are concentrated in 

certain low-skill sectors. This is particularly true of recent 

immigrants from Mexico and Central America. 

This section examines the growth and characteristics of 

the foreign-born workforce and then focuses on their 

labor market outcomes, especially their earnings. Their 

lower earnings reflect, at least in part, the fact that many 

of them have less to offer potential employers than do 

native-born workers. On average, they have fewer years of 

education and experience. Many of them do not speak 

English very well, if at all.3 And, at least initially, they 

may not be familiar with how things are done in the U.S. 

labor market. 

Growth in the Foreign-Born Labor Force

The growth of the economy derives from capital accumulation, productivity increases, and the growth of the labor 

force. During the past decade, foreign-born workers 

accounted for more than half of the growth of the U.S. 

labor force. The number of foreign-born workers increased from 13 million in 1994 to 21 million in 2004 

(see Table 1). 

Foreign-born workers include those who are naturalized 

U.S. citizens, those who are not citizens but are authorized immigrants, and those who are unauthorized immigrants. About 40 percent of foreign-born workers are 

U.S. citizens. Possibly half (6 million to 7 million) of the 

remaining foreign-born workers are unauthorized (see 

Box 1 on page 4). 

In 2004, almost 40 percent of foreign-born workers were 

from Mexico and Central America (see Table 2 on 

page 6). Another 25 percent were from Asia, including 

the Philippines, India, China, Vietnam, and Korea. Most 

of the remaining foreign-born workers had come from 

other parts of the Western Hemisphere and Europe. 

3. In the 2000 census, 25 million of the 31 million foreign-born 

people age 5 and older residing in the United States indicated that 

they spoke a language other than English at home, including 

about 9 million who indicated that they did not speak English 

very well or at all.
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 3

Table 1.

Size and Growth of the U.S. Labor Force Age 16 and Older, by Nativity, 

1994 and 2004

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 1994 and 2004.

Sharp differences exist between the educational attainment of workers from Mexico and Central America and 

that of workers from other parts of the world, as shown in 

Table 2. Workers from Mexico and Central America typically had completed about nine years of education. Workers from other countries had completed an average of 14 

years of education, which was slightly higher than the average educational attainment of native-born workers.4

Those differences are important because the education 

and skills that foreign-born workers bring to the job 

largely determine the impact those workers have on the 

U.S. labor market. 

The differences in educational attainment 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 country. 

For example, the average educational attainment of workers who came from India was 16 years, even though the 

average educational attainment of the adult population in 

India is well below high school level. Many workers from 

India were admitted to the United States because they 

had skills that were in demand.5

Although immigrants work in every part of the country, 

two-thirds of them reside in just six states, where only 

one-third of native-born workers live. The foreign born 

constitute 32 percent of the labor force in California and 

average 21 percent of the labor force in Florida, Illinois, 

New Jersey, New York, and Texas, compared with an average of only 8 percent in the remaining 44 states (see 

Table 3 on page 7). 

During the past decade, the share of workers who are foreign born has been growing in the rest of the country by 

almost as much as it has in the six largest immigrantreceiving states. The share of the labor force that is foreign born increased 4.2 percentage points in those 44 

states, compared with 4.7 percentage points in California 

and 5.6 percentage points in the five other large immigrant-receiving states. 

California and New York are not only major gateways for 

new immigrants but also major sources of foreign-born 

workers for other states. Internal migration has recently 

had a substantial effect on the growth of the foreign-born 

population of states such as Arkansas, Georgia, Nevada, 

and North Carolina. The foreign-born population of 

some of those states also grew significantly as a result of 

direct migration from abroad.6

Over half of all foreign-born workers live in seven consolidated metropolitan areas where only a fifth of native131.1 147.4 16.3 12

118.1 126.0 7.8 7

12.9 21.4 8.5 66

Mexico and Central America 4.6 8.3 3.7 80

Rest of world 8.3 13.1 4.8 58

1994 2004 In Millions Percentage Change

Total

Native Born

Foreign Born

Number (Millions) Growth, 1994 to 2004

4. Average educational attainment is based on an estimate of the 

highest grade of formal school attended and completed for each 

person in the group. Thus, someone who completed 11 years of 

school and later obtained a credential based on passing the General Educational Development tests (GED) would be classified for 

this purpose as having 11 years of education.

5. Information from the Office of Immigration Statistics indicates 

that 40 percent of the immigrants from India who came to the 

United States in fiscal year 2003 were admitted on an employment-based preference, whereas only 3 percent of immigrants 

from Mexico and Central America were admitted on that basis. 

See Department of Homeland Security, Office of Immigration 

Statistics, 2003 Yearbook of Immigration Statistics (September 

2004), pp. 29-32. 

6. Marc J. Perry and Jason P. Schachter, Migration of Natives and the 

Foreign Born: 1995 to 2000, Census 2000 Special Reports (Bureau 

of the Census, August 2003), p. 5, available at www.census.gov/

prod/2003pubs/censr-11.pdf. 
4 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

Box 1.

Measuring the Number of Unauthorized Immigrants

Considerable uncertainty is inherent in estimates of 

the number of unauthorized immigrants that reside 

in the United States and the number that are in the 

labor force. The decennial census, the Current Population Survey (CPS), and similar sources of information about the population and labor force do not ask 

foreign-born people about their legal status in the 

United States aside from whether they are naturalized citizens. Thus, the number of unauthorized immigrants must be estimated by indirect methods that 

introduce the possibility of significant errors. A recent analysis, based on survey data from the CPS and 

administrative data from the Department of Homeland Security and other federal agencies, indicated 

that in early 2004 about 10 million foreign-born 

people were living in the United States without 

authorization and about 6.3 million of them were in 

the labor force. 

Population Estimates

The methodology used in recent estimates of the 

unauthorized foreign-born population subtracts the 

estimated number of legal immigrants from the estimated total number of immigrants. Those two quantities are developed from different data sources and 

estimates of several factors for which definitive information is not available. 

Estimates of the total number of immigrants are usually based on the number of foreign-born people in a 

census or survey. That number is then adjusted upward for the population missed or not covered by the 

survey and adjusted downward for the population 

that is in the United States temporarily, such as foreign students and diplomats. The number of legal 

immigrants is estimated from the number of green 

cards, which confer permanent legal resident status, 

that the government has issued over a period; that 

number is adjusted for emigration and death, for 

which little definitive information is available. Refugee arrivals and asylum approvals are included in the 

legal immigrant population in the year those immigrants arrive or obtain approval, not when they 

obtain green cards.

Two estimates of the unauthorized foreign-born 

population in 2000 illustrate their sensitivity to the 

methods used to produce them. Both estimates were 

significantly larger than earlier estimates because 

they were based on the 2000 census, which counted 

many more immigrants than previous surveys had 

found.1

 The larger estimate of 8.3 million, produced 

by Jeffrey Passel and his colleagues, began with the 

number of foreign-born people who came to the 

United States since 1980 and subtracted the estimated number residing in the United States legally 

in 2000. The smaller estimate of 7.0 million, produced by Robert Warren, began with an estimate of 

the unauthorized immigrant population for 1990 

and updated it using information from the 2000 

census and other sources.

In a more recent estimate, Passel puts the size of the 

unauthorized foreign-born population at 10.3 million in 2004.2 That figure is derived from an estimated foreign-born population of 35.7 million in 

March 2004, from which were subtracted 10.4 million legal permanent residents, 11.3 million naturalized citizens, 1.2 million temporary legal residents,

1. Jeffrey S. Passel, Jennifer Van Hook, and Frank D. Bean, 

Estimates of the Legal and Unauthorized Foreign-Born Population for the United States and Selected States, Based on Census 

2000 (report submitted by the Urban Institute to the Bureau 

of the Census, June 2004); Robert Warren, Estimates of the 

Unauthorized Immigrant Population Residing in the United 

States, 1990 to 2000 (U.S. Immigration and Naturalization 

Service, January 2003), available at http://uscis.gov/

graphics/shared/aboutus/statistics/Ill_Report_1211.pdf

2. Jeffrey S. Passel, “Unauthorized Migrants: Numbers and 

Characteristics” (background briefing prepared for the Task 

Force on Immigration and America’s Future, Pew Hispanic 

Center, June 14, 2005). In this and earlier reports, Passel 

and his coauthors have provided the most comprehensive 

estimates of the unauthorized foreign-born population 

available. 
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 5

Box 1.

Continued

and 2.5 million refugee arrivals.1 Note that between 

1 million and 1.5 million people who have employment authorization documents of other types were 

not subtracted and therefore were included in the 

population of unauthorized immigrants.2

Labor Force Estimates

Far fewer studies have attempted to estimate the 

number of unauthorized immigrants in the labor 

force. Jeffrey Passel provided the most recent estimate.3

 He calculated that about 6.3 million of the 

10.3 unauthorized immigrants in the United States 

in March 2004 were in the labor force. That estimate 

suggests that about 30 percent of all foreign-born 

workers were unauthorized immigrants. 

Passel’s methodology for estimating the number of 

unauthorized immigrants in the labor force is quite 

different from the one he used to estimate the size of 

the unauthorized immigrant population. For his 

labor force estimate, Passel applied a procedure that 

assigns an immigration status to each foreign-born 

individual in the Current Population Survey; the 

assignment of status is based on information about 

individuals available in that survey, as well as other 

information about people who receive various types 

of visas or who are unauthorized. Once the immigration status is designated, it is a straightforward process to tabulate the number of people with a particular immigration status, such as undocumented 

immigrant, and the number with a particular labor 

force status, such as employed or unemployed. 

Most assignments were based on a person’s satisfying 

a particular set of criteria. For example, a person who 

was the spouse or child of a U.S. citizen was assigned 

the status of legal permanent resident. A person from 

a particular country who came to the United States 

during a period of influx of refugees from that country was assigned the status of refugee.

Designating the status of unauthorized immigrant 

was more complex. That status was assigned probabilistically based on an individual’s characteristics, 

including occupation, country of origin, age, and 

sex, and the estimated fraction of people with those 

characteristics who were unauthorized migrants. 

That fraction was estimated using a special survey of 

formerly unauthorized immigrants at the time they 

acquired legal status under the Immigration Reform 

and Control Act of 1986. For example, food service 

and household workers had a high probability of 

being undocumented, whereas judges had a zero 

probability. Any remaining foreign-born people in 

the survey who were not assigned a status through 

any of the tests were assumed to be legal permanent 

residents. 

1. The estimate of 35.7 million for the foreign-born population differs from the estimate of 34 million foreign-born 

people cited in the text because the former figure includes 

adjustments for the foreign-born population in the military 

and living in institutions, as well as an estimate by Passel and 

his colleagues of an undercount of the foreign-born population in the 2000 census.

2. For example, persons with temporary protected status and 

extended voluntary departure status and those who have 

applied for those statuses may account for 3 percent to 4 

percent of the unauthorized immigrant population. Also, 

more than 6 percent of the unauthorized migrant population have applied for green cards but are waiting for them to 

be issued. In total, between 10 percent and 15 percent of 

unauthorized immigrants are known to the Department of 

Homeland Security and have their full legal status pending.

3. Passel, “Unauthorized Migrants: Numbers and Characteristics.” 
6 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

Table 2.

Composition and Educational Attainment of the U.S. Labor Force Age 16 

and Older, by Nativity, 2004

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 2004.

Note: n.a. = not applicable.

147.4 100.0 n.a. 13.5

126.0 85.5 n.a. 13.7

21.4 14.5 100.0 12.2

8.3 5.7 39.0 9.4

6.6 4.5 30.7 9.3

0.7 0.5 3.3 9.2

0.4 0.2 1.7 8.8

0.3 0.2 1.2 9.7

0.4 0.3 2.0 11.5

Belize, other Central America

13.1 8.9 61.0 14.0

5.4 3.7 25.4 14.6

0.9 0.6 4.4 14.6

0.9 0.6 4.0 16.1

0.7 0.5 3.4 14.6

0.6 0.4 2.9 12.8

0.4 0.3 2.0 14.7

1.9 1.3 8.7 14.5

2.8 1.9 13.0 14.4

0.4 0.3 1.8 14.8

0.3 0.2 1.3 15.1

0.3 0.2 1.3 13.9

1.9 1.3 8.6 14.3

2.2 1.5 10.1 12.7

0.6 0.4 2.6 13.0

0.4 0.3 2.1 12.0

0.4 0.3 2.1 13.2

0.4 0.3 1.8 12.5

0.3 0.2 1.5 13.2

1.4 0.9 6.5 13.2

0.3 0.2 1.5 13.3

1.1 0.7 5.0 13.2

1.4 0.9 6.5 13.2

0.3 0.2 1.5 13.3

1.1 0.7 5.0 13.2

1.3 0.9 6.0 13.6

Number

Native born

Foreign born

Mexico

El Salvador

Guatemala

Honduras

Nicaragua, Panama, Costa Rica, 

South America 

Rest of World

Asia

Europe and Canada 

Caribbean

India

China

Vietnam

Korea

Labor Force Age 16 and Older

Mexico and Central America

Average Years

of Education

Completed

Philippines

(Millions)

Percentage of 

Labor Force

Percentage of

Foreign-Born

Labor Force

Other Asia

Canada

England

Poland

Other Europe

Cuba

Dominican Republic

Jamaica

Haiti

Other Caribbean

Colombia

Other South America

Africa

Oceana

Other unspecified

Other Regions
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 7

Table 3.

Geographic Distribution of Native- and Foreign-Born Workers, 1994 and 2004

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 1994 and 2004.

born workers live. Foreign-born workers are most concentrated in Miami, Florida, where 60 percent of the 

workforce is foreign born. In 16 of the 242 metropolitan 

areas throughout the United States, foreign-born workers 

constitute more than 30 percent of the workforce. The 

greatest number of foreign-born workers—more than 3.2 

million—live in California in the Los Angeles/Long 

Beach/Riverside/San Bernardino consolidated metropolitan area, where they represent 16 percent of foreign-born 

workers nationwide. Native-born workers in that area, by 

contrast, represent only 4 percent of the national total of 

native workers. Foreign-born workers are much more 

likely than native-born workers to live in central cities 

(43 percent of foreign-born workers versus 25 percent of 

natives) and much less likely to be in nonmetropolitan 

areas (6 percent versus 23 percent).

What the Foreign Born Bring to the Labor Market

The foreign born have diverse characteristics that are important to the labor market, especially the amount of formal schooling they have completed. Those characteristics 

influence the jobs they seek and the wages they earn.7

Differences in educational attainment—both between 

native-born and foreign-born workers and among the 

foreign-born workers themselves—are striking. Nearly all 

workers age 25 and older who were born in the United 

States have completed at least nine years of education, 

whereas 18 percent of foreign-born workers have completed eight or fewer years (see Table 4). Likewise, about 

6 percent of native-born workers lacked a high school 

diploma or a GED compared with 29 percent of foreignborn workers.8

The high percentage of foreign-born workers without 

a diploma or a GED consists primarily of those from 

Mexico and Central America. Nearly 40 percent of them 

have completed fewer than nine years of education and 

another 20 percent have at least nine years but lack a high 

school diploma. As noted in Table 2, workers from Mexico and Central America have completed an average of 

about nine years of formal schooling compared with an 

average of about 14 years for those from the rest of the 

world and native workers. That five-year disparity is 

far greater than the disparities among major groups of 

native-born workers. For example, the largest difference

Calif. Total Calif. Total

17.6 39.5 90.3 147.4 100.0 100.0 100.0 100.0

11.9 31.3 82.8 126.0 67.7 79.2 91.7 85.5

5.7 8.2 7.5 21.4 32.3 20.8 8.3 14.5

Mexico and Central America 3.0 2.7 2.7 8.3 17.0 6.8 3.0 5.7

Rest of world 2.7 5.5 4.8 13.1 15.3 14.0 5.4 8.9

15.5 34.8 80.7 131.1 100.0 100.0 100.0 100.0

11.2 29.5 77.4 118.1 72.5 84.8 95.8 90.1

4.3 5.3 3.4 12.9 27.5 15.2 4.2 9.9

Mexico and Central America 2.5 1.5 0.6 4.6 16.0 4.3 0.8 3.5

Rest of world 1.8 3.8 2.7 8.3 11.5 10.8 3.4 6.3

Distribution in 1994

N.Y., Fla., 

Distribution in 2004

Tex., N.J., 

and Ill.

Rest of 

Country

N.Y., Fla., 

Tex., N.J., 

Total

Native Born

Foreign Born

Total

Native Born

Foreign Born

Number (Millions) Percentage of the Labor Force

Rest of 

and Ill. Country

7. For a recent analysis of the effect of education on the earnings 

of immigrants, see George J. Borjas and Lawrence F. Katz, 

The Evolution of the Mexican-Born Workforce in the United States, 

Working Paper No. 11281 (Cambridge, Mass.: National Bureau 

of Economic Research, April 2005). 

8. States award high school completion credentials to people who 

have not completed the requirements for a regular high school 

diploma but have passed the General Educational Development 

tests, or GED.
8 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

Table 4.

Educational Attainment of the U.S. Labor Force Age 25 and Older, 

by Nativity, 2004

(Percent)

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 2004.

a. States award high school completion credentials to people who have not completed the requirements for a regular high school diploma 

but have passed the General Educational Development (GED) tests.

between groups of native-born workers classified by race 

and ethnic group is less than three years.

Thus, while immigrants represent only 15 percent of the 

total labor force, they account for over 70 percent of 

workers with no more than an eighth grade education 

and over 25 percent of workers with nine to 12 years of 

education but no high school diploma. Those shares have 

risen over the past decade, because of the influx of workers from Mexico and Central America with little education and because of a decline in the number of nativeborn workers who have not finished high school.

School enrollment rates among young immigrants suggest that those gaps in educational attainment are not 

likely to close in the near future. Among people ages 16 

to 24, those born in Mexico or Central America are less 

than half as likely to be in school as natives or immigrants 

from other parts of the world (see Table 5). Furthermore, 

60 percent of those immigrants from Mexico and Central 

America who are not enrolled in school have not finished 

high school compared with about 20 percent of natives 

and those from other parts of the world.

At the other end of the educational scale, immigrants 

from the rest of the world are much more likely to have 

taken graduate courses or obtained a graduate degree 

than are native-born workers or workers from Mexico 

and Central America (18 percent of immigrants from the 

rest of the world, compared with 11 percent of natives 

and 2 percent of immigrants from Mexico and Central 

America). Again, the marked difference in graduate education between immigrants from the rest of the world 

and those from Mexico and Central America probably 

reflects the difference in the basis for their entry into the 

United States. Workers with graduate education are 

much more likely to qualify for employment-based 

admission than are other workers.9

In addition to educational attainment, other characteristics of immigrants—their age, citizenship, and how long

Total 100 4 6 30 28 21 11

Native Born 100 1 5 31 30 21 11

Foreign Born 100 18 11 25 16 18 12

Mexico and Central America 100 39 20 24 10 5 2

Rest of world 100 5 6 25 20 25 18

Total 100 100 100 100 100 100 100

Native Born 85 28 73 88 91 87 84

Foreign Born 15 72 27 12 9 13 16

Mexico and Central America 6 58 18 4 2 1 1

Rest of world 10 14 9 8 7 12 15

Distribution of Educational Attainment

Share of Educational Attainment Group

All Levels of 

Attainment or Less

 Grade

Degree

9th to 12th 

Grade, No 

Diploma

High School

Diploma 

or GEDa

8th

Bachelor's 

Degree

Graduate 

Courses or 

Graduate 

Degree

Some College 

or an

Associate's 

9. Over 80 percent of those whose admissions were based on an 

employment preference (and whose occupations are known) were 

in executive, managerial, professional, or technical occupations, 

which are generally associated with high levels of educational 

attainment. See Department of Homeland Security, 2003 Yearbook of Immigration Statistics, p. 28.
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 9

Table 5.

Selected Characteristics of the U.S. Population and Labor Force, by Nativity, 2004

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 2004.

Note: n.a. = not applicable.

they have been in the United States, for example—may 

affect their role in the labor market. Workers from Mexico and Central America are about five years younger, on 

average, than native-born workers and workers from 

other parts of the world. However, their potential labor 

market experience (the number of years since completion 

of their schooling) may be about the same as a result of 

their lower level of formal educational attainment.

Workers from Mexico and Central America are less than 

half as likely as workers from other parts of the world to 

be naturalized citizens. Only a small part of that difference reflects the fact that more workers from Mexico and 

Central America have arrived recently. The difference is 

more likely to be a result of the higher share of unauthorized immigrants among people from Mexico and Central America. Their status as unauthorized immigrants is 

likely to reduce their labor market opportunities and produce poorer labor market outcomes. Alternatively, some 

workers born in Mexico and Central America may travel 

back and forth between their country of origin and the 

United States and find it difficult or unnecessary to pursue U.S. citizenship. 

Foreign-born workers who have been in the United States 

for many years are likely to be well established in the U.S. 

labor market. In 2004, about half of foreign-born workers indicated that they came to the United States to stay 

before 1990. A substantial portion of foreign-born workers have lived in the United States since they were children. Those workers are likely to have spent some time in 

the U.S. educational system and their entire working lives 

in the United States. About 20 percent of all foreign-born 

workers came to the United States to stay when they were 

15 years old or younger.

Labor Market Outcomes

The labor market experience of immigrants differs from 

that of natives in three key ways: the likelihood of being 

employed, the type of work they do, and their compensation. Once again, those differences are much greater for 

immigrants from Mexico and Central America than they 

are for immigrants from the rest of the world. 

Labor Force Participation, Employment, and Unemployment. In most age groups, a higher percentage of men 

from Mexico and Central America are in the labor force 

than are native-born men or other male immigrants (see 

Table 6). Despite their lower educational attainment, 

finding work does not appear to be a problem for men 

from Mexico and Central America. Their unemployment 

rate in 2004 (5.6 percent) was, in fact, similar to that of 

native-born men (5.7 percent). Male immigrants from 

the rest of the world had a somewhat higher labor force 

participation rate and a slightly lower unemployment rate 

than did native-born males. 

Three factors may account for the higher participation 

rates of men from Mexico and Central America. First, 

young men who immigrated from that region are much

Total 56 24 13.7 44 54 91 n.a. n.a.

Native Born 58 20 13.9 44 53 100 n.a. n.a.

Foreign Born 44 46 12.3 41 60 43 21 54

Mexico and Central America 25 60 9.3 38 67 25 22 52

Rest of world 62 21 14.1 43 55 53 20 55

at Age 15

 or Younger

Population 

That

 Are Male

Are

 Citizens

Education 

Completed

High School Average 

Age

in School 

or College Graduates

to Stay in U.S.

Percentage of

Not Enrolled 

That Are Not Percentage

Percentage

Before 1990

Ages 16 to 24 Labor Force Age 25 and Older

Percentage

 Enrolled 

Average 

Years of That

Percentage 

That Came

Percentage

That 

Came to 

Stay in U.S. 
10 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

Table 6.

Labor Force Status of the Population Age 16 and Older, 2004

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 2004.

73.3 69.2 5.6 59.2 56.0 5.4

Native Born 72.0 67.9 5.7 60.0 56.9 5.3

Foreign Born 81.0 76.8 5.2 53.8 50.4 6.4

 Mexico and Central America 87.9 83.0 5.6 50.7 46.3 8.6

 Rest of world 76.3 72.6 4.8 55.3 52.4 5.4

63.6 55.5 12.6 58.7 52.3 11.0

Native Born 62.7 54.4 13.3 60.0 53.3 11.2

Foreign Born 70.0 63.9 8.7 47.8 43.7 8.6

 Mexico and Central America 81.1 75.2 7.3 45.2 41.5 8.1

 Rest of world 57.4 51.1 10.9 49.9 45.4 8.9

92.1 86.9 5.7 73.5 69.4 5.6

Native Born 92.0 86.5 6.0 77.0 72.8 5.4

Foreign Born 92.6 88.3 4.7 58.1 54.2 6.8

 Mexico and Central America 95.5 90.5 5.2 50.1 45.3 9.5

 Rest of world 89.5 85.8 4.1 64.4 61.1 5.1

91.9 88.1 4.1 75.7 72.2 4.5

Native Born 91.5 87.8 4.1 77.2 73.9 4.3

Foreign Born 93.7 89.6 4.4 68.2 64.1 6.1

 Mexico and Central America 95.1 91.2 4.2 61.5 56.0 8.9

 Rest of world 92.7 88.5 4.5 72.0 68.6 4.7

87.3 84.0 3.8 76.4 73.6 3.7

Native Born 86.9 83.6 3.7 77.3 74.7 3.4

Foreign Born 90.6 86.4 4.6 70.4 66.3 5.9

 Mexico and Central America 90.2 84.5 6.3 64.2 59.5 7.3

 Rest of world 90.8 87.3 3.8 72.8 68.9 5.4

68.9 66.2 3.9 56.5 54.4 3.7

Native Born 68.1 65.5 3.8 57.3 55.3 3.5

Foreign Born 75.3 71.4 5.2 50.6 47.5 6.0

 Mexico and Central America 75.1 69.4 7.6 39.3 35.9 8.7

 Rest of world 75.4 72.0 4.4 53.8 50.9 5.4

18.8 18.1 3.6 11.1 10.7 3.0

Native Born 18.6 18.0 3.2 11.3 10.9 3.0

Foreign Born 20.3 19.0 6.5 9.5 9.3 2.9

 Mexico and Central America 22.6 20.7 8.3 8.6 8.0 7.7

 Rest of world 19.8 18.6 6.0 9.7 9.5 2.1

Age 65 and Older

Unemployment 

Rate

Male Female

Percentage Percentage

Total

Total

Percentage in

Labor Force

Age 16 and Older

Ages 16 to 24

Ages 25 to 34

Ages 35 to 44

Ages 45 to 54

Ages 55 to 64

Total

Total

Total

Total

Total

Employed

Unemployment 

Rate

Percentage in

Labor Force Employed
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 11

Figure 1.

Employment Status of the Population Ages 25 to 64, by Educational 

Attainment, 2004

(Percentage employed)

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Survey, 2004.

8th Grade or Less 9th to 12th Grade,

No Diploma

High School

Diploma or GED

Some College

or Associate's

Degree

Bachelor's Degree Graduate Courses

or Graduate

Degree

0

10

20

30

40

50

60

70

80

90

100

Males

8th Grade or Less 9th to 12th Grade,

No Diploma

High School

Diploma or GED

Some College

or Associate's

Degree

Bachelor's Degree Graduate Courses

or Graduate

Degree

0

10

20

30

40

50

60

70

80

90

100

Native Born Born in Mexico

or Central America Born in Rest of World

Females
12 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

Table 7.

Occupational Distribution of Workers Ages 25 to 64, by Nativity, 2004

(Percent)

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 2004.

Note: Occupation groups are ordered by the percentage of foreign-born workers employed in them.

less likely to be attending school than are young men 

born in the United States, and out-of-school youth are 

more likely than students to be working or looking for 

work. Second, many native-born men who are not in the 

labor force report in surveys that they are disabled or have 

retired. Foreign-born people who have disabilities that 

prevent them from working may be unlikely to immigrate to, or remain in, the United States. Third, because 

of financial constraints, early retirement is less likely to be 

an option for workers from Mexico and Central America. 

Moreover, those who do retire might choose to return to 

their country of origin.

The overall picture is quite different for foreign-born 

women, especially those from Mexico and Central America. In 2004, the labor force participation rate of women 

from Mexico and Central America was almost 10 percentage points below that of native-born women, and 

their unemployment rate was 3 percentage points higher. 

Some of the difference in labor force participation is 

probably associated with the higher fertility rates of 

women from Mexico and Central America. 

Notably, the employment rates of the foreign born are 

not as closely associated with their educational attainment as are the employment rates of natives. In contrast 

to the case among native-born males, foreign-born males 

with less than a high school education are almost as likely 

to work as those with a bachelor’s degree (see Figure 1 on 

page 11). Among foreign-born females, those with at 

7.1 6.4 11.0 15.6 8.3

6.1 5.6 9.2 17.3 4.4

13.6 14.5 8.9 6.2 10.5

10.4 10.7 8.8 5.7 10.7

3.6 2.8 8.4 15.0 4.5

11.7 12.4 7.5 3.3 10.0

5.9 5.7 6.9 10.0 5.1

3.5 2.9 6.8 9.4 5.2

5.3 5.4 4.8 0.9 7.0

2.9 2.8 3.7 2.5 4.4

3.9 3.9 3.3 4.0 3.0

6.1 6.5 3.3 1.3 4.5

2.5 2.4 3.2 0.3 4.8

4.5 4.8 2.9 0.8 4.1

2.0 1.9 2.5 1.2 3.4

2.2 2.2 2.1 0.3 3.2

0.6 0.4 1.7 3.9 0.3

2.0 2.1 1.4 0.7 1.8

1.1 1.1 1.1 0.1 1.7

2.1 2.3 1.0 0.5 1.2

1.7 1.8 1.0 0.7 1.2

1.3 1.4 0.5 0.2 0.7 ____ ____ ____ ____ ____

Total 100.0 100.0 100.0 100.0 100.0

Rest of 

Mexico 

and 

Central 

Occupation Group America

Production 

Total

Construction and Extraction 

Office and Administrative Support 

Sales and Related 

Building and Grounds Cleaning and Maintenance 

Management 

Transportation and Material Moving 

Food Preparation and Serving Related 

Health Care Practitioner and Technical 

Personal Care and Service 

Installation, Maintenance, and Repair 

Education, Training, and Library 

Computer and Mathematical Science 

Business and Financial Operations 

Health Care Support 

Architecture and Engineering 

Farming, Fishing, and Forestry 

World

Foreign-Born Workers

Legal 

Total

Native-Born 

Workers

Arts, Design, Entertainment, Sports, and Media 

Life, Physical, and Social Science 

Protective Service 

Community and Social Service 
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 13

Table 8.

Distribution of Workers Ages 25 to 64 Across Occupations, by Education Level 

of Occupation, 2004

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 2004.

Notes: The occupations are ordered by the average years of school completed by native workers in the occupation. 

Examples of occupations in which foreign-born workers are concentrated in relatively large numbers: Very Low—agricultural workers, 

dishwashers and cooks, maids, helpers on construction sites, hand packagers; Low—grounds maintenance workers, painters, contruction workers; Middle—food service managers; High—registered nurses, computer programmers, accountants and auditors; Very 

High—college teachers, physicians and surgeons, computer software engineers.

a. Very Low is a component of Low, and Very High is a component of High. The percentages for Low, Middle, and High add to 100.

least a high school diploma are much less likely to work 

than are those with a bachelor’s degree, but the difference 

is smaller than it is for native-born females.

Type of Work. Almost half of all workers from Mexico 

and Central America are in three of 22 occupational 

groups: production; construction and extraction; and 

building and grounds cleaning and maintenance (see 

Table 7). Fewer than one in five native workers and workers from other parts of the world are in those occupations. Immigrant workers from other parts of the world 

have more broadly distributed occupations, although 

they are more likely than either natives or workers from 

Mexico and Central America to be in computer and 

mathematical sciences; life, physical, and social sciences; 

and health care occupations.

Many workers who immigrated from Mexico and Central 

America are employed in occupations that require little 

formal education. When occupations are ranked according to the average educational level of native workers in 

those occupations, three-quarters of workers from Mexico and Central America—but only one-quarter of native 

workers—are in the relatively low-education occupations 

(see Table 8). Workers from Mexico and Central America 

fill large proportions of low-education jobs on construction sites and at restaurants, but very few are in the higheducation occupations. 

11.8 12.2 13.8 16.2 16.9

Workers Across Occupations in the Group 10.5 to 12.0 10.5 to 12.7 12.7 to 15.0 15.0 to 18.0 16.0 to 18.0

6.7 25.9 47.9 26.2 12.8

Mexico and Central America 33.9 74.5 21.6 3.9 1.9

Rest of world 9.8 31.8 40.3 26.2 13.5

8.3 34.6 41.9 23.5 11.3

Mexico and Central America 30.1 80.1 17.2 2.6 1.3

Rest of world 9.5 34.9 37.3 27.8 14.4

4.9 16.2 54.6 29.1 14.5

Mexico and Central America 42.0 62.4 30.9 6.8 3.2

Rest of world 10.1 27.9 44.1 27.9 12.4

Education Level of the Occupation Group

Very Lowa Low Middle High Very Higha

Native Born

Foreign Born

Native Born

Average for Native-Born Workers in the Group

Range of the Averages for Native-Born 

Foreign Born

Native Born

Foreign Born

Female

Years of Education

Percentage of Workers Employed in the Occupation Group

Both Sexes

Male
14 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

Table 9.

Distribution of Workers Ages 25 to 64 Across Major Industry Groups and 

Selected Subgroups, by Nativity, 2004

(Percent)

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 2004.

a. Percentages in the major industry groups sum to 100.

For workers from the remaining regions of the world, 

their distribution across occupations ranked by educational attainment is much like that of native workers 

except that they are somewhat less likely to be in the middle group of occupations. That pattern appears to reflect 

their educational distribution. Nevertheless, half of the 

workers from other parts of the world are in occupations 

where only about one-quarter of native workers are 

found. They are concentrated in some occupations that 

require little formal education, such as taxi drivers, and in 

certain other occupations that require very high levels of 

education, such as college teachers.

Workers from Mexico and Central America are also 

heavily concentrated in certain industries (see Table 9). In 

2004, about half of those workers ages 25 to 64 were employed in just eight sectors: construction (18 percent); 

restaurants (9 percent); landscaping (5 percent); agriculture (4 percent); food manufacturing (4 percent); services 

to buildings and dwellings (3 percent); textile, apparel, 

Agriculture 1.3 1.2 1.8 4.2 0.4

Forestry, Logging, Fishing, Hunting 0.2 0.2 0.1 0.1 0.1

Mining 0.4 0.5 0.2 0.2 0.2

Construction 7.9 7.5 10.1 17.8 5.5

Manufacturing 12.9 12.5 14.8 17.9 12.9

Computer and electronic products 1.3 1.1 2.1 0.9 2.8

Furniture and fixtures manufacturing 0.5 0.5 0.6 1.1 0.4

Food manufacturing 1.2 1.0 2.2 4.2 1.0

Textile, apparel, and leather manufacturing 0.7 0.6 1.5 2.2 1.1

Wholesale Trade 3.5 3.5 3.3 3.6 3.2

Retail Trade 10.1 10.1 9.9 8.1 11.0

Transportation and Utilities 5.5 5.6 4.7 3.7 5.3

Information 2.6 2.8 1.5 0.6 2.1

Financial Activities 7.4 7.8 5.5 2.8 7.1

Professional and Business Services 10.5 10.3 11.7 11.8 11.7

Administrative and support services 3.7 3.3 6.1 9.7 4.0

0.9 0.7 2.1 3.4 1.3

0.8 0.5 2.0 4.5 0.4

Education and Health Services 21.6 22.5 16.6 8.0 21.7

Leisure and Hospitality 6.3 5.4 10.9 13.1 9.6

Accommodations 1.0 0.8 2.3 2.5 2.1

Food services and drinking places 3.6 3.0 7.3 9.4 6.1

Other Services 4.8 4.5 6.8 7.3 6.5

Personal and laundry services 1.5 1.3 2.4 1.7 2.9

Private households 0.5 0.3 1.5 2.4 0.9

Public Administration 5.1 5.7 2.1 0.8 2.8 ____ ____ ____ ____ ____

Totala 100.0 100.0 100.0 100.0 100.0

Landscaping services

Major Industry Groups and Selected Subgroups Total Workers Total

Services to buildings and dwellings

Native-Born Rest of 

World

Foreign-Born Workers

Mexico 

and 

Central 

America
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 15

and leather manufacturing (2 percent); and private 

households (2 percent). Only about 15 percent of workers born in the United States and other parts of the world 

were employed in those industries. Workers who immigrated from other regions of the world were more broadly 

distributed across industries, just as they were across 

occupations. 

Earnings. Foreign-born workers earn less than native 

workers, with lower educational attainment accounting 

for a major part of the difference. In 2004, the average 

weekly earnings of foreign-born men working full time 

were 78 percent of those of their native counterparts 

($745 versus $959); the average weekly earnings of 

foreign-born women were 87 percent of those of nativeborn women ($625 versus $717). (See Table 10.) 

Those differences can be directly linked to the lower earnings of workers from Mexico and Central America. The 

average earnings of men from Mexico and Central America were about half of those of native men, while the earnings of men from the rest of the world were virtually the 

same as those of native men. Likewise, the average earnings of women from Mexico and Central America were 

about 60 percent of those of native women, while those 

of other female immigrants were similar to those of native 

women.

In turn, much of the difference in the earnings of workers 

from Mexico and Central America can be linked to their 

lower educational attainment. For example, note in the 

lower section of Table 10 that the average earnings of 

men from Mexico and Central America within each educational category are at least 70 percent of those of native 

men with similar educational attainment.10 The overall 

average of 54 percent is much lower than any of its components because those immigrants are disproportionately 

in the lower educational categories. Had full-time male 

workers from Mexico and Central America had the same 

educational distribution as natives, they would have 

earned 29 percent less than native men, rather than 46 

percent less (see Table 11). Moreover, if they had also had 

as many potential years of experience as native men 

(based on their age and education), they would have 

earned 27 percent less than native men.11 Similar findings were estimated for women. 

For full-time workers from other parts of the world, in 

contrast, accounting for education increases the earnings 

difference because those workers have somewhat higher 

levels of educational attainment than natives do. Adjusting for educational attainment, foreign-born men from 

the rest of the world earn 11 percent less than their native 

counterparts, but overall, they earn only 3 percent less 

because they have somewhat more education. Accounting 

for potential years of labor market experience has very little effect on the calculated wage differences because those 

foreign-born workers are about the same age as native 

workers. For women from other parts of the world, 

adjusting for their slightly higher educational attainment 

creates a small earnings gap. 

That statistical analysis, however, has several limitations. 

In particular, the measures of educational attainment and 

labor market experience are imperfect. About one in five 

foreign-born workers came to the United States at an age 

when they were young enough to have attended U.S. 

schools.12 The others, however, were either educated in 

their country of origin or received some education in the 

United States when they were older. In either case, the 

education that foreign-born workers receive may have a 

smaller effect on their earnings in U.S. labor markets 

than a U.S. education has for native workers.13

As in the case of education, labor market experience in an 

immigrant’s country of origin is likely to be less valuable 

to U.S. employers than labor market experience in the 

United States; experience in the country of origin, moreover, may not be measured accurately. Some research 

suggests that labor market experience in an immigrant’s

10. The specific comparisons reported in Tables 10 and 11 are with 

natives whose parents are also natives—that is, natives who are at 

least second-generation Americans. That was done because the 

next section of this paper compares the earnings of foreign-born 

workers with the earnings of workers from the second generation.

11. Although no direct measure of labor market experience is available, the years of potential labor market experience can be calculated. For example, assuming a high school student typically 

graduates at age 17, a 25-year-old high school graduate has a 

potential of eight years of labor market experience. That approximation is less accurate for women as a measure of actual experience because they are more likely to have spent time outside of the 

paid labor force.

12. Sherrie A. Koussoudji, “Immigrant Worker Assimilation: Is It a 

Labor Market Phenomenon?” Journal of Human Resources, vol. 24, 

no. 3 (1989).

13. Rachel M. Friedberg, “You Can’t Take It with You? Immigrant 

Assimilation and the Portability of Human Capital,” Journal of 

Labor Economics, University of Chicago, vol. 18, no. 2 (2000).
16 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

Table 10.

Average Weekly Earnings of Full-Time Workers Ages 25 to 64, 

by Educational Attainment, 2004

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 2004.

Note: * = 2 percent or less of the nativity group had attained this level of education, and the standard error of the estimated percentage is 

greater than 5 percentage points.

a. States award high school completion credentials to people who have not completed the requirements for a regular high school diploma 

but have passed the General Educational Development (GED) tests.

b. Those with one parent from Mexico or Central America and one from another part of the world are classified as having a parent from 

Mexico or Central America.

922 459 554 728 858 1,194 1,480

959 545 583 749 871 1,217 1,496

955 548 586 749 869 1,219 1,491

758 518 524 634 801 1,032 1,692

Central Americab

1,091 * 568 799 938 1,216 1,539

745 437 498 600 735 1,039 1,416

511 427 488 539 638 862 *

930 500 526 650 774 1,060 1,439

705 340 391 542 641 894 1,105

717 361 400 549 642 902 1,109

712 360 402 549 640 896 1,105

637 342 344 515 631 1,004 1,028

Central Americab

824 412 426 581 686 959 1,164

625 334 363 484 623 844 1,079

421 322 338 444 547 722 *

711 368 401 501 643 859 1,103

54 78 83 72 73 71 *

79 95 89 85 92 85 113

97 91 90 87 89 87 97

114 * 97 107 108 100 103

59 89 84 81 85 81 *

89 95 86 94 99 112 93

100 102 100 91 100 96 100

116 114 106 106 107 107 105

Total

Average Weekly Earnings (Dollars)

All Levels of 

Attainment

Courses or 

Females

Native Born

Foreign Born

Native Born

Foreign Born

Parents from rest of world

Parents native

Parent from Mexico or 

Parent from Mexico or Central Americab

Born in Rest of World

Parents from Rest of World

Born in Mexico or Central America

Parent from Mexico or Central Americab

Born in Rest of World

Parents from Rest of World

Males

Females

Total

Mexico and Central America

Rest of world

Parents native

Parent from Mexico or 

8th

Grade

9th to 12th 

Grade, No 

High School

Diploma 

Some College

or Associate's Bachelor's 

Graduate 

Graduate 

Degree

Parents from rest of world

Diploma or GED Degree Degree a or Less

Mexico and Central America

Rest of world

Males

Born in Mexico or Central America

Average Weekly Earnings of Workers as a Percentage of the 

Average Earnings of Native Workers with Native Parents
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 17

Table 11.

Differences in Average Weekly Earnings Between Foreign- and Native-Born 

Full-Time Workers Ages 25 to 64, Adjusted for Educational Attainment and 

Experience, 2004

(Percentage difference from native workers with native parents)

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 2004.

Note: Average weekly earnings adjusted for educational attainment uses the average earnings within educational levels for the group but 

shifts the percentage in the educational level to the percentage for native workers with native parents. Educational attainment is based 

on six categories of education ranging from an eighth grade education or less to graduate education, as shown in Table 10. A similar 

procedure is used for the adjustment for experience. A person's experience is his or her age minus the normal age of labor market 

entry corresponding to the person's educational attainment. The age of labor market entry ranges from 16 years to 25 years across the 

range of education levels.

a. Those with one parent from Mexico or Central America and one from another part of the world are classified as having a parent from 

Mexico or Central America.

country of origin has very little impact on earnings in the 

destination country.14

The length of time that immigrants have been in the 

United States also influences their earnings. Foreign-born 

workers who came to the United States many years ago 

generally earn more than those who arrived more 

recently. For example, among males employed full time, 

those from Mexico and Central America who came between 2000 and 2004 earned about $420 per week compared with $610 for those who arrived in 1983 or earlier 

(see Figure 2). 

That pattern can be interpreted in several different 

ways.15 First, it may indicate the speed with which immigrants assimilate into the U.S. economy. Assimilation can 

include learning how to negotiate the U.S. labor market 

or gaining experience or skills that are particularly imporUnadjusted

Mexico and Central America -46 -29 -27 -41 -22 -21

from Mexico or Central 

Americaa -21 -8 -5 -11 0 2

Rest of World -3 -11 -10 0 -3 -3

from Rest of World 14 4 6 16 7 8

Educational 

Attainment 

Foreign-Born Workers from 

Native Workers with a Parent 

Foreign-Born Workers from 

Native Workers with Parents 

Unadjusted

Adjusted for 

Educational 

Attainment

Adjusted for 

Educational 

Attainment 

and and 

Experience

Males Females

Experience

Adjusted for 

Educational 

Attainment

Adjusted for 

14. Friedberg, “You Can’t Take It with You?”

15. Potentially some of the difference in their weekly earnings might 

be due to the fact that recent immigrants are much younger, on 

average, than those who came earlier. Older workers usually have 

more labor market experience, which is generally associated with 

higher earnings. In this group, however, such an association is not 

evident. For example, recent arrivals ages 25 to 34 earned about 

the same, on average, as recent arrivals who were older, perhaps 

indicating that labor market experience in their home country was 

not rewarded in the U.S. labor market.
18 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

Figure 2.

Average Weekly Earnings of Full-Time, Foreign-Born Workers Ages 25 to 64 

in 2004, by the Year They Came to the United States to Stay

(Dollars per week)

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Survey, 2004.

tant in the United States, such as the ability to speak 

English.16

Second, it may be an indication of selective emigration—

that is, those with poor labor market experiences in the 

United States may be more likely to return to their country of origin than those with better labor market experiences.17

Third, it may indicate that more-recent arrivals typically 

have fewer labor market skills that those who arrived previously, even within education and age groups. A 2005 

study found that the earnings gap between recent immigrants from Mexico and native workers is increasingly 

due to the lower educational attainment of workers born 

in Mexico.18

The rate of assimilation might be dependent on a 

foreign-born worker’s level of education. Some research 

finds that although the occupational gap between HisMales from Mexico

or Central America

Males from Rest

of World

Females from Mexico

or Central America

Females from Rest

of World

0

200

400

600

800

1,000

1,200

2000-2004 

1994-1999 

1984-1993 

1983 or Earlier 

16. Research indicates that English-language skill has a strong effect 

on earnings, with most of that effect associated with its impact on 

educational attainment. See Hoyt Bleakley and Aimee Chin, 

“Language Skills and Earnings: Evidence from Childhood Immigrants,” Review of Economics and Statistics, vol. 86, no. 2 (2004), 

pp. 481-496. See also Sherrie A. Kossoudji, “English Language 

Ability and the Labor Market Opportunities of Hispanic and East 

Asian Immigrant Men,” Journal of Labor Economics, University of 

Chicago, vol. 6, no. 2 (1988). The latter study finds that, at all 

levels of education, the economic cost of English-language deficiency is generally larger for Hispanic men than for Asian men.

17. Darren Lubotsky, Chutes or Ladders? A Longitudinal Analysis of 

Immigrant Earnings, Developmental Studies Paper 195 (Princeton, N.J.: Princeton University, Woodrow Wilson School of Public and International Affairs, August 2000). Lubotsky finds that 

immigrants’ earnings grow 10 percent to 13 percent during their 

first 20 years in the United States relative to the earnings of natives 

with similar labor market experience. That is substantially less 

than the narrowing earnings gap observed for a particular cohort 

of immigrants from one decennial census to another. He suggests 

that emigration may account for the difference because he tracks 

the same group of individuals over time whereas the Census 

Bureau includes workers who later emigrate.

18. George J. Borjas and Lawrence F. Katz, The Evolution of the 

Mexican-Born Workforce in the United States, Working Paper 

No. 11281 (Cambridge, Mass.: National Bureau of Economic 

Research, April 2005).
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 19

Table 12.

Selected Characteristics of Workers Ages 25 to 64, by Nativity and Parents’ 

Nativity, 2004

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 2004.

a. Those with one parent from Mexico or Central America and one from another part of the world are classified as having a parent from 

Mexico or Central America.

panic immigrants, non-Hispanic immigrants, and U.S.-

born Hispanics narrows with the length of time spent in 

the United States, immigrants from Mexico with low levels of education start in low-status occupations, and their 

occupational status does not converge over time with that 

of non-Hispanic foreign-born workers or U.S.-born 

Hispanics.19

The Next Generation

Although foreign-born (first generation) workers are 

likely to earn substantially less than native workers during 

their working lives, the evidence suggests that the earnings gap is much smaller for their children (second generation), in large part due to their additional years of education, as well as to increases in earnings within educational 

groups. For example, adjusting for educational attainment and potential labor market experience, native-born 

men who had at least one parent from Mexico or Central 

America earned 5 percent less than other native-born 

men, while men from Mexico and Central America 

earned 27 percent less (see Table 11 on page 17). The educational attainment of U.S.-born male children of immigrants from Mexico and Central America averaged 

12.8 years of schooling compared with 9.2 years for male 

workers who were born in Mexico or Central America—a 

substantial improvement but still less than the 13.9 years 

of education that native-born men with native parents 

have received (see Table 12).

The Impact of Foreign-Born Workers 

on the U.S. Labor Market

Immigrants—especially immigrants with limited education—are often thought to be competing with certain 

native-born workers for low-skill jobs, thereby contributing to the widening earnings gap between high school 

dropouts and other workers. But some argue that many 

of those immigrants take jobs that would otherwise not 

exist or that complement the jobs of native workers, 

thereby increasing employment opportunities for natives. 

This section presents an analytic framework for considering how immigration can affect domestic labor markets 

and provides a critical review of the pertinent empirical 

literature. 

61,677 13.6 42 23 53,146 13.9 43 23

47,607 13.9 43 23 43,097 14.1 43 23

Central America 4,400 9.2 38 20 2,054 9.9 39 22

Mexico or Central Americaa 843 12.8 37 19 701 13.0 38 19

6,094 14.2 42 22 4,884 14.0 42 22

Rest of World 2,733 14.8 42 22 2,411 14.8 42 22

(ThouForeign Born from Mexico or 

Native with a Parent Born in 

Foreign Born from Rest of World

Native with Parents Born in 

Number 

sands)

Number 

Completed

Average 

Age

Market

 Experience

Average 

Years of 

Potential 

Labor 

Average Average 

Years of 

Education 

Years of 

Education 

Completed

Market

 Experience

(Thousands)

Male Female

All Workers

Native with Native Parents

Average 

Age

Average 

Years of 

Potential 

Labor 

19. Maude Toussaint-Comeau, The Occupational Assimilation of Hispanics in the U.S.: Evidence from Panel Data, Working Paper 2004-

15 ( Federal Reserve Bank of Chicago, 2004).
20 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

Analytic Framework

Foreign-born workers, who accounted for about 15 percent of all workers in 2004 and more than half of the 

growth of the workforce during the previous decade, hold 

a disproportionately large share of jobs that require very 

little education. Over one-third of all dishwashers, janitors, maids, and cooks are foreign born.

How would those jobs have been filled in the absence of 

the new immigrants? Presumably, some of those jobs 

would have been filled by other workers; in that case, 

employers might have been required to pay higher wages 

or to find other ways of making the jobs more attractive. 

Some jobs might not have been filled at all if employers 

were not ready to pay the required compensation; in that 

case, the goods and services would not have been produced. In other cases, employers might have changed the 

way that they produced those goods and services—for 

example, by automating or changing the mix of needed 

skills to better reflect those of the available labor pool.

Without new immigrant workers, some goods once produced in the United States might have been obtained 

through international trade. In the U.S. textile and 

apparel industry, for instance, one-third of the workers in 

2004 were immigrants. In the absence of those foreignborn workers, the shift to trade-based sources might have 

been more rapid. Yet many immigrants, especially those 

with very low levels of education, were doing work—for 

example, washing dishes or cleaning hotel rooms—that 

cannot be done in another country. If the work they did 

was to be done at all, it had to be performed in the 

United States.

A simple supply-and-demand framework is useful for 

considering the potential effect of immigrants on employment opportunities for workers already in the United 

States. Suppose, for example, that one is trying to estimate the impact of a large number of immigrants with 

limited education on the wages and employment opportunities of U.S.-born high school dropouts. The initial 

effect is that the supply of unskilled labor increases. As a 

consequence, employers may be able to attract a sufficient 

number of workers without offering as high a wage as 

they would otherwise. The arrival of the immigrants 

leaves workers already in that market worse off because 

the jobs available to them pay less than they would have 

in the absence of the new workers. The affected workers 

can either work at the lower wage, search for a better job, 

or withdraw from the market. As costs of production are 

reduced, two outcomes are possible: the profits of employers increase and the prices that consumers pay for the 

products decrease. Either or both of these results may 

occur. 

But that initial impact is likely to generate secondary 

changes in the supply of, and the demand for, labor as 

people adjust to the new situation. Those secondary 

changes, some perhaps occurring immediately and others 

developing over time, can mitigate the initial impact. On 

the supply side, for example, students who would face 

increased competition from immigrants if they dropped 

out of school might have an incentive to stay in school 

longer or find other ways to acquire skills that would better distinguish them from the immigrants. The consequent reduction in the supply of native high school dropouts would tend to raise wages in that market. At the 

same time, wages would also increase for workers who 

acquired the additional skills needed to lift themselves 

into a different, higher-wage market.

Likewise, the additional immigrants may induce greater 

demand because their presence either generates more demand for the product or attracts more capital. For example, the demand for labor might increase because the new 

immigrants purchase goods and services in that market or 

because new firms are attracted to the market by the 

availability of the additional workers.

The increase in the supply of one category of labor could 

affect demand or supply in other categories as well. The 

increased availability of registered nurses from abroad, for 

example, may make it more feasible for a hospital to 

expand its capacity, thereby increasing the demand for 

other hospital workers. Likewise, an expansion in the 

number of foreign-born child care workers could increase 

the number of native-born mothers of young children 

willing and able to work outside the home.

Although the supply-and-demand analytical framework is 

useful for identifying ways in which a labor market can 

adjust to an influx of immigrants, it does not, by itself, 

quantify those adjustments. Whether the presence of 

additional immigrants induces adjustments that ultimately result in higher or lower wages for different groups 

of workers is an empirical question. (See Box 2 for a discussion of how the growing presence of immigrants who 

earn below-average wages in itself lowers the growth in 

overall earnings.)
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 21

Box 2.

How an Increase in Foreign-Born Workers Can Affect Average 

Earnings Growth

Although the impact of an influx of foreign-born 

workers on the earnings of native-born workers is 

difficult to quantify, the presence of an increasing 

number of immigrant workers clearly reduces overall 

earnings growth. This occurs simply because foreignborn workers earn less than native workers, and that 

difference lowers the average earnings of the U.S. 

workforce as a whole.

Because a substantial share of foreign-born workers 

have not graduated from high school, their increased 

presence can also distort comparisons of trends in 

earnings by educational attainment. Thus, commonly cited statistics on earnings growth can be 

misleading if used as indicators of progress during a 

period in which an increasing share of the workforce 

is foreign born. 

The growth in the average weekly earnings of men 

ages 25 to 64 working full-time during the past decade illustrates this point (see table below). Differences by educational attainment in the earnings 

growth of the entire group—that is, foreign- plus 

native-born men—follow a familiar pattern: the average earnings of men who had not graduated from 

high school rose by only about 2 percent, while that 

of college graduates increased by about 12 percent. 

However, the growth in the average earnings of native-born men within each educational category exceeded the growth in earnings for the corresponding 

foreign- plus native-born category. The earnings of 

native-born men (shown in the lower panel of the table) grew by about 2 percentage points more than 

the earnings of natives plus immigrants. Moreover, 

the differences in earnings growth between educational groups were much smaller for native-born 

men than for foreign- plus native-born men.

Average Weekly Earnings of Foreign- and Native-Born Men,

by Educational Attainment, 1994 to 2004

Source: Congressional Budget Office based on the Bureau of the Census, Current Population Surveys, 1994 and 2004.

Note: Data are for full-time workers ages 25 to 64.

6,340 515 2.3

17,690 730 4.3

15,035 860 6.2

19,240 1,290 11.9 ______ ____ ____

58,300 920 10.1

3,160 575 5.4

15,265 750 5.8

13,590 870 6.8

16,315 1,310 12.4 ______ ____ ____

48,330 960 12.0

Earnings

(Dollars)

No Diploma

Bachelor's Degree

Total

No Diploma

Employed

(Thousands)

High School Diploma

Some College

2004

Number Average Weekly 

1994 to 2004

Real Earnings

Growth

(Percentage Change)

Foreign- and Native-Born Men

Native-Born Men

High School Diploma

Some College

Bachelor's Degree

Total
22 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

A Review of the Empirical Literature

A large number of studies have attempted to estimate the 

effects of immigration on native workers, but their conclusions reveal little consensus. The main challenge facing 

researchers has been to isolate the changes in labor market 

outcomes for native workers that are caused by the presence of foreign-born workers from the changes that 

would have occurred anyway. Unable to rerun economic 

history without immigration, researchers have used statistical techniques to try to isolate those effects. In doing so, 

most researchers have used one of two approaches: the 

area approach or the nationwide approach. 

The Area Approach. Most of the studies have focused on 

areas where a large increase in the number of immigrants 

has occurred. That approach is based on the assumption 

that any initial adverse effects on native workers are most 

likely to show up in locations with particularly large inflows or concentrations of immigrants. The studies compare the experiences of native workers in areas with substantial increases in immigration with the experiences of 

native workers in areas that did not have such increases. 

The differences in those experiences, after statistically 

controlling for other factors, are then attributed to immigration. 

A review of those studies in the mid-1990s, conducted as 

part of an examination of immigration by the National 

Research Council, found that the studies “show only a 

weak relationship between native wages and the number 

of immigrants in a city or state. Furthermore, in these 

studies the numerically weak relationship between native 

wages and immigration is observed across all types of native workers, skilled and unskilled, male and female, minority and nonminority. The one group that appears to 

suffer substantially from new waves of immigration are 

immigrants from earlier waves, for whom the recent immigrants are close substitutes in the labor market.”20

One frequently cited study based on the area approach is 

an analysis of the labor market in Miami after the sudden 

arrival of a large number of Cuban immigrants—the 

Mariel immigrants—in 1980. The author of the study, 

David Card, estimated that the influx of immigrants had 

virtually no effect on the wages of workers already in that 

labor market, even though it increased the size of the 

Miami labor force by 7 percent in less than one year.21

He attributed the ability of the Miami labor market to 

adjust to such a large influx of new immigrants to two 

characteristics of that market. First, because of previous 

waves of immigration, Miami already had a large number 

of employers (especially apparel and textile firms) that 

were able to expand their operations to absorb the new 

immigrants. Second, the arrival of the new immigrants 

might have dissuaded other workers from moving to 

Miami, which was already a popular destination for people from other countries and other parts of the United 

States.22

More recent studies based on differences across a large 

number of local labor markets have continued to find little, if any, adverse effect on native workers. For example, 

based on his analysis of data from the 2000 census for 

about 300 metropolitan areas, David Card concluded, 

“Although immigration has a strong effect on relative 

supplies of different skill groups, local labor market outcomes of low skilled natives are not much affected by 

these relative supply shocks.”23

Researchers disagree about how to interpret the results 

from studies based on differences in labor market outcomes across locations. Taken at face value, the results 

suggest that the addition of large numbers of foreignborn workers to a labor market has little or no impact on

20. James P. Smith and Barry Edmonston, eds., The New Americans: 

Economic, Demographic, and Fiscal Effects of Immigration (Washington, D.C.: National Academy Press, 1997), p. 6. A recent statistical analysis of about 350 estimates of immigration’s impact on 

wages, drawn from studies conducted in the United States, 

Europe, Israel, and Australia, also found that most of the estimated impacts were small. Over two-thirds of the estimates were 

based on the area approach. See Simonetta Longhi, Peter 

Nijkamp, and Jacques Poot, “A Meta-Analytic Assessment of the 

Effect of Immigration on Wages,” Journal of Economic Surveys, vol. 

19, no. 3 (2005), pp. 451-477.

21. David Card, “The Impact of the Mariel Boatlift on the Miami 

Labor Market,” Industrial and Labor Relations Review, vol. 43, no. 

2 (1990), pp. 245-257.

22. A recent analysis of production processes in Miami suggests a 

third explanation: firms there might have slowed their introduction of labor-saving machinery in response to the influx of a large 

number of unskilled workers. See Ethan Lewis, How Did the 

Miami Labor Market Absorb the Mariel Immigrants? Working 

Paper 04-3 (Federal Reserve Bank of Philadelphia, 2004).

23. David Card, Is the New Immigration Really So Bad? Working Paper 

No. 11547 (Cambridge, Mass.: National Bureau of Economic 

Research, August 2005), p. 24. 
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 23

the earnings of workers already there.24 But critics of that 

approach point out that the location decisions of foreignborn workers are likely to be influenced by potential 

wages. Thus, the failure to find a significant effect may 

simply mean that immigrants tend to move to places 

where the job opportunities are best. Had the foreignborn workers not arrived, the workers already present 

might have gained more from the strong labor market.

Moreover, an influx of foreign-born workers could trigger 

the movement of employers to that location and the 

movement of other workers out of it. To the extent that 

employers or workers adjust their location decisions in 

ways that offset the otherwise adverse impact of immigration, the effects will be diffused. 

The considerable mobility of the population provides 

support for such potential adjustments. For example, data 

from the 2000 census indicate that about 8 percent of the 

respondents were living in a different state than they had 

been five years earlier, and 10 percent were living in a different county within the same state. Moreover, 18 percent 

of the foreign-born population had been living outside 

the United States five years earlier.25 To the extent that 

the decisions of those movers were influenced by the 

availability of job opportunities and the wages associated 

with those jobs, the estimated impacts on earnings of an 

increased number of immigrants in specific locations 

could have understated the overall effects. The actual 

impact of labor market conditions on the migration decisions of foreign- and native-born workers, however, 

remains uncertain.

The Nationwide Approach. To overcome potential problems associated with estimating movements across areas, 

other studies have been based on nationwide variations in 

the number of immigrants over time. Those studies have 

used national data to examine changes in the earnings of 

different groups of native workers—categorized by educational attainment, work experience, or occupation—that 

are associated with changes in the number of immigrants 

with similar characteristics. That approach is based on 

the idea that the adverse effects of an influx of immigrants are most likely to show up among the workers 

whose employment-related characteristics are most similar to those of the immigrants. By using nationwide data, 

the approach does not miss effects from geographic 

adjustments by workers and employers. If, for example, 

the movement of Mexican high school dropouts into San 

Diego caused native high school dropouts to move to 

another U.S. city, national data could capture impacts 

that would be missed by looking only at data for San 

Diego.

A widely cited study by George Borjas illustrates this approach.26 The author used data that the Census Bureau 

collected in its decennial census from 1960 through 2000 

to classify male workers ages 18 to 64 by skill group. Having observed that employers are more likely to view workers with the same level of education as substitutes for one 

another if they have similar amounts of experience, Borjas defined a skill group in terms of both educational 

attainment and potential labor market experience, rather 

than educational attainment alone. Borjas found substantial variation in immigrants’ share of employment in 

those education-experience categories over the 1960-

2000 period. Those findings enabled him to estimate 

impacts on the average weekly earnings of 32 groups of 

men, from high school dropouts with less than six years 

of potential work experience to college graduates with 

over 35 years of experience.

That study estimated that a 10 percent increase in the 

number of workers in an education-experience category 

would reduce the average weekly earnings of men in that 

group by about 4 percent before secondary adjustments 

in capital formation or investments in skills by workers 

are made. Using a simulation of the impact of large numbers of immigrants analogous to the change in the number of foreign-born male workers between 1980 and 

2000, Borjas calculated that the average weekly earnings 

of native-born men as a group would be reduced by 

3 percent to 4 percent, with high school dropouts experiencing the largest adverse impact. He estimated that their 

24. At least in the short run, an influx of foreign-born workers can 

increase the rental prices of local housing, thereby reducing the 

purchasing power of local workers who rent, even if their nominal 

wages are not affected. See Albert Saiz, “Room in the Kitchen for 

the Melting Pot: Immigration and Rental Prices,” Review of Economics and Statistics, vol. 85, no. 3 (2003), pp. 502-521.

25. Marc J. Perry and Jason P. Schachter, Migration of Natives and the 

Foreign Born: 1995 to 2000, Census 2000 Special Reports (Bureau 

of the Census, August 2003), p. 3, available at www.census.gov/

prod/2003pubs/censr-11.pdf.

26. George J. Borjas, “The Labor Demand Curve Is Downward 

Sloping: Reexamining the Impact of Immigration on the Labor 

Market,” Quarterly Journal of Economics, vol. 18, no. 4 (2003), 

pp. 1335-1374.
24 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

earnings would be about 9 percent lower than they would 

be in the absence of increased competition from foreignborn workers.27

Although the use of national data should overcome the 

main problems with the area approach, the nationwide 

approach also has limitations. In particular, it does not 

account for the secondary adjustments that are likely to 

be made. As a result, it overstates the long-run impact of 

immigration on native workers’ earnings if the presence 

of foreign-born workers stimulates the demand for workers—by attracting more capital, for example—or leads 

natives to acquire more education. Both adjustments to 

the presence of more foreign-born workers are likely to 

occur.

Borjas himself noted the potential importance of such 

adjustments in a recent paper that estimated the long-run 

impact of immigration on the earnings of native workers 

if the nation’s capital stock increased by enough to keep 

the returns on capital constant. If complete adjustment of 

the capital stock occurred, Borjas found, there would be 

no long-run impact on the average weekly earnings of 

native men overall. In that situation, some groups would 

gain and other groups would lose; the workers most likely 

to lose would be those whose education and experience 

most closely resembled those of the new immigrants. In 

particular, Borjas estimated that the earnings of men 

without a high school diploma would be reduced by the 

influx of immigrants, although that long-run impact 

(-4 percent) was about half the size of the short-term 

impact.28 Whether the nation’s capital stock would adjust 

to the expansion of the immigrant workforce to the extent used in that illustration is not known, but it is certainly reasonable to assume that considerable adjustment 

would occur.29

Likewise, it is reasonable to assume that some natives 

would stay in school longer as a consequence of the influx 

of so many foreign-born workers who lack a high school 

education. Attaining a diploma is one way of moving into 

a different labor market. How much of the increase in 

educational attainment of the native population can be 

attributed to that cause is not known. But to the extent 

that it occurred, Borjas’s original estimate would overstate 

the long-run impact of immigration on native workers’ 

earnings.

Finally, foreign-born workers are employed disproportionately in some occupations, such as computer software 

engineers and physicians, which require a very high level 

of skill. Just as the addition of large numbers of foreignborn workers with less than a high school education 

could depress the earnings of native high school dropouts, so too the addition of large numbers of highly educated foreign-born workers could depress the earnings of 

highly educated native workers. 

Again, the empirical literature has not agreed on a conclusion. One recent working paper estimated that the 

growth in the number of foreign-born recipients of U.S. 

doctoral degrees who planned to remain in the United 

States reduced the earnings of other workers who received 

doctoral degrees in the same field of study.30 But another 

working paper estimated that an increase in the foreignborn percentage of workers in an occupation did not 

appear to reduce the earnings of native workers in skilled 

occupations, although it did have an adverse impact on 

workers in manual labor occupations.31 Likewise, a study 

of the surge in skilled immigrants from the Soviet Union 

to Israel in the early 1990s found no adverse impact on 

the earnings of native workers with similar skills.32

27. Subsequently, Borjas made refinements in his analysis that 

resulted in slightly different estimates but did not change the basic 

findings.

28. George J. Borjas, Wage Trends Among Disadvantaged Minorities, 

NPC Working Paper No. 05-12 (Ann Arbor, Mich.: University of 

Michigan, National Poverty Center, August 2005). 

29. In a different context, a recent analysis of adjustment costs, based 

on responses to variations in military spending and oil price 

shocks, suggests that capital can adjust quickly. See Robert E. 

Hall, “Measuring Factor Adjustment Costs,” Quarterly Journal of 

Economics, vol. 119, no. 3 (2004), pp. 899-927.

30. George J. Borjas, The Labor Market Impact of High-Skill Immigration, Working Paper No. 11217 (Cambridge, Mass.: National 

Bureau of Economic Research, March 2005).

31. See Pia M. Orrenius and Madeline Zavodny, Does Immigration 

Affect Wages? A Look at Occupation-Level Evidence, Research 

Department Working Paper 0302 (Federal Reserve Bank of 

Dallas, August 2003).

32. Rachel M. Friedberg, “The Impact of Mass Migration on the 

Israeli Labor Market,” Quarterly Journal of Economics, vol. 116, 

no. 4 (2001), pp. 1373-1408.
THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET 25

Implications for the Future as the 

Baby Boomers Exit the Labor Force

A significant, long-lasting shift in the age profile of the 

U.S. population is under way. The Census Bureau 

projects that between 2000 and 2050 the number of people age 65 and older will more than double, while the 

number of adults under age 65 will grow by about 35 

percent.33 That shift reflects demographic trends that 

have been in play for many years and are expected to continue into the future: the aging of the baby-boom generation (those born between 1946 and 1964) and the continued increases in life expectancy.

Beginning in the mid-1960s, members of the baby-boom 

generation poured into the labor force. Many baby 

boomers are now in their 50s and will soon become eligible for Social Security retirement benefits. Some of them 

have already withdrawn from the labor force, often 

because of a disability.34

The Congressional Budget Office (CBO) projects that 

total labor force growth over the next decade will be 

considerably slower than its historical rate of about 1.5 

percent a year during the past half century. The slower 

projected pace stems from CBO’s expectation that the 

percentage of the population that will be in the labor 

force will decline sharply during the next 10 years as the 

leading edge of the baby-boom generation reaches the 

traditional retirement age. It will also be spurred by other 

factors: the labor force participation rate of men is likely 

to continue its historical downward trend, and the participation rate of women is not expected to increase as much 

as it has in the past.35

The baby-boom generation’s exit from the labor force 

could well foreshadow a major shift in the role of foreignborn workers in the labor force. Unless native fertility 

rates increase, it is likely that most of the growth in the 

U.S. labor force will come from immigration by the middle of the century. As long as people continue to move to 

and remain in the United States to work, the foreignborn share of the labor force will continue to grow. 

Projections of immigration and other demographic variables are based on assumptions that are subject to considerable debate, but the likelihood that immigrants will 

continue to play a large and growing role in the U.S. 

labor market is very high. Census Bureau projections 

prior to the 2000 census illustrate the potential importance of immigration.36 For its middle series, the Census 

Bureau’s staff assumed that net migration to the United 

States would average roughly 900,000 to 1 million per 

year through 2050. Based on that and other assumptions, 

they projected that the total U.S. population would 

increase by about 128 million people between 2000 and 

2050. In the absence of any immigration or emigration 

during that 50-year period, the increase would be only 

about 54 million people.37 Put another way, about 60 

percent of the projected population growth would come 

from new immigrants and their offspring.

More important, nearly all of the projected additions to 

the population associated with immigration are under age 

65. Looking only at people ages 15 to 64, about 50 million—83 percent—of the projected 60 million increase 

in population in that age group would consist of new immigrants and their children. Therefore, future labor force 

growth is likely to be largely the result of immigration.

Thus, decisions regarding immigration policy—in particular, how many immigrants to admit, the criteria for 

entry, and how to deal with unauthorized admissions—

33. See Bureau of the Census, “Projected Population of the United 

States, by Age and Sex: 2000 to 2050,” Internet release on March 

18, 2004, available at www.census.gov/ipc/www/usinterimproj/

natprojtab02a.pdf .

34. Congressional Budget Office, Disability and Retirement: The Early 

Exit of Baby Boomers from the Labor Force (November 2004).

35. The Congressional Budget Office’s (CBO’s) projections of potential labor force growth over the next decade are presented in The 

Budget and Economic Outlook: An Update (August 2005). CBO 

projects a 0.8 percent annual rate of growth in the size of the labor 

force, adjusted for cyclical variations. That is half the annual 

growth rate for the 1950 to 2004 period. 

36. The Census Bureau subsequently released a new estimate of the 

size of the population in 2000 and new interim projections of 

population growth but not the detailed information needed to 

replicate the analysis reported in this paragraph. The Bureau’s latest projections call for the total population to increase from about 

280 million in 2000 to 420 million in 2050. See Bureau of the 

Census, “Projected Population of the United States.”

37. Frederick W. Hollmann, Tammany J. Mulder, and Jeffrey E. Kallan, Methodology and Assumptions for the Population Projections of 

the United States: 1999 to 2100, Population Division Working 

Paper No. 38 (Bureau of the Census, Population Division, January 13, 2000). In subsequent methodological revisions, the Census Bureau increased the projected number of immigrants by 

about 10 percent, raising the portion of total population growth 

attributable to immigration. 
26 THE ROLE OF IMMIGRANTS IN THE U.S. LABOR MARKET

are likely to shape the size and composition of the U.S. 

labor force well into the future. 

If the new immigrants resemble those who arrived in 

recent years, they will enter the U.S. labor market with 

fewer years of education, on average, than native-born 

workers have and will be disproportionately employed in 

lower-skill occupations. Whether the retirement of the 

baby boomers and the growing demand for a wide range 

of services associated with an aging population will 

increase the relative earnings in such occupations is 

unknown. 

The long-term impact of immigration on the size and 

composition of the U.S. labor force will also include the 

increased supply of labor that the immigrants’ offspring 

provide. Children born in the United States to parents 

from Mexico and Central America are much more likely 

than the immigrants who were born there to have completed high school. As a result, their work-related characteristics are likely to more closely resemble those of other 

native-born workers.