Immigrants’ Labor Market Performance: Growth and Change over the Business Cycle

Pia Orrenius, Federal Reserve Bank of Dallas
Madeline Zavodny, Agnes Scott College

After figuring prominently in U.S. economic growth for decades, immigrants have been hit hard by the current recession. Employment and incomes have fallen more among immigrants than natives, while unemployment and poverty rates have risen more among immigrants. After documenting the excess sensitivity of immigrants’ labor market outcomes to the business cycle, this paper examines why immigrants have more cyclical outcomes than natives. There are a number of potential explanations since immigrants differ from natives in many ways: they tend to have less education and to work in different industries and occupations, for example. A closer look at some of these factors suggests education plays a large role. Immigrants who lack a high school degree have the highest cyclicality of economic outcomes. College-educated immigrants also have significantly more cyclical outcomes than college-educated natives, however, raising the question of whether employment-based immigration policies have created a particularly market-sensitive labor pool.