Chapter 3. The Adjustment of Immigrants in the Labor Market

This chapter explores immigrant labor market adjustment by first describing methodological and theoretical considerations central to the analysis of earnings growth and occupational mobility. When no restrictions are placed on entry earnings or earnings growth, an inverse relationship between immigrant entry earnings and earnings growth emerges. An implication of this relationship is that the popular method for controlling for cohort effects developed by Borjas, and used in almost all recent studies of immigrant adjustment, is flawed. Recent US immigrants have low initial earnings, relative to natives and earlier immigrant cohorts, but high earnings growth, a pattern consistent with high levels of human capital investment. Why immigrants invest more in human capital than natives, and why investment patterns vary across immigrant groups, is explored. Important individual attributes include how easily immigrants’ source-country human capital transfers to the host country and how permanently attached immigrants are to the host country. Economic and social contexts, beyond the individual, are highlighted. Labor market adjustment from a family perspective is examined, with light shed on the controversy surrounding the Family Investment Hypothesis. The chapter concludes with a framework for examining immigrant adjustment across the labor markets of major immigrant-host countries and with directions for future research.