The Immigrant Success Story

The U.S. immigration system is largely built upon the principle of family reunification. In Fiscal Year (FY) 2016, more than two-thirds (68 percent) of all individuals receiving Lawful Permanent Resident (LPR) status in this country did so through the family-based immigration system. By comparison, 11.7 percent went through the employment-based system (primarily available to workers with advanced degrees or skills, with some avenues for lesser-skilled workers). Others becoming LPRs in FY 2016 were admitted to the United States as refugees (10.2 percent); 4.2 percent through the Diversity Visa lottery for immigrants from nations that are historically underrepresented in the United States; and 4.2 percent through a variety of other channels, such as asylum (Figure 1).

Figure 1: Persons Obtaining Lawful Permanent Residency by Class of Admission, Fiscal Year 2016  

Source: U.S. Dep’t of Homeland Sec., “Table 6: Persons Obtaining Lawful Permanent Resident Status By Type And Major Class Of Admission: Fiscal Years 2014 To 2016,” in 2016 Yearbook of Immigration Statistics (Washington, DC, 2017), https://www.dhs.gov/immigration-statistics/yearbook/2016/table6.

Admissions through the family-based system are limited by a “permeable” cap. The immediate relatives of U.S. citizens (spouses, minor children, and parents) are not subject to caps, whereas everyone else falls into one of five “family-preference” categories, each subject to its own cap (Table 1). The precise formula is complex because any unused visas in one preference category are added to the caps of other preference categories. 

Table 1: Numerical Limits on Family-Based Immigration to the United States

Family reunification constitutes about two-thirds of all permanent immigration to the United States. Counting only categories subject to caps, family-based immigration channels account for about 80 percent of permanent slots, while employment-based amount to roughly 20 percent of such slots.

In FY 2016, the United States admitted a total of 804,793 family-based immigrants, including both capped and uncapped categories. Of these immigrants, roughly 70 percent (566,706) were immediate relatives of U.S. citizens and 30 percent (238,087) fell under one of the family-preference categories (Table 2).

Table 2: Family-Sponsored Immigrants by Class of Admission, Fiscal Year 2016 

The family-centered structure of the U.S. immigration system is often contrasted with immigration systems of other countries, such as Canada and the United Kingdom (U.K.), where economic criteria are more important in the selection of immigrants. However this sort of comparison is not as straightforward as it might seem. For instance, about half of the ostensibly economic migrants in Canada and the U.K. are the dependent family members of immigrants who were selected according to economic criteria. If these family members are reclassified as family migrants, then family-based admissions account for 66 percent of immigrants to Canada and 57 percent of immigrants to the U.K.

While these admission levels are still less than those in the United States, the difference is not nearly as great as might initially appear if all the economic migrants to Canada and the U.K. were counted together with their dependent relatives. Moreover, when family-based flows are adjusted for differences in total population size, different countries’ admission rates of family migrants are very similar: 2.1 admissions per 1,000 people in the United States, 2.6 per 1,000 in Australia, and 2 per 1,000 in Canada.

Earnings of Post-1965 Immigrants

For four decades prior to 1965, immigration to the United States was dominated by a system of national origin quotas designed to severely limit immigration from Southern Europe, Eastern Europe, and Asia. Although new family-based and skill-based preferences were introduced in 1952, ethnicity remained the litmus test for would-be immigrants, as evidenced by the fact that 85 percent of visas were allocated to people from Northern and Western European countries. 

The Immigration Act of 1965 eliminated national origin quotas (with the exception of capping the number of admissions from any one country) and created a predominantly family-based system.  Although post-1965 immigration rules were more selective in some ways, such as requiring sponsorship by either a family member or employer, most data suggest that the entry earnings of U.S. immigrants (adjusted for education) fell.  This decline accompanied an increase in immigration from developing countries that had previously been prohibited.

Post-1965 immigrants coming to the United States from parts of the world with high levels of economic development had initial earnings that approached or exceeded the earnings of U.S. natives with similar levels of education and experience. But immigrants from developing countries had lower initial earnings compared to similar U.S. natives or immigrants from more developed economies. Immigrants from developing countries also were less likely than those from developed countries to emigrate from the United States, either to return home or go on to a different country. 

The decline in entry earnings among newer, developing-country immigrants—together with a flawed assumption that their earnings change very little over time—suggested to some scholars that the new immigrants were less economically productive than the immigrants who had come before. But, in reality, post-1965 immigrants have high rates of earnings growth over time. Moreover, earnings growth has increased over time at the same time entry earnings have fallen.

Studies that follow individual U.S. immigrants confirm that recent immigrant men and women start with relatively low earnings, but experience earnings growth far exceeding that of earlier immigrants or U.S. natives. Because of this decades-long decline in the initial earnings of recently arrived immigrants, economists such a George Borjas lament the declining labor market “quality” of immigrants since 1965. However, Borjas’ analysis does not take increasing earnings into account.

We demonstrate these growth trends by following the earnings of three cohorts of immigrants over the span of 10 years (between decennial censuses):

• The earnings of the cohort that entered between 1965 and 1970 were measured in 1970 and again in 1980.
• The earnings of the cohort that entered between 1975 and 1980 were measured in 1980 and again in 1990.
• The earnings of the cohort that entered between 1985 and 1990 were measured in 1990 and again in 2000.

A pronounced trend in these data is the increase in earnings experienced by each immigrant cohort over the roughly 10 years following their arrival in the United States (Figure 2):

As entry earnings fell, earnings growth increased.

• The 1965-1970 cohort went from making 65 percent what a comparable native-born worker earned in 1970 to making 85 percent of native-born earnings in 1980.
• The 1975-1980 cohort went from making 50 percent of native-born earnings in 1980 to 84 percent in 1990.
• The 1985-1990 cohort went from making 41 percent of native-born earnings in 1990 to 85 percent in 2000.

Figure 2: Immigrant Earnings as a Share of Native Earnings, Change After 10 Years

Source: Authors' estimates from 1970, 1980, 1990, and 2000 IPUMS.

The sizeable increase in earnings over time is missed completely, however, if the sole focus is the declining initial earnings of each cohort relative to native-born workers in the same age range. When only tracking initial earnings, as in the scenarios modeled below, it looks as though post-1965 earnings have been in decline:

• Immigrants who were recently arrived in 1970 (the 1965-1970 cohort) started out in the U.S. labor market making 65 percent of what comparable native-born workers earned.
• Immigrants who were recently arrived in 1980 (the 1975-1980 cohort) made 50 percent of what a comparable native-born worker earned.
• Immigrants who were recently arrived in 1990 (the 1985-1990 cohort) made 41 percent of what a native-born worker earned.

Our findings regarding the increase in earnings over time are similar to the results of other studies that follow individual earnings with longitudinal survey or administrative record data. Regardless of where immigrants begin, their earnings converge with time, resonating with the prediction that low-skill-transferability immigrants invest more in human capital—and hence experience higher earnings growth—than high-skill-transferability immigrants (employment-based immigrants).

Studies of Canadian immigrants also reveal an inverse relationship between immigrant entry earnings and earnings growth. Furthermore, family-based admissions in both Canada and the United States are associated with lower entry earnings, but higher earnings growth, relative to employment-based immigrants.

Earnings of Family-Based and Employment-Based Immigrants

To further demonstrate the positive relationship between family-based immigration and earnings growth, we examined initial earnings and earnings growth by types of admission to the United States. Using 1990 census data and 1975-1990 INS data on admission criteria, we analyzed the earnings over time of immigrant men aged 25 to 65 years old. Our analysis reveals that as the share of immigration attributable to family-based channels grows, immigrants’ initial earnings decrease, but earnings growth increases over time.

In addition, we found a significant increase in earnings growth after taking into account siblings who entered the country through the family-based system. In this analysis, a 10 percentage-point increase in sibling admissions increased immigrant annual earnings by 1.06 percent per year. This increase is on top of the earnings-growth increase associated with family admissions in general.

The inverse relationship between immigrants’ entry earnings and earnings growth suggests that the differences between family-based and employment-based immigration are more nuanced than they might first appear. Our analysis of 1993−1998 INS public use files and the 2000 decennial census and 2008 American Community Survey indicates that employment-based immigrants initially out-earn family-based immigrants. By the very nature of their admission into the country, employment-based immigrants are sought out by employers who want workers with highly transferable skills that can be put to use immediately. Family-based immigrants, however, have a higher propensity to invest in new human capital (their own education and training), which translates into higher earnings growth over time compared to employment-based immigrants. 

Employment-based immigrants enter the United States with skills linked to specific employment opportunities and start with relatively high earnings, making it more costly for them to invest in new human capital. As a result, employment-based immigrants are less likely than family-based immigrants to invest in their own education and training. For example, the propensity of a 25-year-old family-based immigrant to attend school is two-and-a-half times greater than for an otherwise similar employment-based immigrant; at age 40, it is twice as high; and at age 50 it is one and a half times greater. 

In other words, employment-based immigrants with high income would see their earnings significantly diminished if they took time off to enroll in school or attend classes. Family-based immigrants, on the other hand, have less to lose (since their earnings tend to be lower initially) and much to gain (a higher level of earnings growth over the ensuing decade). In this way, family-based immigrants prioritize investment in their own human capital in order to achieve greater upward mobility.

Investments in human capital take myriad forms and are difficult to measure. But one thing is certain: it is much more than mastery of English that fuels the high earnings growth experienced by family immigrants. Adult immigrants (most of whom entered the United States via family admissions) are much more likely than natives, at all ages, to be enrolled in school to earn a college degree or high-school diploma. Not surprisingly, the greater propensity of immigrants to pursue more education is particularly large for immigrants who have decided to stay permanently in the United States—foreign-born naturalized citizens—and it is particularly high for family-based immigrants.

Family-based immigration yields other economic benefits which are too seldom incorporated into the literature on the economics of immigration. First, family immigrants facilitate employment-based immigration among workers who not only want a job in the United States, but also want to be near their families. Second, highly skilled siblings of highly skilled employment-based immigrants often enter the country through the family-based system. Third, family-based immigration (especially of siblings) provides personnel for the creation of family-based businesses.

Facilitating High-Skilled Immigration

Debates over immigrant admission policies often frame the issue as a stark dichotomy: the United States can admit highly educated immigrants with specific skills, or immigrants with family ties to this country. Yet highly educated immigrants have families, too. Will they be more likely to move to a country where their siblings, parents, and adult children are also welcome—or one where few, if any, family members are allowed to follow? In a survey by the National Science Foundation that asked immigrant scientists and engineers why they moved to the United States, the largest share of respondents (37.1 percent) identified “family-related reasons.” A family-friendly policy may thus help attract highly educated immigrants.

There are additional factors that blur the line between family- and employment-based admissions. For example, U.S. Census data matched to INS admissions data in the 1990s revealed that immigrant education levels are positively correlated with the percentage of employment-based immigrants. This is not surprising given that professionals, scientists, and artists of exceptional ability are admitted via one employment category. However, immigrant education levels also increase with sibling admissions. This suggests that employment-based immigrants are followed by their highly educated siblings, who gain admission via the siblings’ preference.

Siblings following in the footsteps of well-educated, employment-based immigrants would be most prevalent among immigrants from less-developed countries where employment opportunities for the highly educated are more limited than in the United States. All else being equal, a college-educated sibling of a German immigrant in the United States, for example, would be less likely to migrate to this country than the college-educated sibling of a Mexican immigrant. Indeed, higher education and percentage of siblings also immigrating are negatively associated for immigrants from Europe, but positively associated for immigrants from Asia and Central and South America.

Facilitating Business Formation

Immigrants not only augment the labor force; they often become entrepreneurs as well. Once again, immigrants admitted via family channels—particularly siblings—play a prominent role. To examine the relationship between admission criteria and self-employment, we used the 1990 Census and INS admissions data to measure the share of a particular cohort (defined by country of origin and year of entry) that was self-employed. We further analyzed these groups to determine the shares of self-employed individuals admitted via the employment-based system and via the family-based system in the siblings category.

Our analysis revealed significant findings pertaining to the two largest groups of immigrants (Asians and Latin Americans). Specifically, the results indicate that there is no significant correlation between the share of these immigrants admitted based on occupational skills and the propensity to be self-employed. Yet a significant, positive relationship exists between the propensity of immigrants to be self-employed and the percent of immigrants who were admitted via the siblings category. In fact, admission as a sibling had the strongest effect on the tendency to be self-employed. Indeed, the effect on the propensity to be self-employed of the siblings’ admission criterion exceeds that of any other variable, such as level of schooling.

Despite the centrality of family-based immigration to the modern U.S. immigration system, lawmakers have repeatedly sought to cut back family immigration while prioritizing the admission of immigrants with certain skills. As previously discussed, the Immigration Act of 1965 introduced the current system of restricted and non-restricted admission categories greatly favoring immigrants with family members in the United States. This law permitted admissions of spouses, minor children, and parents of U.S. citizens without regard to numerical limitations. Of the numerically restricted visas, 80 percent were reserved for the adult children and siblings of U.S. citizens (as well as their spouses and children) and for the spouses and children of legal permanent residents. Only 20 percent of the numerically restricted visas were allocated to applicants based on their occupational skills. This classification includes two components: workers (“skilled” and “unskilled”) in occupations for which labor is deemed scarce; and professionals, scientists, and artists of exceptional ability. 

Thus, for over half a century, family unification has been the mainstay of the U.S. immigration system, with a minority of admissions reserved for occupational skills. Nevertheless, some immigration policy experts and economists have long advocated for a more skills-based admissions system. Passage of the 1990 Immigration Act signaled a small move in that direction, buoyed by the belief that immigrants admitted for their occupational skills are more economically productive than family-based immigrants. The 1990 law increased employment-based admissions but did not alter the essentially family-based nature of U.S. immigration. 

A call for fundamentally changing the country’s family-based policy did occur in 1997. The U.S. Commission on Immigration Reform (mandated by the 1990 Immigration Act) recommended eliminating immigration preferences for the brothers, sisters, and adult children of U.S. citizens and legal permanent residents. This recommendation was based on two questionable assumptions: that only preserving the nuclear family unit (parents and children) is in the “national interest,” and that extended family members are inherently of less economic value than immigrants chosen on the basis of skills.

This recommendation re-emerged in the 2013 Senate immigration reform proposal, which simultaneously included an avenue to legal status for most undocumented immigrants along with cuts to family immigration. Supporters of this provision argued that to be economically competitive the United States must reduce kinship admissions and increase skill-based admissions. Ultimately, the bill passed the Senate but was not called up for a vote in the House of Representatives. 

Unfortunately, efforts to shrink the family-based immigration system while expanding the prioritizing admissions based on the prospective immigrants’ possession of certain skills. A false dichotomy fuels such proposals. For instance, the Reforming American Immigration for Strong Employment (RAISE) Act of 2017 called for the creation of a “merit-based” immigration system that would devalue family ties and prioritize education and job skills. In voicing support for the RAISE Act, the Trump administration stereotyped family-based immigrants as less skilled and impoverished — an incorrect portrayal. Being a family-based immigrant does not preclude being a highly skilled worker.

Scholars and policymakers often focus on immigrants’ initial earnings and ignore earnings growth. This creates a distorted view of immigrants’ successes and economic contributions to the United States. This misrepresentation promotes a policy preference for immigrants who fill an immediate labor market need, overlooking the fact that other immigrants also succeed economically. Moreover, such narrow preferences fail to recognize that other immigrants adapt to the U.S. labor market, add economic flexibility, and bring innovation to the economy in ways fundamentally different from immigrants who come to fill specific job openings.

Policies hostile to family-based immigrants risk not only losing out on these sources of flexibility and innovation, but also risk damaging the country’s ability to recruit employment-based migrants. The decision to migrate is more complex than the single reason stated on a person’s visa. The United States risks alienating many potential high-skilled immigrants by imposing excessive limits on which family members can join them.

Yet these risks can be avoided. The strong inverse relationship between immigrant entry earnings and earnings growth in the United States suggests that policymakers should not be overly concerned about low initial earnings among immigrants with otherwise similar levels of schooling. It further suggests that in countries such as the United States—with flexible labor markets and a societal openness to learning throughout life—immigrant economic adjustment confers broad economic benefits. Those who immigrate to fill specific jobs, and are paid accordingly, have less of an incentive to invest in new human capital than immigrants lacking immediately transferable skills. As such, an immigrant admission policy designed only to fill specific labor market needs may be less likely to promote a flexible labor force than an approach which also encompasses family-based immigration.