How Immigrants Fare across the Earnings Distribution in Australia and the United States

This paper investigates determinants of the earnings distribution for native-born workers and immigrant workers in two countries. The authors, using data from the 2000 U.S. Census and 2001 Australian Census, employ a methodology (quantile regression) that facilitates measurement of the native-born/immigrant earnings differential and the partial effect of explanatory variables such as schooling and experience at each decile of the earnings distribution. They find evidence that schooling and labor market experience had stronger earnings effects at higher deciles. The native/immigrant earnings gap varied by decile, and in particular increased in the United States at higher deciles. The results suggest that in the United States minimum wages compressed earnings at low deciles, whereas in Australia the minimum (administered) wage system compressed earnings across the entire distribution. A pattern of higher earnings for immigrants than for the native-born at the lowest earnings decile in Australia may reflect favorable selectivity in migration.