As noted earlier, one can think of the data reported in Table 1 as being calculated from the model in equations (12)-(14) where there are no standardizing variables in the vector X. It is of interest to determine the sensitivity of the rate of wage growth in the immigrant population (relative to that of natives) to differences in human capital across the groups, particularly educational attainment. I estimated the regression model in (12) including a vector of dummy variables indicating the worker’s educational attainment. The dummy variables indicate if the worker has less than 9 years of schooling; 9 to 11 years; 12 years; 13 to 15 years; or 16 years or more. The fixed effects vijk were then computed at the mean level of educational attainment for the entire immigrant sample.
Table 2 reports the education-adjusted log wage levels and rate of wage growth (relative to natives). Not surprisingly, the wage gap between immigrants and natives falls when we control for differences in educational attainment between the two groups. For example, the entry wage of the immigrants who migrated in 1970-74 and were 35-44 years old in 1980 is 20 percent lower than that of natives in the same age group, but is only 15 percent lower than that of natives who have the same age and educational attainment. The data also suggest that there is faster wage convergence between immigrants and natives if we adjust for differences in educational attainment. The relative rate of wage growth for the immigrants who arrived in the late 1960s and were 25-34 years old in 1970 was 7 percentage points in the first ten years, and an additional 4 percentage points in the second ten years. The education-adjusted rate of wage growth was 9 percentage points in the first 10 years, and another 5 percentage points in the second ten years.
Not surprisingly, there exist significant differences in economic progress across the various national origin groups. Table 3 illustrates this variation by reporting the unadjusted and education-adjusted rates of wage growth for selected national origin groups (relative to natives). Some of the groups exhibit very high rates of wage growth, while other groups do not exhibit any economic improvement. Consider, for example, the British immigrants who entered the United States in the late 1960s and were 25-34 years old in 1970. Their relative wage rose by 15 percentage points in the first ten years after arrival, and by an additional 7 percentage points in the second ten years. In contrast, the relative wage of the comparable group of immigrants from the Dominican Republic rose by only 2 percentage points in the first ten years, and by another 3 percentage points in the second ten years.