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Article Highlights
- Share of high-earning workers who are foreign-born increased substantially between 2005 and 2019
- Incomes of high-earning foreign-born workers have grown faster than those of U.S.-born workers
- High-earning foreign-born workers are more likely to stay at top of income distribution over time than high-earning U.S.-born workers
The United States has famously been called a nation of immigrants. But despite the integral role immigrants have played in shaping the U.S. through the country’s history, their effect on the economy remains contested. Some argue that immigrants fill low-paying jobs that U.S.-born workers do not want, while others claim that immigrants are close substitutes for U.S.-born workers and thus depress wages.
These and other similar narratives tend to focus on workers at the lower end of the income distribution. Less attention has been paid to high-earning immigrant workers, who contribute to the U.S. economy in different and important ways. These workers support a healthy economy by creating jobs, increasing GDP per capita, and strengthening the tax base, which bolsters social safety net programs like Social Security.
Given these contributions, it seems important to ask, Have high-earning foreign-born1 workers flourished in recent years? And, to have a meaningful point of comparison, How have high-earning foreign-born workers fared relative to U.S.-born workers?
Newly released data from the Income Distributions and Dynamics in America (IDDA) project can shed light on these questions. This dataset contains summary statistics describing income levels and changes for a variety of demographic groups at the national and state levels. The summary statistics were created by linking the universe of W-2 and 1040 IRS tax data with demographic data from the Census Bureau (read the story behind the project).
Increased prosperity among foreign-born workers
Since 2005, high-earning foreign-born workers in the U.S. have increased their share of earnings compared with their U.S.-born counterparts. This is evident from Figure 1, which shows that even though the share of all workers who were foreign-born slightly declined from 2005 to 2019 in the IDDA data, the share of high-earning workers who were foreign-born increased substantially. The share of workers with incomes above the 99th and 99.9th percentiles who were foreign-born increased nearly 50 percent.
The increase in the share of top earners who are foreign-born is a result of the fast income growth these workers have experienced. Figure 2 shows that the earnings of foreign-born workers at the top of the income distribution have been rising faster than the earnings of their U.S.-born counterparts. As a result, by 2019, the top earnings of foreign-born workers far exceeded those of U.S.-born workers.
Source: Federal Reserve Bank of Minneapolis, Income Distributions and Dynamics in America, U.S. individual-level data.
Figure 2 shows the extent to which income growth among the highest-earning foreign-born workers has outpaced that of U.S.-born workers since 2005. For instance, in 2005, both foreign-born and U.S.-born workers at the 99.9th percentile of the distribution took home around $810,000 in income. However, by 2019, the income of the 99.9th percentile had grown to $885,000 for U.S.-born workers (adjusted for inflation) and a whopping $1.18 million for foreign-born workers—34 percent higher than the income of U.S.-born workers in this percentile.
Examining the path to prosperity
How can the IDDA data help us understand the prospering of high-earning foreign-born workers since 2005? One way is to look at variation across U.S. states to see where high-earning foreign-born workers made the biggest gains.
Interestingly, the states that already had large shares of high-earning foreign-born workers in 2005 are the places that saw the share increase the most (Figure 3). For example, the right-hand graph in Figure 3 shows that in 2005, 16.6 percent of New Jersey workers with incomes above the 98th percentile were foreign-born, fourth highest in the country. By 2019, this share had increased 6.8 percentage points, to 23.4 percent. This increase was not driven by changes to the total foreign-born worker population in New Jersey, which declined slightly over the period from 21 percent to 20 percent. In contrast, in Oklahoma, only 6 percent of workers at the 98th percentile were foreign-born in 2005, and this share had inched up by only 1 percentage point by 2019.
It is evident that foreign-born workers made larger inroads into top income bins in states where foreign-born labor was already a big presence among top earners. What could explain this trend? Perhaps states with the highest shares of high-earning foreign-born workers are home to high-earning industries in which foreign-born workers are disproportionately represented, like science and engineering. Or maybe once immigrants reach the highest earnings bins, they are likely to give a helping hand to ensure that the next cohort of immigrants thrive in the labor market. Future research leveraging the Income Distributions and Dynamics in America data can hopefully provide a better understanding of what is driving this trend.
Not only are foreign-born workers disproportionately represented among the country’s top earners, their incomes are also more persistent than those of U.S.-born workers: Foreign-born workers are more likely than U.S.-born workers to continue earning high incomes in future years. Among foreign-born workers who earned incomes above the 90th percentile in 2014, 74 percent of them continued to earn incomes above the 90th percentile in 2019. This outcome was 6 percentage points lower for U.S.-born workers.
This pattern suggests that once foreign-born workers reach the highest rungs of the income ladder, their incomes are somewhat more secure than the incomes of U.S.-born workers. Thus, once foreign-born workers prosper, they are more likely to continue to prosper. The higher level of income security experienced by foreign-born workers is likely one contributing factor to why the share of high earners who are foreign-born increased between 2005 and 2019.
Opportunities to move beyond descriptive analysis
In this article, Income Distributions and Dynamics in America data have been used to describe the relative prosperity of high-earning foreign-born workers. These data revealed that both the share of high-earning workers who were foreign-born and the incomes of high-earning foreign-born workers increased substantially from 2005 to 2019. By leveraging the state-level statistics, this article showed that states with the highest shares of high-earning foreign-born workers experienced the biggest increases in high-earning foreign-born workers. The mobility statistics illustrate that once foreign-born workers achieve these high incomes, they are also slightly more likely to retain them in future years than U.S.-born workers.
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It is evident that high-earning foreign-born workers flourished between 2005 and 2019. However, additional research, potentially leveraging the IDDA data, is needed to understand what has driven this prosperity. Is it connected to the changing composition of the immigrant population? Are foreign-born workers aging into prime-working ages while U.S.-born workers are aging out?
Answering these and similar questions will illuminate the mechanisms that have enabled the relative prospering of high-earning foreign-born workers, which may in turn help researchers and policymakers think through policies that support continued prosperity for all.
Endnote
1 Foreign-born workers are defined as workers who were born outside of the U.S. to parents who were not U.S. citizens. U.S.-born workers are workers who are not foreign-born.
