7. ADDITIONAL TESTS AND ROBUSTNESS CHECKS
7.3 Robustness Checks
There have been arguments about immigrants being in more cyclically affected industries and occupations or holding different educational levels that would make them more vulnerable to
143
business cycle conditions. This section contains a discussion of the estimates associated with the interactions among the business cycle measure, and the education, industry, and occupation controls, to investigate their influence on the cyclical behavior between immigrants and natives.
The models estimated in Table 8 follow the same structure as the baseline two-way transition model (Specification 2, Table 3). Column 1 reports the same set of estimates as provided by Specification 2 of Table 3. Columns 2 through 5 compare whether the inclusion of the new interactions would affect the magnitude of the immigrant-native gap in their business cycle responsiveness. In the employment-to-unemployment transitions shown in Panel A, the inclusion of the education, industry, and occupation interaction reduces the corresponding coefficient (Undiff*Immigrant) from 0.0005 to 0.0004, 0.00035, and 0.00044, respectively. The coefficient falls to 0.00031 when all three interactions are included together. Thus, education, industry, and occupation contribute to a stronger cyclical responsiveness for immigrants as economic conditions worsen. The remaining immigrant-native gap in transition rates into unemployment would possibly be attributed to the potential impact of discrimination. Unobserved unfamiliarity with the labor market that makes them less productive may also contribute to immigrants still being first-fired when the influence of education, industry, and occupation are controlled. This may result from immigrants having different family backgrounds and educational quality, or their lack of U.S.-specific human capital,33 including their proficiency in the English language, knowledge of social norms, communication and cognitive skills, etc.
In the unemployment-to-employment transitions in Panel B, the coefficient estimate on Undiff*Immigrant falls from 0.0026 to 0.0021 and 0.0024 when controlling for the cyclical influence of education and industry, respectively. This indicates that a relatively higher unemployment exit rate for immigrants is partially due to their being concentrated in certain types of education and industry, which offers them a higher chance of becoming re-employed.
33 For the studies of immigrant-native earning gaps, Chiswick (1978) found that being less productive leads to the earning gap in earlier years, by using a basic human capital earnings function in a multiple regression analysis.
144
Controlling for the influence of occupation during the business cycle slightly increases the coefficient estimate by 0.00006, meaning that without the cyclical influence of being in certain types of occupations immigrants would have had higher rates of leaving unemployment as economic conditions worsen. Adding all the three types of control factors reduces the coefficient to 0.0018. Policy discrepancy, such as immigrants being ineligible for many federal benefit programs, may help explain the remaining gap showing that immigrants are still more likely to be rehired the following month. Overall, the inclusion of the three new interactions contributes somewhat to the widening and narrowing of the immigrant-native transition gaps but does not alter the pattern of immigrants being first-fired and first-hired over the business cycle.
[Insert Table 8 Here]
8. CONCLUSION
Using the monthly matched individual-level observations from CPS, this paper compares the cyclical sensitivities of immigrants versus natives from 1996 to 2013. The paper initially investigates labor market transitions by a two-way transition model and then expands the analysis to a three-way transition model. To capture the fluctuations in local labor demand, the paper uses variations generated by the monthly state-level unemployment relative to a national measure of full employment.
The underlying transition pattern between employment and unemployment implies that immigrants are more likely to be fired than natives as business cycle conditions worsen. They also have a higher probability of being re-employed in the following month when the local demand weakens. When adding the transitions across labor force in the three-way transition
145
model, empirical findings confirm the above pattern from the two-way transition model that immigrants are first fired and first hired over the business cycle. Thus, the immigrant-native gap in aggregate unemployment rate over the sample period is mainly caused by immigrants being associated with a higher probability in the unemployment entry flow. Further, evidence from the three-way transition model reveals that immigrants are less likely to leave the labor force and are more likely to move from nonparticipation to searching for work than natives when demand conditions are relatively weak. This pattern may be driven by the fact that immigrants are ineligible for or are reluctant to apply for most public support programs intended to help families during recessions.
In order to find what types of immigrant groups would be affected most by cyclical changes, the paper decomposes the sample to different demographic groups by country of origin, age, education, residential region, industry, and occupation. Considerable evidence suggests that immigrants who are more likely to enter unemployment are those aged below 50, with no more than a high school degree, working in the construction, trade, or transportation fields. And these are the immigrant groups who drive the first-fired pattern. Immigrants who are more likely to exit unemployment are characterized by those from Mexico and Asia, aged 31 to 40 years old, with less than a high school or higher than a master’s degree, residing in the West, being involved with the agricultural and financial industries, and working in the private sector. Compared with native workers, the first-hired pattern among immigrants appears to be driven by these groups with a greater chance of leaving unemployment.
In the test of changes brought by the Great Recession, the most noticeable change is an upward shift in the baseline probability of losing a job and a downward shift in the odds of finding a job for all workers in the post-Great Recession period. Obviously, as the Great Recession hit the economy, both immigrant and native workers were negatively affected.
However, the cyclical volatility of transitioning into unemployment declined for immigrants after the start of the Great Recession.
146
To provide a comprehensive explanation to the underlying transitions, the paper also tests the influence of skill and employment characteristics on the immigrant-native differential patterns in labor market transitions. After controlling for the cyclical influence of education, industry, and occupation, immigrants are still found to be first-fired and first-hired over the business cycle as compared with the native-born. Potential discrimination and lack of U.S.-specific human capital may help explain the remaining gap in transitions into unemployment, and the gap in transitions into employment may be attributable to unfavorable public policies towards immigrants.
147 REFERENCES
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149
Figure 1. Seasonally Adjusted Monthly Unemployment Rates: Current Population Surveys, 1996-2013.
Notes: Monthly unemployment rates are calculated by author using the CPS data. All data are seasonally adjusted. The sample consists of people aged 20-64 who are in the labor force for any two consecutive months. Shaded area represents recessions as reported by the National Bureau of Economic Research (NBER).
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Unemployment Rate
Recession Immigrants Natives
150
Figure 2. Seasonally Adjusted Monthly Unemployment Entry Rates: Current Population Surveys, 1996-2013.
Notes: Monthly unemployment entry rates are calculated by author using the CPS data. All data are seasonally adjusted. The sample consists of people aged 20-64 who are in the labor force for any two consecutive months. Shaded area represents recessions as reported by the National Bureau of Economic Research (NBER).
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Unemployment Entry Rate Recession
Immigrants Natives
151
Figure 3. Seasonally Adjusted Monthly Unemployment Exit Rates: Current Population Surveys, 1996-2013.
Notes: Monthly unemployment exit rates are calculated by author using the CPS data. All data are seasonally adjusted. The sample consists of people aged 20-64 who are in the labor force for any two consecutive months. Shaded area represents recessions as reported by the National Bureau of Economic Research (NBER).
0%
10%
20%
30%
40%
50%
60%
Unemployment Exit Rate Recession
Immigrants Natives
152
Table 1. Sample Composition by Immigrant Status, CPS, 1996-2013.
Native (%) Immigrant (%) Total (%)
Hawaiian/Pacific Islander 0.2 0.6 0.2
2 race combinations 1.0 0.6 1.0
More than 2 races 0.1 0.0 0.1
Total 100 100 100
Country of Birth
United States and its territories 99.0 0.0 86.4
Mexico 0.1 28.2 3.7
153
Professional school degree 1.4 1.6 1.4
Doctorate degree 1.1 2.0 1.2
Transportation and utilities 5.4 4.6 5.3
Information 2.5 1.6 2.4
Financial activities 7.1 5.4 6.9
Professional and business services 10.1 11.6 10.3
Educational and health services 22.3 16.9 21.7
Leisure and hospitality 6.7 12.0 7.3
Self-employed, incorporated 3.6 3.5 3.6
Self-employed, not incorporated 7.5 7.0 7.4
Without pay 0.1 0.1 0.1
Total 100 100 100
Observations 10,217,419 1,486,801 11,704,220 Notes: The sample consists of people aged 20-64. All estimates are calculated using sample weights provided by the CPS.
154
Table 2. Unemployment and Transition Rates, Matched Current Population Surveys.
Panel A. 1996-2013
Immigrants (%) N Natives (%) N Immigrant-Native
Difference (%)
Unemployment Rate 5.03 1,094,181 4.47 7,916,965 0.56
Unemployment Entry Rate 1.65 1,041,193 1.22 7,590,294 0.43
Unemployment Exit Rate 33.24 52,988 28.88 326,671 4.36
Panel B. 1996-2007
Immigrants (%) N Natives (%) N Immigrant-Native
Difference (%)
Unemployment Rate 3.96 687,546 3.50 5,352,555 0.46
Unemployment Entry Rate 1.49 661,004 1.13 5,174,972 0.36
Unemployment Exit Rate 39.43 26,542 35.11 177,583 4.32
Panel C. 2008-2013
Immigrants (%) N Natives (%) N Immigrant-Native
Difference (%)
Unemployment Rate 6.72 406,635 6.39 2,564,410 0.33
Unemployment Entry Rate 1.92 380,189 1.39 2,415,322 0.53
Unemployment Exit Rate 27.46 26,446 22.13 149,088 5.33
Notes: The sample consists of people aged 20-64 who are in the labor force for any two consecutive months. All estimates are calculated using sample weights provided by the CPS.
155
Table 3. Two-way Transitions between Employment and Unemployment: Matched CPS Data, 1996-2013.
Specification
Regressor (1) (2) (3) (4)
Panel A.Linear Regressions for Probability of Employment-to-Unemployment Transition Immigrant 0.00291*** 0.00236*** 0.00342*** 0.00236***
(0.000179) (0.000180) (0.000161) (0.000180) Undiff 0.00107*** 0.000985*** 0.000891*** 0.000891***
(0.0000267) (0.0000280) (0.0000279) (0.0000327)
Undiff*Immigrant 0.000503*** 0.000464*** 0.000381***
(0.0000740) (0.0000746) (0.0000859)
(0.000934) (0.000934) (0.000161) (0.000934)
Observations 8,622,334 8,622,334 8,622,334 8,622,334
Mean of dependent variable 0.0128 0.0128 0.0128 0.0128 Panel B. Linear Regressions for Probability of Unemployment-to-Employment Transition
Immigrant 0.0655*** 0.0602*** 0.0542*** 0.0602***
(0.00297) (0.00370) (0.00361) (0.00370)
Undiff -0.0324*** -0.0329*** -0.0334*** -0.0328***
(0.000412) (0.000438) (0.000440) (0.000493)
Undiff* Immigrant 0.00262** 0.00266** 0.00213*
(0.00102) (0.00104) (0.00117)
Observations 370,144 370,144 370,144 370,144
Mean of dependent variable 0.2976 0.2976 0.2976 0.2976 Notes: The sample consists of people aged 20-64 who are in the labor force for any two consecutive months. All estimates are calculated using sample weights provided by the CPS.
Standard errors are adjusted for multiple observations per individual. All specifications also included a constant, age, age squared, gender, marital status, race, education, occupation and industry, and state and month fixed effects except Specification 3, which excludes personal and job controls.
* p < 0.10, ** p < 0.05, *** p < 0.01
†Undiff = the state-level unemployment rate – the national natural rate of unemployment.
156
Table 4. Three-way Transitions across All Labor Force States: Matched CPS Data, 1996-2013.
Transition
Immigrant 0.00222*** 0.00659*** 0.0412*** 0.0188*** 0.0144*** 0.00168***
(0.000175) (0.000239) (0.00303) (0.00265) (0.000753) (0.000509)
Undiff 0.000965*** -0.000103*** -0.0254*** -0.00543*** -0.00296*** 0.00347***
(0.0000274) (0.0000334) (0.000366) (0.000347) (0.000103) (0.0000908) Undiff* Immigrant 0.000494*** -0.000480*** 0.00350*** -0.00223*** 0.0000601 0.00104***
(0.0000721) (0.0000845) (0.000846) (0.000774) (0.000251) (0.000211)
Constant 0.0515*** 0.139*** 0.414*** 0.414*** 0.155*** 0.100***
(0.000899) (0.00122) (0.0120) (0.0113) (0.00244) (0.00201)
Observations 8,805,216 8,805,216 457,460 457,460 2,416,885 2,416,885
Mean of dependent variable 0.0125 0.0215 0.2403 0.1927 0.0651 0.0379
Notes: The sample consists of people aged 20-64. All estimates are calculated using sample weights provided by the CPS. Standard errors are adjusted for multiple observations per individual. All specifications also included a constant, age, age squared, gender, marital status, race, education, occupation and industry, and state and month fixed effects except Specification 5 and 6, which exclude occupation and industry.
*p < 0.10, ** p < 0.05, *** p < 0.01
†Undiff = the state-level unemployment rate – the national natural rate of unemployment.
157
Table 5. Two-way Transitions by Country of Origin: Matched CPS Data, 1996-2013.
Notes: The sample consists of people aged 20-64 who are in the labor force for any two consecutive months. All estimates are calculated using sample weights provided by the CPS. Standard errors are adjusted for multiple observations per individual. All specifications also included a constant, the immigrant dummy by country of origin, the business cycle control variable, relative personal and job controls, and state and month fixed effects, comparable to the baseline model in Table 3 Specification 2.
* p < 0.10, ** p < 0.05, *** p < 0.01
†Undiff = the state-level unemployment rate – the national natural rate of unemployment.
Employment to Unemployment Unemployment to Employment
Undiff*Mexico 0.00153*** 0.00311*
158
Table 6. Test for Heterogeneity Based on Two-way Transitions: Matched CPS Data, 1996-2013.
Employment to Unemployment Unemployment to Employment Reported Coefficient: Undiff*Immigrant
No more high school 0.000804*** 0.00312**
(0.000128) (0.00135)
Some college but no degree 0.000187 0.00275
(0.000151) (0.00225)
Bachelor's degree -0.000073 -0.00236
(0.000123) (0.00252)
Master's degree and above -0.000178 0.0110***
(0.000119) (0.00395)
159 Table 6 Continued.
Employment to Unemployment Unemployment to Employment Reported Coefficient: Undiff*Immigrant
Wholesale and retail trade 0.000565*** 0.0026
(0.000185) (0.00277)
Transportation and utilities 0.000586** 0.00124
(0.000297) (0.00514)
Information 0.000683 0.000421
(0.000526) (0.00635)
Financial activities 0.0000336 0.0126***
(0.000212) (0.00421)
Professional and business services 0.000165 -0.000308
(0.000222) (0.00281)
Educational and health services -0.00000648 0.000738
(0.000123) (0.00308)
Leisure and hospitality 0.00000727 0.00332
(0.000210) (0.00328) reported estimate is Undiff*Immigrant. All estimates are calculated using sample weights provided by the CPS.
Standard errors are adjusted for multiple observations per individual. All specifications also included a constant, the immigrant dummy by country of origin, the business cycle control variable, relative personal and job controls, and state and month fixed effects, comparable to the baseline model in Table 3 Specification 2.
* p < 0.10, ** p < 0.05, *** p < 0.01
†Undiff = the state-level unemployment rate – the national natural rate of unemployment.
160
Table 7. Tests for Changes in Estimated Transitions from before to after the Great Recession: Matched CPS Data, 1996-2013.
Specification
Regressor (1) (2) (3)
Panel A. Linear Regressions for Probability of Employment-to-Unemployment Transition
Pre-recession 0.0575*** 0.0574*** 0.0575***
(0.00114) (0.00114) (0.00114)
Post-recession 0.0731*** 0.0733*** 0.0785***
(0.00621) (0.00621) (0.00771)
Recession* Immigrant 0.00117*** -0.000424 0.0000748
(0.000331) (0.000487) (0.000514)
Recession*Undiff -0.000457*** -0.000414*** -0.000523***
(0.0000692) (0.0000720) (0.0000809)
Observations 8,622,334 8,622,334 8,622,334
Panel B. Linear Regressions for Probability of Unemployment-to-Employment Transition
Pre-recession 0.583*** 0.583*** 0.585***
(0.0219) (0.0219) (0.0219)
Post-recession 0.457*** 0.455*** 0.563***
(0.105) (0.105) (0.118)
Recession* Immigrant 0.00768 0.0162* 0.0155*
(0.00541) (0.00849) (0.00868)
Recession*Undiff 0.0226*** 0.0232*** 0.0210***
(0.00141) (0.00149) (0.00178)
Observations 370,144 370,144 370,144
Notes: The sample period covers 1996-2013. The reported coefficients are the changes in relative parameters from the sample period 1996-2007 to 2008-2013. The sample consists of people aged 20-64 who are in the labor force for any two consecutive months. All estimates are calculated using sample weights provided by the CPS. Standard errors are adjusted for multiple observations per individual. A non-constant regression method is used here. All specifications also included, age, age squared, gender, marital status, race, education, occupation and industry, and state and month fixed effects.
* p < 0.10, ** p < 0.05, *** p < 0.01
†Undiff = the state-level unemployment rate – the national natural rate of unemployment.
161
Table 8. Tests for the Influence of Education, Occupation, and Industry Based on Two-way Transitions: Matched CPS Data, 1996-2013.
Specification
Regressor (1) (2) (3) (4) (5)
Panel A. Transitions from Employment to Unemployment
Immigrant 0.00236*** 0.00232*** 0.00237*** 0.00237*** 0.00232***
(-0.00018) (-0.00018) (-0.00018) (-0.00018) (-0.00018)
Undiff 0.000985*** 0.000249** 0.000356*** 0.00407*** 0.00250**
(-0.000028) (-0.000105) (-0.0000635) (-0.00122) (-0.00122)
Undiff*Immigrant 0.000503*** 0.000397*** 0.000352*** 0.000436*** 0.000308***
(-0.000074) (-0.000074) (-0.0000739) (-0.0000742) (-0.0000744)
Undiff*Education indicators No Yes No No Yes
Undiff*Industry indicators No No Yes No Yes
Undiff*Occupation indicators No No No Yes Yes
Observations 8,622,334 8,622,334 8,622,334 8,622,334 8,622,334
Mean of dependent variable 0.0128 0.0128 0.0128 0.0128 0.0128
Panel B. Transitions from Unemployment to Employment
Immigrant 0.0602*** 0.0613*** 0.0607*** 0.0601*** 0.0616***
(-0.0037) (-0.0037) (-0.0037) (-0.0037) (-0.00371)
Undiff -0.0329*** -0.0192*** -0.0323*** -0.0525*** -0.0391*
(-0.000438) (-0.00528) (-0.00588) (-0.0188) (-0.0206)
Undiff*Immigrant 0.00262** 0.00208** 0.00240** 0.00268*** 0.00184*
(-0.00102) (-0.00103) (-0.00102) (-0.00102) (-0.00103)
Undiff*Education indicators No Yes No No Yes
Undiff*Industry indicators No No Yes No Yes
Undiff*Occupation indicators No No No Yes Yes
Observations 370,144 370,144 370,144 370,144 370,144
Mean of dependent variable 0.2976 0.2976 0.2976 0.2976 0.2976
Notes: The sample consists of people aged 20-64 who are in the labor force for any two consecutive months. All estimates are calculated using sample weights provided by the CPS.
Standard errors are adjusted for multiple observations per individual. All specifications also included a constant, age, age squared, gender, marital status, race, education, occupation and industry, and state and month fixed effects. * p < 0.10, ** p < 0.05, *** p < 0.01. †Undiff = the state-level unemployment rate – the national natural rate of unemployment.
162 APPENDIX
Table A1. Rotation Groups in the Current Population Survey.
Source: B. C. Madrian and L. J. Lefgren, 2000, An approach to longitudinally matching Current Population Survey (CPS) respondents.
163
Table A2. Monthly Unemployment Status: Matched CPS Data, 1996-2013.
Unemployed
Immigrant -0.00370*** 0.00176***
(0.000429) (0.000299)
Undiff 0.00960*** 0.00761***
(0.0000870) (0.0000699)
Undiff*Immigrant -0.000146 -0.000284*
(0.000208) (0.000165)
Constant 0.168*** 0.0416***
(0.00225) (0.000266)
Observations 9262676 11704220
Personal and Job Controls Yes No
Notes: The sample consists of people aged 20-64 in the labor force. All estimates are calculated using sample weights provided by the CPS. Standard errors are adjusted for multiple observations per individual. The dependent variable Unemployed is a dummy, 1 for a worker being unemployed in a month, 0 otherwise. All specifications also included a constant, age, age squared, gender, marital status, race, education, occupation and industry, and state and month fixed effects.
* p < 0.10, ** p < 0.05, *** p < 0.01
†Undiff = the state-level unemployment rate – the national natural rate of unemployment.
164
Table A3. Estimated Transitions between Employment and Unemployment:
Matched CPS Data, 1996-2007.
Specification
Regressor (1) (2) (3) (4)
Panel A.Linear Regressions for Probability of Employment-to-Unemployment Transition Immigrant 0.00211*** 0.00227*** 0.00345*** 0.00227***
(0.000211) (0.000218) (0.000194) (0.000218)
Undiff 0.00144*** 0.00132*** 0.00124*** 0.00132***
(0.0000658) (0.0000673) (0.0000676) (0.0000741)
Undiff*Immigrant 0.000974*** 0.00105*** 0.000999***
(0.000172) (0.000173) (0.000206)
(0.00111) (0.00111) (0.000192) (0.00111)
Observations 5826823 5826823 5826823 5826823
Panel B. Linear Regressions for Probability of Unemployment-to-Employment Transition
Immigrant 0.0603*** 0.0600*** 0.0539*** 0.0600***
(0.00440) (0.00441) (0.00418) (0.00441)
Undiff -0.0466*** -0.0470*** -0.0490*** -0.0451***
(0.00158) (0.00165) (0.00168) (0.00190)
Undiff* Immigrant 0.00357 0.00329 0.00234
(0.00372) (0.00383) (0.00457)
Observations 199530 199530 199530 199530
Notes: The sample consists of people aged 20-64 who are in the labor force for any two consecutive months. All estimates are calculated using sample weights provided by the CPS.
Standard errors are adjusted for multiple observations per individual. All specifications also included a constant, age, age squared, gender, marital status, race, education, occupation and industry, and state and month fixed effects except Specification 3, which excludes personal and job controls.
* p < 0.10, ** p < 0.05, *** p < 0.01
†Undiff = the state-level unemployment rate – the national natural rate of unemployment.