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The Allocation of Immigrant Talent in the United States

labor supply, bringing along ideas and knowledge from across the world, boosting innovation, growth, and fiscal sustainability.2 Yet, despite immigrants accounting for close to 20% of the U.S. labor force, they often do not have an easy time navigating U.S. labor markets. Occupational regulations and licensing, lack of U.S.-specific skills, and outright discrimination, among other barriers, have been previously documented to prevent immigrants from fully achieving their potential—thereby also limiting the aggregate potential of the U.S. economy. In this essay, we document salient features of the distribution and compensation of immigrant talent across occupations in the U.S. economy. Our goal is to shed light on the extent of immigrant underperformance in U.S. labor markets. These empirical findings constitute the starting point of our recent working paper, “The Allocation of Immigrant Talent: Macroeconomic Implications for the U.S. and Across Countries,” where we quantify the aggregate and distributional costs of these barriers to the economic integration of immigrants, as well as their implications for the design of immigration policy. The goal of this essay is to revisit these empirical findings, revealing the extent of immigrant underperformance in the U.S. while raising a number of questions we address in more detail in the paper. We use individual-level data from the American Community Survey for 2019 to document key facts on the earnings and participation of immigrants relative to natives across various occupations.3 To simplify the exposition, we partition the set of occupations into the following five groups: non-routine cognitive (e.g., managers, engineers), non-routine manual (e.g., childcare workers, nurses), routine cognitive (e.g., data entry, cashiers), routine manual (e.g., construction, electricians), and non-employment.4,5,6 Moreover, we also group immigrants based on their time since immigration, English proficiency, and income level of their country of origin. Figure 1 illustrates the distribution of employment between natives and immigrants of different groups across the five occupation categories. Each column in the figure The Allocation of Immigrant Talent in the United States