Immigrant–native pay gap driven by lack of access to high-paying jobs

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Abstract
Immigrants to high-income countries often face considerable and persistent labor market difficulties upon arrival, while their native-born children typically experience economic progress. However, little is known about the degree to which these immigrant–native earnings differences stem from unequal pay when doing the same work for the same employer versus labor market processes that sort immigrants into lower-paid jobs. Using linked employer–employee data on 13.4 million workers from nine European and North American countries, we find that the segregation of immigrant-background workers in lower-paying jobs accounts for about four-fifths of immigrant–native earnings differences. Although within-job pay inequality remains consequential for immigrants in several countries, our results demonstrate that lack of access to higher-paying jobs is the primary driver of the immigrant–native pay gap across a range of highly diverse institutional and demographic host-country contexts. These findings highlight the importance of policies aimed at reducing between-job segregation, such as language, job training, and job search assistance programs; improving access to domestic education; recognizing foreign qualifications; and settlement programs aimed at enhancing access to job-relevant information and networks. Policies targeting employer bias in hiring and promotion decisions are also likely of high relevance, whereas measures aimed at ensuring equal pay for equal work may have more limited potential for further progress in closing the immigrant–native pay gap.