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Assimilation Effect on Immigrants in NZ and Australia

This essay examines the assimilation effect on immigrants in New Zealand and Australia. The analysis incorporates the effect of personal characteristics including education level, age, labour market experience, years of migration, ethnicity and etc. in addition, the effect of ethnic capital will be investigated as well. Furthermore, I will test the effect of ethnic capital on low skilled and less English proficiency immigrant’s income and assimilation process. This investigation will fulfil the international literature gap and it has not been investigated for New Zealand.

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2.1 Literature Review

The word “assimilation” means the process of immigrants’ earnings converging to the earnings of a comparable native after a period of time in the host country. Assimilation is a sensitive problem for New Zealand as New Zealand is a traditional immigration receiving country; as Topel (1991) points out, if new immigrants are not successfully assimilated, the increased immigrant flows could place additional burdens on the public welfare systems, while exacerbating other social problems associated with persistent poverty; so I want to emphasise this issue.

Two of the labour market’s assimilation aspects are of special interest: employment assimilation and wage assimilation. Many studies have attempted to analyses earning’s assimilation process of immigrants and indicate that many variables would affect assimilation effect.

Immigrants might face some problems and disadvantages in earnings during the first several years following migration, but after some time, their earnings can gradually converge to the same level as the natives. The assimilation effect may depend on factors such as self-selection, country of origin, cohort effect, education, and skill effect (Chiswick, 1978). The effects of country of origin may strongly affect assimilation; immigrants from some countries who enter with high incomes have outcomes similar to native born individuals, while other immigrants fail to demonstrate signs of relative improvement in labour market outcomes over time (L. Winkelmann & Winkelmann, 1998).

Education is another important factor associated with differences in labour market outcomes; the converging profile may vary according to different education levels (R. Winkelmann, 2000). Transferability of skill is another factor; many studies show that skills cannot be transferred among countries perfectly as different countries have different systems of issuing degrees or certificates of authentication; for example, skills obtained in less-developed countries are less useful to employers in the host country (Duleep & Dowhan, 2002).

Furthermore, ethnic concentration would affect assimilation effects positively; the positive and negative effects of ethnic concentration may be more significant in some groups of immigrants; some positive effect has been found in European countries (for example, Edin, Fredriksson, & Aslund, 2003); on the other hand, the negative effect has also been found in the United States (Lazear, 1999). There have been fewer studies of ethnic concentration in New Zealand, so I would like to test the effect of ethnic concentration by using New Zealand data in my studies to examine how ethnic concentration influences the assimilation effect in New Zealand. In addition, “ethnic capital” (J. Borjas, 1992) is a specific consideration in ethnic factor. The effects of ethnic capital on assimilation and cohort effect has not been tested in New Zealand by recent data.

For assimilation effect, recent studies have been taken in the U.S., European Countries, and New Zealand. Chiswick (19782000) based on U.S. Census pointed out that the assimilation effect may depend on factors such as self-selection, country of origin, cohort effect, education, and skill effect; immigrants arrived in the U.S. may face some disadvantages but after some years of migration their earning will converge to the similar level of natives’. Card (2005) used the U.S. CPS data from 1995 to 2002, found when the variables of age and geographic location is controlled in the wage model without the variable of educational attainment, immigrant men earn approximately 18-23 percent lower than third and higher generation of natives; when educational attainment was considered then this figure for immigrants will decrease to 11 percent. Adsera & Chiswick (2007) suggested that immigrants’ earning will catch up with natives’ after 18 years since migration by studied the earnings of immigrants in 15 European countries. Fertig and Schurer (2007) pointed a strong cohort effect on assimilation of immigrants by analysed the 21 waves of the German Socioeconomic panel from 1984 to 2004; they found recent cohort of immigrants’ earning may catch up with natives’ after less than 9 years which is shorter than the earlier cohort group (who arrive between 1969 and 1973).

Winkelmann and Winkelmann (1998) used individual record data from the 1981, 1986 and 1996 New Zealand Population Censuses found in New Zealand the assimilation effect may act differently for different ethnic groups as immigrants who came from the UK and Australia could earn the salary as high as natives’ while Asian immigrants may face some disadvantages at the beginning but their earnings will catch up with natives’ in a short time; but Pacific Island immigrants fail to reveal the same achievement as Asian immigrants. Furthermore, the cohort effect has been found from their study, the recent immigrants from U.K. and Australia may earn higher earning than earlier immigrants.

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Recent New Zealand studies has found that Immigrants hold less wealth than similar NZ natives: This is explained by fewer inheritances and lower incomes amongst migrants, though the age profile of migrants goes some ways towards closing the gap (Gibson, Morton, & Stillman, 2007; Stillman & Velamuri, 2010). Only workers born in the UK earn more, on average, than similarly skilled New Zealand-born. Other workers from Asian countries earn significantly less (Stillman & Velamuri, 2010). For both men and women, immigrants with less than 15 to 20 years in New Zealand have significantly lower occupational rank than comparable New Zealand-born workers (Maré & Stillman, 2010)

Education has played a vital role in immigrant’s assimilation process. University-qualified immigrants receive less of an income premium from their qualifications than do New Zealand-born graduates (Maré & Stillman, 2010). Furthermore, Maani (1994; 2004) has shown the returns to educational qualifications, and this specification, with the inverse of years since migration, allows a negative potential impact to be greater for recent immigrants, and decreasing over time. On the other hand, unlike what Friedberg (2000) finds for the United States, foreign-earned qualifications appear to be fairly portable to the New Zealand labour market (Stillman & Mare, 2010).

2.2 Hypotheses

Because immigrants from the previous cohort set up an initial ethnic enclave in a particular locality, more and more immigrants will be attracted to locate, work and live there. Immigrants will benefit from ethnic capital as ethnic capital will offset the disadvantages that immigrants face when trying to find employment. In the case in which a number of immigrant-owned businesses have been set up, more job opportunities for immigrants from the same ethnic enclave can be offered. Hence, I think ethnic capital would have the following effects on the assimilation effect:

  1. Effect on low-skilled immigrants: Since the disadvantages of poor communication skills and a lower educational or skill level it is very hard for low-skilled immigrants and immigrants with limited English proficiency to find a job out of the ethnic enclave. Low skilled immigrants are the main labour force for immigrant-owned businesses. While the ethnic enclave can provide job opportunities for them, their wage or salary will be lower than the native’s level. Thus, I would like to expect that the ethnic capital has a negative effect on assimilation effect for them.[1]
  1. Effect on high-skilled immigrants: I expect ethnic capital will significantly help highly skilled immigrants to find a job and to be finally successfully assimilated to the natives because highly skilled immigrants have the skills and experiences that are needed by local companies. Highly skilled immigrants can work for immigrant-owned companies also; so their elasticity of labour supply will be relatively higher. As a result, ethnic capital will significantly help highly skilled immigrants to increase their income.[2]

[1] The reasons for this scenario could be: (1) Being employed in the ethnic enclave could reduce the cost of learning English for them; so they may be happy to accept a job in which the salary/wage is lower. (2) Because they do not have the skills which are needed by the local economy, and also because they have problems communicating with natives, their only chance of work is to find a job in the ethnic enclave.

[2] I assume that some of the highly skilled immigrants act as the intermediate agency between the local community and the ethnic enclave, offering special services which assist the two-way communication between the local community and the ethnic enclave. When greater numbers of low-skilled immigrants settle in an ethnic enclave, then the demand (which can be from both local community and ethnic enclave) for services from the intermediate agency will become less elastic; so highly skilled immigrants can earn greater profits and experience a much faster assimilation effect.


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