Immigrants to Europe and North America earn nearly 18 percent less than native-born workers and struggle to gain access to jobs in higher-paying industries, occupations and companies, according to a new multinational, multi-university study published in Nature.

The research analyzes employer-employee data on 13.5 million people from nine immigrant-receiving countries in Europe and North America: Canada, Denmark, France, Germany, Netherlands, Norway, Spain, Sweden and the United States. It was conducted by researchers from more than a dozen universities around the world, including UC Irvine sociologist Andrew Penner.

“Our study shows that three-fourths of the differences between immigrant workers and native-born workers are due to a lack of access into good jobs,” says Penner. “In an economy like ours that depends on immigrant labor, this means that we need to do a better job of matching people to jobs that match their skills and so that they can better contribute to society. This is important not just for the sake of immigrants, but for the sake of everyone, because we all benefit.”

The study seeks to quantify the pay gap between immigrant and native-born workers in the nine countries, and also to identify the source of pay disparities: whether immigrant workers earn less because they end up in lower-paid industries, occupations and companies; or whether immigrants earn less because they are paid less than non-immigrants for doing the same job in the same company.

The study documents that the immigrant–native pay gap, which stood at 17.9 percent overall, is not primarily driven by unequal pay for equal work, but rather by limited access to higher-paying industries, occupations and companies (known as sorting).  More precisely, three-quarters of the gap was due to sorting into lower-paying employment and the remaining quarter was due to differences in pay for the same job and company (known as within-job inequality).

In countries where data was available (Canada, Denmark, Germany, Netherlands, Norway and Sweden), researchers also looked at the children of immigrants to discover whether the same earnings patterns continued across generations.

For the second generation, the overall gap had narrowed to 5.7 percent but persisted, especially for children of immigrants from Africa and the Middle East. The within-job difference in pay was, on average, 1.1 percent. 

The research has important policy implications, since it informs whether integration measures should focus on equal pay for equal work, or on improving access to higher-paying jobs. These findings highlight the importance of policies aimed at improving access, through measures such as language training, skill development, job search assistance, domestic education opportunities, foreign credential recognition, and enhanced access to job-relevant information and networks. Policies targeting employer bias in hiring and promotion decisions may also be effective, according to the coauthors.

Some of the main findings include:

• On average across the nine countries, immigrant workers earned 17.9 percent less than native-born workers.
• Approximately three-quarters of the pay gap was due to immigrants sorting into lower-paying industries, occupations and companies. The other quarter was due to immigrant workers receiving lower pay for the same work; that gap was 4.6 percent.
• The pay gap varied widely among countries for first-generation immigrants. Spain (29.9 percent) and Canada (27.5 percent) had the largest overall gaps. Norway (20.3 percent), Germany (19.6 percent), France (18.9 percent), and Netherlands (15.4 percent) saw mid-level differences. The smallest differences relative to native-born workers were found in the U.S. (10.6 percent), Denmark (9.2 percent) and Sweden (7.0 percent).
• For the second generation, the pay gap had narrowed to an average 5.7 percent. By country, the differences were: Norway (8.7 percent), Germany (7.7 percent), Netherlands (5.5 percent), Sweden (5.3 percent), Denmark (5.2 percent) and Canada (1.9 percent). About 80 percent of the difference was due to sorting. The within-job pay gap was 1.1 percent.
• By region of immigrant worker origin, the average overall pay gaps were: Sub-Saharan Africa (26.1 percent), Middle East and North Africa (23.7 percent), Asia (20.1 percent), Latin America (18.5 percent) and Europe, North America and other Western countries (9.0 percent).

“I am so excited about this project--when we started putting together a team of researchers working on administrative records from around the world, this is exactly the kind of cutting-edge work that we hoped we would be able to conduct,” says Penner. “And in the current moment, when immigration is a highly salient issue, I think it is really helpful to have an international perspective on what kinds of policies can help immigrants succeed in the labor market.”

Additional researchers include: Are Skeie Hermansen, Department of Sociology, University of Oslo (Norway), and Swedish Institute for Social Research, Stockholm University (Sweden); Marta Elvira, Departments of Strategic Management and Managing People in Organizations, IESE Business School (Barcelona, Spain); Olivier Godechot, Sciences Po, CRIS, CNRS (Paris, France) and Sciences Po, AxPo (Paris, France); Martin Hällsten, Department of Sociology, Stockholm University (Sweden); Lasse Folke Henriksen, Department of Organization, Copenhagen Business School (Denmark); Feng Hou, Statistics Canada;  Zoltán Lippényi, Department of Sociology, University of Groningen (Netherlands); Trond Petersen, Department of Sociology, University of California, Berkeley; Malte Reichelt, School of Business, Economics, and Society, University of Erlangen-Nuremberg, Institute for Employment Research, and Leibniz Institute for Educational Trajectories (Germany); Halil Sabanci, Management Department, Frankfurt School of Finance and Management (Germany); Mirna Safi, Sciences Po, CRIS, CNRS (France); Donald Tomaskovic-Devey, Department of Sociology, University of Massachusetts, Amherst; and Erik Vickstrom, Center for Economic Studies, United States Census Bureau.

Funding for this work was provided by Agence Nationale de la Recherche, ANR-17-CE41-0009-01; Carlsberg Foundation, grant #CF19-0175 (LFH); European Research Council ERC Starting Grant #340045; Independent Research Fund Denmark, grant #5052-00143b; MaxPo, Sciences Po; National Science Foundation, Award #0525831; Research Council of Norway, Grant #287016.

-courtesy of IESE
-pictured top to bottom: Bustling New York street, courtesy of Drazen_/iStock. Andrew Penner, UC Irvine sociologist, courtesy of UCI social sciences.