Wage disparities across immigrant generations: Education, segregation, or differential pay?

Abstract

Immigrants and their native-born children often face considerable wage penalties relative to natives, but less is known about whether this inequality arises through differences in educational qualifications, unequal sorting across occupations and establishments, or differential pay from employers for the same work (i.e., within-job inequality). Using linked employer–employee data from Norway, we ask (a) whether immigrant–native wage gaps reflect in differences in education, sorting, or within-job pay, (b) whether wage gaps differ by immigrant generation, and (c) whether wage gaps vary across different segments of the labor market. We find that immigrant–native wage inequality primarily reflects sorting into lower-paying jobs and wage gaps are considerably reduced across immigrant generations. When doing the same work for the same employer, immigrant-background workers, especially children of immigrants, earn similar wages to natives. There is considerable variation in sorting on jobs across market segments, but within-job pay differentials are strikingly similar.