August 10, 2006

Growth in the Foreign-Born Workforce and Employment of the Native Born

III. Impact of the Foreign-Born Workforce

Employment Rate: Percent of population 16 and older that is employed

Labor Force Participation Rate: Percent of population 16 and older that is employed or actively looking for work

Unemployment Rate: Percent of labor force that is without work and actively looking for work

This analysis exploits the wide variations in the growth of the foreign-born population and the employment outcomes for native-born workers across states. For example, the changes in the foreign-born population between 1990 and 2000 ranged from an increase of 278% North Carolina to a decrease of 1.1% in Maine. Similarly, in 2000, the employment rate for the native born ranged from 73.1% in Minnesota to 53.9% in West Virginia.

The question is whether there is a consistent pattern in the relationship between the growth in the foreign-born workforce and employment outcomes for the native-born population. If there was a negative relationship between an increase in the number of foreign-born workers and the employment of native-born workers, one would expect a pattern to emerge. More specifically, above-average growth in the foreign-born population 16 and older would be associated with below-average employment rates or labor force participation rates or higher-than-average unemployment rates for the native born. Conversely, less-than-average growth in the foreign-born population would be associated with better-than-average employment outcomes for the native-born in those areas.

This analysis does not find a clear, consistent pattern which would suggest a direct relationship between the growth in the foreign-born workforce and employment outcomes for native-born workers.

Assessing the Impact

To assess whether the growth in the foreign-born population is related to the employment outcome of native-born workers, Census Bureau data were used to group states according to whether their foreign-born population growth was above or below average and whether the native-born employment rate was above or below average. That produces the four groupings of states shown in Table 3.

Two of the four groups could be described as arising from a positive relationship (or correlation) between the growth of the foreign-born population and the employment rate of native-born workers. In the states in those two groups, high rates of growth in the foreign-born population are associated with high employment outcomes for the native-born (FB +, NB +) and low rates of growth are associated with low employment rates (FB ─, NB ─). States clustered in these two groups would indicate that employment outcomes for native-born workers may not be harmed by changes in the foreign-born population.

The other two groups in Table 3 could be described as arising from a negative relationship. In these states, high rates of growth in the foreign-born population are associated with low employment rates for the native-born (FB +, NB ─) and low rates of growth are associated with high employment rates (FB ─, NB +). States clustered in these two groups would indicate that employment outcomes for native-born workers may be harmed by changes in the foreign-born population.

Finally, if states are scattered across the four groups, that would indicate there is no relationship between changes in the foreign-born population and employment outcomes for native-born workers.

The method described above was also used to determine the relationship between the growth in the foreign-born population and two other measures of native-born employment—the labor force participation rate and the unemployment rate.

The assignment of states into the four groups is done twice, once for 1990-2000 and again for 2000-2004. States may fall into different groups in the two time periods depending on how they fared. For example, a state in which the foreign-born population grew faster than average between 1990 and 2000 may have experienced slower-than-average growth between 2000 and 2004. A complete listing of the states that fall into each group in the two time periods is in Tables A1 and A2 in Appendix A. The following sections show the results of applying this grouping methodology to data for 1990-2000 and 2000-2004.