The differentiation between convergence and conditional convergence is extremely useful for understanding the economic progress of immigrants. As in the cross-country studies in the economic growth literature, the raw data reveal a positive correlation between the log entry wage of immigrants and the subsequent rate of wage growth. Furthermore, the same source country characteristics that lead to high entry wages tend to lead to faster wage growth. This positive correlation between entry wages and wage growth, however, turns negative when one compares immigrant groups who start out with similar human capital endowments. The empirical evidence, therefore, indicates that even though immigrant groups with the same level of human capital will have similar earnings over the long haul, the sizable wage differentials observed among the various immigrant groups at the time of entry may well diverge over time.
Conceptual Framework
What is the relationship between entry wage levels and the rate of economic progress experienced by immigrants? This question is of more than passing interest because the entry wages of immigrant cohorts (relative to natives) have fallen dramatically in recent decades. Borjas (1995) reports that the immigrants who entered the United States between 1965 and 1969 earned about 18 percent less than natives in 1970, while the immigrants who entered between 1985 and 1989 earned 38 percent less than natives in 1990.
If the lower entry wages of more recent cohorts were compensated by a sufficiently higher rate of future wage growth, the present value of the (relative) earnings profiles of immigrants might not be as different as the differences in entry wage levels would suggest. In fact, the direction of the “quality” differential between immigrants and natives could be the opposite of that implied by the trend in entry wages. However, if more recent cohorts have a lower rate of wage growth than earlier cohorts, the long-run implications of the decline in entry wages are amplified. It is important, therefore, to isolate the factors that determine the rate of wage growth of immigrant cohorts, and to determine the trends in the rate of economic progress across successive cohorts.