Immigrant wage profiles within and between establishments

Life cycle wages of immigrants from developing countries fall short of catching up with wages of natives. Using linked employer–employee data, we show that 40% of the native–immigrant wage gap is explained by differential sorting across establishments. We find that returns to experience and seniority are similar for immigrant and native workers, but that differences in job mobility and intermittent spells of unemployment are major sources of disparity in lifetime wage growth. The inferior wage growth of immigrants primarily results from failure to advance to higher paying establishments over time. These empirical patterns are consistent with signaling disadvantages of immigrant job seekers, but not with the explanation that low wage growth follows from inferior information about employers and job opportunities.

► Life cycle wages of developing-country immigrants fail to converge to native wages.
► Forty percent of the wage gap comes from differential sorting across establishments.
► Slow immigrant wage growth primarily results from unfavorable job mobility.
► Immigrant workers endure more job changes with intermittent unemployment.
► Within-firm wage growth is similar for immigrant and native employees.