The immigrant wage gap and assimilation in Australia: the impact of unobserved heterogeneity

This paper provides an overview of asylum migration from poor strife-prone countries to the OECD since the 1950s. I examine the political and economic factors in source countries that generate refugees and asylum seekers. Particular attention is given to the rising trend of asylum applications up to the 1990s, and the policy backlash that followed. I consider the political economy of restrictive asylum policies, especially in EU countries, as well as the effectiveness of those policies in deterring asylum seekers. The paper concludes with an outline of the assimilation of refugees in host country labour markets. Immigrants to Australia are selected on observable characteristics. They may also differ from natives on unobservable characteristics such as ambition or motivation. Controlling for unobserved heterogeneity, we find a wage gap for immigrant men from English-speaking backgrounds, in contrast with previous research. Controlling for unobserved heterogeneity also seems important for finding cohort effects. Immigrants that arrived before 1976 faced a larger wage gap compared to native-born Australians than subsequent cohorts. Confirming other research, we find wage gaps for immigrant men and women from non-English speaking backgrounds. All immigrants experience wage assimilation as time spent in Australia increases.