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Source: Authors’ calculations based on Table 1.
There is minimal change to the payoff to labour market experience for those born in Australia, with the reduction ranging from 7 to 15 percent. This implies that labour market experience has only a modest impact on occupational status for those born in Australia.
The control for occupation has a slightly greater impact on the payoff to pre-immigration experience for immigrants from English-speaking countries. This ranges from 12 to 23 percent. Among immigrants from non-English-speaking countries, the pattern of effects is quite different, with the payoff to pre-immigration labour market experience rising once account is taken of occupation. Evaluated at 10 years, the payoff to pre-immigration labour market experience rises from 0.5 percent per year in the benchmark model, to 0.66 percent (a 32 percent increase) following control for Major Group occupation. It rises further to 0.86 percent (a 72 percent increase over the benchmark model) when dichotomous variables for the 44 Census occupations are included in the model. These changes in the estimated effects as the earnings equation is augmented with information on occupation follow the pattern found for the US labour market by Chiswick and Miller (2007). Comparison of Table 2 for Australia and Table 3 for the US reveals that the changes in the effects of educational attainment on earnings following standardisation for occupation are broadly the same in Australia and the United States. While precise estimates of the differences in the relative magnitudes of the changes in Australia and the United States due to holding occupation constant are hard to assess, given the different definitions of the variables and the level of detail on occupation, it appears that inter-occupational earnings differences are greater in the payoff to education in Australia than in the US. This may follow from the more centralised system of wage determination, and perhaps greater union power, in Australia than in the US, and as a result the more egalitarian distribution of earnings within each occupation (see Miller, Mulvey and Martin, 1995).
Note: Only 11 percent of the foreign born were from English-speaking developed countries.
Source: Chiswick and Miller (2007).
(ii) Occupation Fixed Effects
Differences in the impact of occupation on earnings across the three birthplace groups can be assessed informally by plotting the fixed effects from the respective earnings equations. Figures 1 and 2, respectively, present the plot of the estimated occupational “fixed effects” coefficients from the model for the Australian born against the “fixed effects” coefficients for immigrants from English-speaking countries and non-English-speaking countries. The straight line AA in these figures is the simple regression of the coefficients on occupation for the Australian born on the coefficients for immigrants from English-speaking countries and non-English-speaking countries, respectively.5 These comparisons of the occupational fixed effects suggest that they are so close that they are not likely to be the main contributor to the different pattern of results across birthplace groups in Table 2. Given these findings, the explanation for the differences in the estimates of the earnings equation between the Australian born and the foreign born when occupation is held constant needs to focus on the partial effects of the explanatory variables on occupational choice.
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