Color Lines, Country Lines: Race, Immigration, and Wealth Stratification in America

Chapter 2. A Theoretical Model for Wealth in an Era of Immigration

A Theoretical Model for Wealth in an Era of Immigration E xisting wealth theory no longer seems adequate to explain immigrants ’ wealth when we consider that, without an inheritance, some immigrants can achieve wealth attainment within a generation yet African Americans cannot. Can a simple addition of wealth theory and immigration theory lend insight to wealth stratification in an era of immigration? Although the second approach improves on the first one, the addition suffers two limitations. For one, immigration theory, which explains the decision to migrate and subsequent adaptation in the host society, largely ignores immigrants’ activities outside the labor market in credit or capital markets in either their host or their home country. The second limitation stems from the fact that the contemporary immigration is a large-scale population movement of self-selected individuals from countries with very different economic, political, and cultural characteristics that have varying historical and contemporary geopolitical relationships with the United States. Immigration can impact wealth strati fication and thus wealth outcomes for both immigrants and natives. This chapter takes on these theoretical challenges and develops an integrated framework that sheds light on the phenomenon of wealth stratification in the post-1965 immigration era. Immigrant wealth can differ from native wealth for a number of reasons . The sheer proportion of non-white immigrants, particularly Hispanics , brings the wealth level of immigrants as a whole down because of the racial-ethnic hierarchy inherent to the wealth distribution. In addition , the economic, social, political, and cultural conditions of origin countries and the migration process select different types of immigrants —such as professional versus labor, legal versus undocumented, economic versus refugee—each with different motivations. The combination of background, motivation, and reception lead to various assimilation processes. Finally, differences in economic behaviors between immigrants and natives can result in different strategies and outcomes in Chapter 2 13 wealth accumulation. To help us better understand the rationales behind these complex processes, in this chapter I systematically review three relevant theories and develop an integrated framework to guide the analyses that follow. The first relevant theory is about the racial-ethnic stratification of wealth. The second is about international migration and assimilation. The third is about economic behaviors in wealth accumulation. Racialethnic stratification theory addresses the macro structural forces in the racial-ethnic hierarchy and residential racial segregation that shape the wealth distribution. International migration theories provide rationales for potential migrants’ engaging in cost-benefit calculations, minimizing risks facing their households, drawing on network resources to reduce migration costs, and making migration decisions under the bi-national migration system of the origin and destination countries. Whereas international migration theories deal with decisions and actions taken during the migration process, assimilation theories deal with immigrants’ lives after arrival in the United States. This discussion will address classical assimilation, transnationalism, segmented assimilation, and the new assimilation . Economic theories of wealth accumulation focus on microlevel factors generating households’ life cycle income, consumption, saving , and portfolio allocation behaviors. Together, the three theories constitute a useful basis for an integrated framework in which to understand race, immigration, and wealth stratification. This framework is featured by the conceptual treatment of the structure of a multifactor stratification system, from which immigration’s impact on wealth strati- fication can be predicted; the development of a typology of wealth regime, which extends wealth theory; and use of the notion of wealth attainment , which extends assimilation theory. Theories on International Migration Douglas Massey and his colleagues (1993) provide a comprehensive survey of multidisciplinary theories on international migration, including neoclassical economics, new economics, world systems theory, segmented labor market theory, and cumulative causation of migration theory . George Borjas’s (1987) relative inequality theory postulates that relative inequality between the sending and receiving countries determines positive versus negative self-selection of immigrants. Neoclassical Economics of Migration According to the neoclassical economic theory of migration, geographic differences in the supply and demand for labor are the driving force behind international migration (Ranis and Fei 1961). Countries with abun14 Color Lines, Country Lines dant capital but limited labor are generally characterized by high wages, and countries with limited capital but abundant labor by low wages. This imbalance generates the current of labor flows from low-wage to high-wage countries. At the micro level, potential migrants calculate the relative benefits and costs of migration. Benefits are generally the higher wages expected in the...