On February 8, 2013, I published an article on the economic state of the American middle class and how that might affect the U.S. stock market. One of the strands of comments to that article focused on immigrants and their economic role. Some of the comments were informative. Some others were a bit one-sided. I have singled out one of those comments for response, as a way of leading into the important subject of the likely economic impact of the large number of second-generation immigrants now growing up in our cities.
When we discuss this subject, we should bear in mind that almost all of us are immigrants or descendants of immigrants, that most of our first-generation forebears were poor, and that almost wherever they came from, when they got here, they were discriminated against for being dirty, dumb and different. They also were excoriated because they were willing to work at messy or brutal jobs for low pay, thereby driving down the wages of "honest Americans." This was true regardless of whether our forbears were Irish, Italian, German, Chinese, Japanese or Jewish from Eastern Europe. And not only did Americans already here discriminate against all those immigrant groups, the various groups also discriminated against and warred with the other contemporaneous immigrants. Yet gradually, we all became Americanized, and by the third generation, our national or ethnic origin began to fade into the background.
The comment that I am using as grist for my mill alleged as follows regarding our Latino immigrants: "As for the 'hard working' immigrants - that's maybe true for a large portion of the first generation. Their children, however, seldom share that work ethic. Their entry into the entitlement mentality of the American underclass is pervasive."
Coincidentally, on February 7, 2013, Pew Research Social & Demographic Trends released a new report titled "Second-Generation Americans: A Portrait of the Adult Children of Immigrants." The report finds as follows:
Second-generation Americans -- the 20 million adult U.S.-born children of immigrants -- are substantially better off than immigrants themselves on key measures of socio-economic attainment, according to a new Pew Research Center analysis of U.S. Census Bureau data.
They have higher incomes; more are college graduates and homeowners; and fewer live in poverty. In all of these measures, their characteristics resemble those of the full U.S. adult population.
Hispanics and Asian Americans make up about seven-in-ten of today's adult immigrants and about half of today's adult second generation. The second-generation of both groups are much more likely than immigrants to speak English, to have friends and spouses outside their ethnic or racial group, to say their group gets along well with others and to think of themselves as "a typical American," according to Pew Research surveys.
This Pew report is consistent with earlier data and reports on second generation immigrants. For good and ill, Latino and Asian second generation Americans tend to become much more like their American age cohort than like their parents. As Pew found, they make more money, are more likely to own their own homes, and are more likely to have gone to college.
Some of the comments that followed the one I have quoted above also noted the high level of births and the high level of non-marital births among the Latino community, suggesting, perhaps, that America is about to be overrun by these fecund, feckless people. That of course is reminiscent of what American Protestants said about the Catholic Irish and Italian immigrants. But more important for present purposes is how fast the demographic picture of the Latino-American culture is changing.
Although non-marital births have tended to be very high among Latino women, the level of non-martial births among the second generation Latino woman is much lower and is trending toward the Americana mean. (Admittedly the American mean is a high level of about 40%, with whites alone at 29%). Just as non-marital births among American-born Latino women are significantly lower than among foreign born Latino women, the fertility rate among Hispanic women, as reported by the National Center for Health Statistics in October 2012, is declining-by an estimated six percentage points in 2011 alone. This may be a stunning leading indicator. Teenage pregnancies also are plunging in the Latino community.
Thus, although more Latino children now live in poverty than white or black children, that picture is beginning to change, as the Latino community assimilates. Whereas in 2010 (the most recent year for which I have data) the poverty rate among children of Latino immigrant parents was 40% and was 57% among children of single Latino mothers, among children of U.S.-born parents it was about 30%. See here. Small progress, some might say, but progress nevertheless. I regret that I do not have comparable data for other immigrant groups for the late 19th or early 20th century.
Asian Americans are following similar patterns of assimilation. Here is what Pew had to say about Asian Americans on the same topic of non-marital births:
"About three-in-ten (31%) of U.S.-born Asian women who had children recently are unmarried, compared with just 10% of all recent foreign-born Asian-American mothers. Among the U.S. population as a whole, about four-in-ten recent American mothers are unmarried. Even as births to single mothers have become more widespread in recent decades, Pew Research surveys find that a sizable majority of Americans believe this growing phenomenon has been bad for society. So in the eyes of the public, this appears to be a case of "downward assimilation" by second generation and later generations of Asian Americans to an increasingly prevalent-but still frowned upon-U.S. pattern of behavior."
Thus it appears that more recent immigrants are following the same basic path as earlier generations of immigrants. They become more and more like the American population as a whole.
At SA we like to relate discussions like this one to the economy and investments. My take on the impacts of Latino and Asian American assimilation is that they are likely to be positive, just as the impacts of prior generations of assimilating immigrants have positively impacted America and its economy. Assimilating immigrants will earn more money, will have more education, and therefore will contribute more to the economy than their forebears could. If demography is destiny-and I believe that adage is close to correct-then our recent immigrants will help to make the U.S. economy grow. That, in turn, will be good for us as investors because in the long run, only a growing economy produces good investment results for the majority of investors.
These are long-term trends that I am discussing. But if you are not too aged, then long term-investing is the way to go, and our immigrant brethren will help future markets to make all of us wealthier. And, no, my name is not Dr. Pangloss. I am just an old New Yorker who perhaps visited the Statue of Liberty one time too many.