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Journal Issue: Opportunity in America Volume 16 Number 2 Fall 2006

Making It in America: Social Mobility in the Immigrant Population
George J. Borjas

Ethnic Capital and Social Mobility

The finding that the intergenerational correlation in the relative wage of ethnic groups is around 0.5 raises an important puzzle. Many studies conclude that about 20 to 40 percent of the skill differences among parents are typically transmitted to their children.17 Ethnic wage differences thus seem more persistent than one would expect simply from the intergenerational correlation between parents and children.

To solve this puzzle, some have argued that a person's ethnic background—in and of itself—may affect social mobility.18 In particular, the skills of the next generation depend not only on what parents do, but also on “ethnic capital,” or the characteristics of the ethnic environment where the children are raised. A highly advantaged ethnic environment— one where most parents are college graduates, for example—imbues children with valuable characteristics that enhance their socioeconomic achievement later in life. In contrast, disadvantaged ethnic environments— those where most parents may be high school dropouts or welfare recipients— imbue children with characteristics that may impede future socioeconomic achievement. In effect, the ethnic environment is like glue in the process of social mobility, ensuring that the average characteristics of the ethnic group do not change much from generation to generation.

To illustrate the link between ethnic capital and social mobility, consider the children of hypothetical Mexican and Korean families. Suppose the parents in these two families have a similar socioeconomic status. Even though the parents are, say, high school graduates, the child in the Mexican household will likely grow up in an ethnic enclave where many of the neighbors are high school dropouts and where few of the child's friends go on to college. In contrast, the child in the Korean household will likely grow up in an area where many neighbors have some college education and where many of the child's friends will go on to college.

If ethnic capital matters—in other words, if exposure to different types of ethnic influences has an effect on social and economic development—the two children in this hypothetical example are on different socioeconomic paths that will lead to very different life experiences. The Mexican child will be continually exposed to cultural and economic contacts common among low-educated workers, while the Korean child will be exposed to contacts that are common among college graduates. The ethnic capital hypothesis argues that continual exposure to a particular type of ethnic capital tends to “pull” the child toward the average or norm in that ethnic group. In other words, ethnic capital is like a magnet—attracting the child toward the socioeconomic outcomes experienced by the typical person in the particular ethnic group. In effect, ethnic capital increases the persistence of ethnic wage differences across generations.

Many studies have shown that ethnicity seems to have an independent effect—above and beyond that of parental socioeconomic status—on the outcomes of children in particular ethnic groups and that much of that effect can be directly linked to the importance of ethnic enclaves, which tend to cluster workers with relatively similar socioeconomic characteristics into a very compact geographic area.19  In rough terms, about half of the persistence in the relative wage of different ethnic groups seems to be attributable to ethnic capital.

It is worth emphasizing that the mix of factors that makes ethnic capital socially important may differ significantly across ethnic groups and across ethnic enclaves. A recent study of ethnic neighborhoods in Los Angeles found that local social organizations and businesses in Chinatown and Koreatown are dominated by the respective ethnic groups, while those in Pico-Union (a Mexican–Central American immigrant neighborhood) tend to be much more mixed.20 The Chinese and Korean owners of small businesses tend to attend local churches in their respective ethnic enclave, eat at local restaurants, and shop at local stores alongside the working class Chinese and Korean immigrants. Such interactions, however, are rarer in Pico-Union. Because the social and economic consequences of these different types of interactions are not fully understood, much work remains to be done in delineating how ethnic capital helps or hampers the assimilation process for different ethnic groups.