The steep drop in the incomes of non-citizen households is distinct from income trends among other groups. Median real income of non-citizen households declined from $40,617 in 2006 to $37,637 in 2007, or by 7.3%.7 The median income of naturalized citizen households also declined, but their loss of 1.5% appears minimal in comparison. In contrast, the median annual income of all U.S. households increased 1.3%, from $49,568 in 2006 to $50,233 in 2007 (Table 1). While the increase was modest, it was an improvement over the preceding year—from 2005 to 2006, household income in the U.S. increased only 0.7%.
The sharp reversal in the fortune of non-citizen households is not unprecedented in their recent economic history. Figure 1 shows the annual percentage change in the median real income of all households and non-citizen households from 1998 to 2007. The data illustrate that non-citizen households have been on an income roller coaster ride for the past 10 years. In contrast, economy wide fluctuations in incomes have been relatively shallow.8
Non-citizen household incomes increased rapidly from 1998 to 2000, as the economy reached the peak of an historic expansion. The incomes of non-citizen households increased 3.3%, 7.9% and 9.8% successively, in the three-year period from 1998 to 2000. The income gains made by non-citizen households during peak years of the economic expansion began to reverse as the economy entered a recession in 2001. The incomes of non-citizen households fell 4.2% in 2001 and decreased an additional 3.9% and 5.6% in 2002 and 2003.
The economic recovery that commenced in the middle of 2003 reestablished growth in earnings. The incomes of non-citizen households increased 2.4%, 2.8% and 4.1% in three consecutive years, from 2004 to 2006. But this growth halted and reversed sharply in 2007 as incomes dropped 7.3%. The cause for the latest setback appears to be the decline of activity in the construction industry, which shed more than 700,000 jobs in 2007 and caused a jump in the unemployment rate for foreign born and Hispanic workers. (Kochhar, 2008)
The ups and downs in the incomes of non-citizens can be illustrated for a hypothetical household earning $30,000 in 1997. Based on the growth rates shown in Figure 1, the inflation-adjusted income of this household would have peaked at $36,715 in 2000. Trends thereafter would have reduced the household’s income to $31,908 in 2003. Economic recovery from 2004 to 2006 would have led to renewed income gains, with household income reaching $34,966 in 2006. The latest setback in income growth would have reduced the income of this household to $32,414 in 2007, 11.7% less than the peak attained in 2000.9
Figure 1 also shows the trends in income for all U.S. households. Fluctuations in the incomes of all households are far less severe than in the incomes of non-citizen households. The highest increase for all U.S. households was 3.5% in 1998 and the largest drop was 2.2% in 2001.
Although non-citizen households experienced greater income instability, their incomes increased by more than average in the past 10 years. The cumulative effect of the ups and downs was to raise household incomes for non-citizens by 8.0%—from $30,000 in 1997 to $32,414 in 2007 for the hypothetical household. However, for all households in the U.S., incomes increased only 5.6% on average—from $30,000 in 1997 to $31,682 in 2007 for a hypothetical household.10