The benefits of a GED certificate for immigrants

During the past two decades, the United States has experience an influx of immigrants who are coming from relatively new regions of the world.  Although some immigrants coming from these newer countries are no less educated or skilled when compared to other immigrants in the U.S., the ratio of immigrant wages to native U.S. workers’ wages has declined over this period.  Historically employers valued an immigrant’s skills similar to a native U.S. worker because the education and work experience was known and very similar to what one would obtain in the U.S.  This paper asserts that the reason for the wage differential between today’s immigrants and native workers is due to the asymmetric information that employers have at the time of hiring.  Without previous knowledge of the content and quality of the foreign education, an employer is simply not willing to pay these workers the same as he would a U.S. native or an immigrant from better-known regions of the world, at least initially.  Obtaining a U.S. General Education Development (GED) certificate could signal to potential employers the quality of one’s education and hence improve the economic outcome of immigrants from lesser-known regions of the world.

Earning a GED certificate is one way to signal unobservable characteristics to employers.  Yet because the unobservables are of both cognitive and noncognitive in nature, the signal that a GED sends to potential employers is a mixed signal.  A GED recipient is likely to have greater cognitive abilities, which enhance wages, and at the same time he is likely to have lower noncognitive skills.  A native U.S. GED recipient is also a high school dropout who typically lacks the noncognitive skills that employers value like punctuality, motivation, and persistence.  This paper argues that for immigrants, the GED is not a mixed signal.  It is an effective and clear signal of a worker’s skills, both cognitive and noncognitive. 

Data for this study come from the U.S. Census Bureau’s American Community Survey (ACS), which is an annual cross-section survey of about 3 million U.S. households per year.  These data provide a good sample of not only U.S. natives but also the immigrant population in the U.S.  Unlike other data sources, both legal and illegal immigrants are surveyed.  Moreover, the ACS distinguishes GED recipients from traditional high school graduates.  Using the 2009 sample, preliminary OLS results show, after controlling background characteristics, an immigrant who obtains a GED has higher logged earnings than similar natives with GEDs or immigrants without one.  Moreover, limiting the analysis to only immigrants, the rate of return to obtaining a GED is compared across the immigrants’ home countries.  Immigrants from those regions that are now the predominant source of U.S. immigrants benefit more from obtaining their GED than do other immigrants.  Despite inferior quality of schools that are likely to exist in newer regions, GED recipients from nations where student-teacher ratios are relatively high or the average education levels are low benefit more than those immigrants from more developed nations.