Effects of Ethnic Enclosure of Neighborhoods, Workplace, and Industrial Sectors on Earnings

Effects of Ethnic Enclosure of Neighborhoods, Workplace, and Industrial Sectors on Earnings Eric Fong (University of Toronto) and FengHou (Statistics Canada)

Introduction (1) • Group boundaries • applying of the concept: the study of the economic attainments of racial and ethnic groups is to understand how levels of social enclosure in specific contexts, especially ethnic enclosure, affect economic attainments of groups. • Ethnic enclosure (in line with Barth’s (1969) early writing): occurs when groups are interested in reducing competition with other groups in a society • Social enclosure fosters in-group social interaction and facilitates ethnic solidarity • can organize their own communities and obtain available limited resources through competition and cooperation with other groups.

Introduction (2) • Objectives: • focus on exploring how the levels of ethnic enclosure affect the earnings of minority groups • consider simultaneously the effect of the enclosure level of ethnic boundaries in three different contexts: neighborhood, workplace, and industrial sector. • encompass the environments where individuals spend most of their time: at home and at work

Introduction (3) • Contributions • extend the discussion by comparing the effects of three contexts simultaneously • previous studies typically focused on only one type of ethnic boundary in relation to earnings • acknowledges that individuals are affected by ethnic boundaries in different contexts, and that the ethnic enclosure levels of these contexts can be different • we explore the joint effects of the ethnic enclosure levels of different contexts • offer a more comprehensive understanding of the effects of ethnic enclosure and provides a more realistic picture

Ethnic Boundaries in Neighborhoods • Early writing about the assimilation of minority groups - zero-sum relationship between ethnic enclosure and participating in the wider society. • assume that a higher level of ethnic enclosure implies “structural homogeneity” (Blau). • The homogeneity of the ethnic enclosed environment, though facilitate solidarity within the group, confines social contact and limit access to economic opportunities of the wider society. • Recent studies still echo the line of reasoning (xxxx).

Ethnic Boundaries in Neighborhoods • The negative view of ethnic clustering in neighborhoods and earnings of ethnic members has been challenged in recent years. • Studies have argued that co-ethnic members cluster in neighborhoods facilitates the development of ethnic bounded social capital. • fosters social support among members of the group • close proximity and frequent interaction in the neighborhoods • opportunities to interact and, with trust, are more willing to share job information among each other. • job referral. • to seek and, reciprocally willing to provide informal advise in the marketplace. • Social capital developed in the co-ethnic neighborhoods among co-ethnic members “offer(s) a better route to upward mobility.”

Ethnic Boundaries in Neighborhoods Hypothesis 1: The level of ethnic concentration in neighborhoods is negatively related to the earnings of co-ethnic residents. Hypothesis 2: The level of ethnic concentration in neighborhoods is positively related to the earnings of co-ethnic residents.

CO-ETHNIC WORKPLACE CONCENTRATION • Ethnic businesses are operated in an ethnic enclosed environment • provides ethnic-specific products and services best served by ethnic members • knowledge and familiarity with the co-ethnic products and services give them an almost monopolistic access to co-ethnic customers • This working environment with distinctive ethnic boundaries creates economic opportunities for co-ethnic workers

CO-ETHNIC WORKPLACE CONCENTRATION • ethnic businesses are largely governed by the mechanism of co-ethnic paternalism • employers of ethnic businesses emphasize on loyalty and subordination from their employees in return of favorable treatment. • Relying on the informal arrangement and ethnic networks considerably reducing operation costs. • important alternative path to economic advancement for co-ethnic members

CO-ETHNIC WORKPLACE CONCENTRATION • ethnic employers benefit more than workers, as they have access to the enclosed co-ethnic labor market. • to reduce their costs and maximize their economic returns, through the ethnic-based paternalistic relationships that emphasize loyalty, employers usually put co-ethnic workers in situation to working long hours at lower wages. • to control the performance of employees through group expectation and social pressure

CO-ETHNIC WORKPLACE CONCENTRATION • the mechanism of co-ethnic paternalistic relationship in ethnic businesses can be weakened with a lower level of ethnic enclosure. • the paternalistic relationship that emphasizes loyalty is weakened. • Employees may maximize their economic gains by demanding wages and working conditions that are comparable to those in the wider market. • recruitment may rely less on personal ethnic networks, employees in these businesses are more likely to obtain their jobs through formal channels, such as employment agencies • conditions of job offers from ethnic businesses become more competitive. • These changes may result in higher operating costs and lower earnings for business owners.

CO-ETHNIC WORKPLACE CONCENTRATION Hypothesis 3: Higher earnings are associated with employers in businesses that have a higher proportion of co-ethnic members. Hypothesis 4: Higher earnings are associated with co-ethnic employees working in businesses that have a lower proportion of co-ethnic members

CO-ETHNIC INDUSTRIAL CONCENTRATION • co-ethnic businesses are over represented In an industrial sector • agglomeration creates economies of scale • benefitted from the co-ethnic trust and reciprocity, industrial concentration helps to lower transaction costs • helps to have more control in setting industrial standards and criteria that are favorable to their own operations

CO-ETHNIC INDUSTRIAL CONCENTRATION • NOT necessarily lead to advantages in earnings for employers • Microeconomic understanding of business behavior - a common pattern is that firms will enter an industrial sector as they see the potential for profit. • As competition increases, profit is quickly reduced. Equilibrium is reached when the marginal profit of firms is zero. • The earnings of employers will decrease as the co-ethnic proportion in an industrial sector increases.

CO-ETHNIC INDUSTRIAL CONCENTRATION • earnings of co-ethnic employees in highly enclosed industrial sectors lower than those of employees in less ethnically enclosed industrial sectors • ethnic industrial sectors could support only a limited number of businesses • With an abundant supply of co-ethnic labor, wages of workers will be kept low • clear boundary of the ethnic organizational ecology, union organizations are likely to be shut out from the industrial sector

CO-ETHNIC INDUSTRIAL CONCENTRATION Hypothesis 5: Lower earnings are associated with employers in industrial sectors with higher proportions of ethnic concentration. Hypothesis 6: Lower earnings are associated with employees in industrial sectors with higher proportions of ethnic concentration.

Joint Effect • “reachability” : increase the heterogeneity of network members, and in turn more information, support, and resources can be obtained • “structural hole” :networks generated in different co-ethnic contexts put co-ethnic members in a position to bridge different networks • position to activate resources from networks embedded in different contexts. If they have difficulty activating networks in one context, they can utilize networks in another co-ethnic concentrated context

Joint Effect Hypothesis 7: The joint effect of residing in co-ethnic neighborhoods, working in ethnic businesses, and working in ethnic concentrated industrial sectors is associated with higher earnings for both employers and employees.

Data • 2006Canadian Census 20% sample microdatafile • Groups: • 4 largest visible minority groups, Chinese, Black, Filipino, and South Asian • 2 large European ethnic groups, Italian and Portuguese • 8 largest metropolitan areas in Canada: Toronto, Montreal, Vancouver, Ottawa, Calgary, Edmonton, Winnipeg, and Hamilton

Data • include only individuals aged 20 to 65 who had positive earnings and worked at least one week in the year prior to the census • Dependent Variable log transformation of weekly earnings • Independent Variables • co-ethnic residential concentration: co-ethnic proportion in a census tract • co-ethnic workplace concentration: co-ethnic proportion of the population at a workplace • Co-ethnic concentration in industrial sector: odds ratios of co-ethnic industrial representaton • (Eij/Oij)/(Ej-1/Oj-1)

Control Variables • Educational level • Working experience: “age minus years of schooling minus 6”. • Full-time status • Gender • Marital status • Generational status: 1st generation, 1.5 generation, 2nd generation, and 3rd-and-higher generation • Official language ability : • Neighborhood Economic Standing : logged neighborhood median earnings. • Location of residence: a set of dummy variables, each representing one metropolitan area other than Toronto where the respondents reside. Toronto is used as the contrast metropolis.

Table 1: Observed and Expected Co-ethnic Percentage in Neighborhoods, Workplace and Industrial Sectors by Selected Groups and Class of Work, 2006

Table 2: Observed and Expected Co-ethnic Percentage in Neighborhoods, Workplace and Industrial Sectors by Selected Groups and Class of Work, 2006

Table 3: Effects of Co-Ethnic Concentration of Neighborhoods, Workplaces, and Industrial Sectors and Their Joint Effects on Earnings of Six Selected Groups, Controlling for Socioeconomic Background and City, 2006.

Conclusion • Strong support of the positive relationship of joint effect and earnings of employees • Ethnic enclosure is not necessarily a disadvantage for co-ethnic members. If co-ethnic members are “embedded extensively” in various co-ethnic contexts, the situation can have a positive relationship to their earnings. • Intensity and extensity of embeddedness • segmented assimilation, conflict results of previous findings on ethnic enclosure in specific context • ethnic enclosure levels affect the earning potential of workers and employers in different ways • the integration of the literature in entrepreneurship and life course with race and ethnic relations study is needed in the analysis of economic attainments of race and ethnic groups

Effects of Ethnic Enclosure of Neighborhoods, Workplace, and Industrial Sectors on Earnings