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Immigrants to Australia are selected on observable characteristics. They may also differ from natives on unobservable characteristics such as ambition or motivation. If we account for unobservable differences, we find a wage gap for immigrant men from English-speaking backgrounds, in contrast with previous research which has found no wage gap. Controlling for unobserved heterogeneity also seems important for finding cohort effects. Immigrants that arrived before 1985 faced a larger wage gap compared to native-born Australians than subsequent cohorts. Confirming other research, we find wage gaps for immigrant men and women from non-English-speaking backgrounds (NESBs). Wage assimilation occurs slowly for all groups, but is slowest for those from NESBs.
