Does citizenship matter? The economic impact of naturalizations in Germany

This paper analyses whether citizenship acquisition affects the labour market performance of immigrants in Germany. The study uses actual micro data from the employment sample of the Institute for Employment Research, which covers more than 80% of the entire labour force in Germany. The econometric analysis has been carried out using panel data techniques, which allow to disentangle the effects of self-selection and legal impact of citizenship acquisition. Estimates from a pooled OLS specification suggest the existence of a wage premium for naturalized immigrants of both genders. Fixed effects estimates for males show an increased wage growth in the years following naturalization, consistent with the argument that naturalization increases the labour market opportunities of immigrants. Results for female employees indicate that the wage premium of naturalized women is solely the result of a positive self-selection process.     

Brexit and immigration

• Net inward migration from the EU has been running at record levels in recent years, although the steep increase in new National Insurance numbers issued suggests that the official data may be understating the level of immigration. There was a clear step up in inflows after both expansions of the EU into central and eastern Europe, while the relative strength of the UK labour market has been an important driver of the more recent rise in inflows.
• High levels of immigration have helped to offset the impact of an ageing population and ensured that the UK has enjoyed stronger labour supply growth than many of its peers. With migrants typically being better educated than their UK‐born counterparts, the quality of the stock of labour has also improved, and migrants have been found to have a net positive fiscal impact.
• But there have been some downsides, with evidence that high immigration has had a small dampening impact on wages. That migrants tend to head to London and the other southern regions over other destinations has exacerbated the imbalances in regional housing markets.
• Given that a desire to have greater control over immigration is usually one of the key motivations for those favouring Brexit, a vote in favour of leaving the EU is likely to see the UK abandon the policy of free movement of labour. This would probably see the UK extend the points‐based system that it currently uses for non‐EU countries to include EU migrants.
• Our modelling suggests that the adoption of a ‘populist’ immigration policy which lowers net inward migration by 60,000 a year could reduce the level of GDP by 1.1% in 2030 compared with our baseline forecast.

     

Intra‐European labour migration and low‐wage competition—comparing the Danish and Swedish experiences across three sectors

The article compares how low‐wage competition and labour migration from EU11 Member States affect industrial relations and working conditions for natives and migrants in three sectors (transport, cleaning and agriculture) in Denmark and Sweden. The analysis shows how already vulnerable sectors with below‐average union density and collective agreements—especially geographical dispersed sectors—are strongly affected.     

A firm level perspective on migration: the role of extra-EU workers in Italian manufacturing

A production-theory approach to migration is adopted in this paper to address the role of migrant workers from extra-EU countries in Italian manufacturing firms. The adoption of flexible functional forms to model firm-level technology lets us directly derive different measures of elasticity from the coefficients of the estimated production and cost functions. The use of foreign labour is shown to affect the industry composition in favour of low skill intensive sectors and the estimated cross demand elasticities confirm the complementarity between migrant and native workers found in previous studies. However, the two labour inputs prove to be substitutes in terms of the Morishima elasticity of substitution: in general, firms tend to increase the foreign labour intensity of production in response to a decline in migrants’ wage, while the migrant to domestic labour ratio responds to changes in the domestic workers’ wage only for firms in low skill intensive sectors.     

A Meta‐Analytic Assessment of the Effect of Immigration on Wages

Abstract.  In our increasingly interconnected and open world, international migration is becoming an important socioeconomic phenomenon for many countries. Since the early 1980s, many studies about the impact of immigration on host labour markets have been undertaken. Borjas (2003 , The labor demand curve is downward sloping: reexamining the impact of immigration on the labor market. Quarterly Journal of Economics 118(4): 1335–1374) noted that the estimated effect of immigration on the wage of native workers varies widely from study to study and sometimes even within the same study. In addition, these effects cluster around zero. Such a small effect is a rather surprising outcome, given that in a closed competitive labour market an increase in labour supply may be expected to exert a downward pressure on wages. We revisit this issue by applying meta‐analytic techniques to a set of 18 papers, which altogether generated 348 estimates of the percentage change in the wage of a native worker with respect to a 1 percentage point increase in the ratio of immigrants over native workers. While many studies in our database employ US data, estimates are also obtained from Germany, The Netherlands, France, Norway, Austria, Israel and Australia. Our analysis shows that results vary across countries and are inter alia related to the type of modelling approach. Technical issues such as publication bias and quality of the estimates are addressed as well.     

THE IMPACT OF IMMIGRATION ON THE LABOR MARKET

The literature on the impact of immigration on the labor market is highly controversial. The aim of this paper is to review the existing literature and draw some general conclusions on how wages and employment respond to immigration. Economic studies indicate that the impact of immigration on the average wage and employment of native workers is null or slightly positive. However, because adjustments take time, the immediate labor market effects of unexpected (as opposed to expected) migration episodes can be detrimental. Immigration also can have distributional consequences. In particular, the skill composition of immigrants matters in determining their impact on native labor market outcomes. An inflow of immigrants will tend to reduce the wages of competing native workers (with skills similar to those of the migrants), and increase those of complementary workers (with skills that complement those of immigrants). By affecting the skill composition of the workforce, immigration can create winners and losers among native workers via changes in the wage structure.     

MEASURING HUMAN CAPITAL AND ITS EFFECTS ON WAGE GROWTH

Abstract Ever since Mincer, years of labour market experience were used to approximate individual's general human capital, while years of seniority were used to approximate job‐specific human capital. This specification is restrictive because it assumes that starting wages at a new job depend only on job market experience. In this paper, I investigate the effects of human capital on wage growth by using a more flexible specification of the wage equation, which allows for a rich set of information on past employment spells to affect the starting wages. In addition, I endogenize the labour mobility decision. In order to illuminate the effects of human capital accumulation patterns on wage growth, I compare counterfactual career paths for representative individuals.     

Egyptian men working abroad: Labour supply responses by the women left behind

Female labour force participation has remained low in Egypt. This paper examines whether male international migration provides a leeway for women to enter the labour market and/or to increase their labour supply. In line with previous studies, we find a decrease in wage work particularly in urban areas. However, women living in rural areas and affected by migration are much more likely to be employed in non-wage activities (i.e. unpaid family work) and subsistence work compared to women in non-migrant households. Furthermore, we find evidence that this labour supply response is driven by the household's need to replace the migrant's labour rather than by a loosening of a financing constraint on family enterprises made possible by the flow of remittances.     

The migration response to local labour market shocks: Evidence from EU regions during the global economic crisis

The global economic crisis has strongly affected Europe's economic geography. This study investigates the role of local labour market disparities in determining regional net in‐migration rates. While only a weak link is detected in the precrisis period, the local labour market context of migration grows significantly stronger during the crisis. Decompositions of the estimation results show that changes in migration rates are firstly a result of widened disparities across European regions throughout the crisis. However, also behavioural adjustment processes occur, e.g. an orientation of migrants towards urban areas and away from regions with persistently high long‐run unemployment rates.     

Migrants Encounter Migrants in the City: the Changing Context of ‘Home’ for Second‐Generation Greek‐American Return Migrants

This article looks at the ‘return’ migration of second‐generation Greek Americans to their parents’ homeland, Greece. It is based on interviews with, and written accounts supplied by, 40 participants in the research, all now living in the Athens region. The article addresses two main sets of questions. First, why do they relocate to Greece, what are they looking for, and how do they cope with difficulties and disappointments? Second, and more specifically, how do they react to the fact that Greece is no longer a homogenous hellenistic society, but has become in recent years a de facto multicultural one due to the presence of hundreds of thousands of immigrant workers and their families? Three hypotheses are proposed for this inter‐migrant encounter: returnees, shocked by the ‘new immigration’, view it negatively as upsetting the ‘pure Greek’ homeland they had hoped to find; returnees are more sympathetic because of their own families’ history as immigrants in multicultural America; and returnees differentiate themselves as ‘good’ migrants from Greece’s immigrants who are constructed as ‘bad’ migrants. Evidence from the migrants’ testimonies is found to support all three hypotheses; however, there is more support for the second one. In addition, a fourth outcome was voiced: that of discrimination against Greek Americans who are made to feel, in certain circumstances, outsiders by the ‘true’ Greeks. Suggestions are made for further comparative research.     

Tighter labour markets to finally lift global wages

• Wage growth has been relatively slow since 2007 in advanced economies, but an upturn may be in sight. Slow productivity growth remains an issue but tighter labour markets make a positive response by wages to rising inflation more likely and there are signs that compositional and crisis‐related effects that dragged wage growth down are fading – though Japan may be an exception.
• Overall, our forecasts are for a moderate improvement in wage growth in the major economies in 2017–18, with the pace of growth rising by 0.5–1% per year relative to its 2016 level by 2018 – enough to keep consumer spending reasonably solid.
• Few countries have maintained their pre‐crisis pace of wage growth since 2007. In part this reflects a mixture of low inflation and weak productivity growth, but other factors have also been in play: in the US and Japan wage growth has run as much as 0.5–1% per year lower than conventional models would suggest.
• The link with productivity seems to have weakened since 2007 and Phillips curves – which relate wages to unemployment – have become flatter. A notable exception is Germany, where the labour market has behaved in a much more ‘normal’ fashion over recent years with wage growth responding to diminishing slack.
• ‘Compositional’ factors related to shifts in the structure of the workforce may have had an important influence in holding down wage growth, cutting it by as much as 2% per year in the US and 1% per year in the UK. There are some signs that the impact of these effects in the UK and US are fading, but not in Japan.
• The forecast rise in inflation over the next year as energy price base effects turn positive is a potential risk to real wages. But the decline in measures of labour market slack in the US, UK and Germany suggests wages are more likely to move up with inflation than was the case in 2010–11 when oil prices spiked and real wages fell.

     

Can consumers continue to lean against the real wage squeeze?

This has been no ‘normal’ consumer recovery. The emphasis on rising employment levels, rather than wage growth, to drive the improvement in real incomes means that while the collective spending power of UK households has strengthened, many individual households continue to feel squeezed. A tightening labour market and emerging skills shortages will improve workers' wage bargaining power, but progress will be gradual and, for many workers, limited by the impact of further strong growth in the labour supply. Therefore, with little scope for households to further reduce the share of income saved, consumer spending growth is likely to remain relatively subdued, lagging well behind the growth rates achieved over the decade prior to the financial crisis.     

From the dark end of the street to the bright side of the road? The wage returns to migration in Britain

We examine the impact of internal migration in Britain on the growth in men's hourly wages using nationally representative panel data. To do this we compare wage outcomes for migrants against different control groups, and explicitly allow for the potential endogeneity of the migration decision. Our results demonstrate the existence of a wage growth premium to migration. The size of this premium depends on any associated job mobility and the reason for migration, and is largest for continuously employed men who migrated for job related reasons. The wage profiles of migrants and other workers diverge substantially in the two years post-migration.     

Regression‐Kink Approach for Wage Effect on Male Work Hours

In finding the effect of after‐tax wage rate on work hours, the main difficulty is the endogeneity of after‐tax wage rate that equals ‘one minus average tax rate’ times wage rate. To overcome this endogeneity problem, we take advantage of jumps in the marginal income tax rate, which is a regression discontinuity (RD) idea. This RD, in turn, makes the average income tax rate ‘kink‐continuous’, which is a regression kink (RK) idea. We provide a simple economic model resulting in the RD and RK features, explain how to implement RK in practice, and then apply our methods to Korean male data. Our main RK‐based labour supply elasticity estimate 7.16% turned out to be insignificant with t‐value 1.52, but it is much larger than most estimates in the literature. This may be attributed to, among other things, the facts that the RK instrument is unique, that RK identifies only the local elasticity at the kink point and that RK requires large data as regression derivatives are estimated.     

Broker imposed precarity of Indian technical immigrants

The primary purpose of this article is to investigate the labour supply chain of Indian technical immigrants in the United States. The two important findings that emerge are as follows: First, the study unearths a latent phenomenon of broker‐induced precarity that results from the labour supply chain and explores how aspirational jobs are becoming precarious ones. Second, the study provides a foundation for devising policies and interventions to make the process of the labour supply chain less detrimental to the Indian technical immigrants. This article draws on a seven‐month‐long field‐based qualitative study and ensures a meticulous triangulation of the findings through an analysis of archival data and actual artefacts related to manpower movement across the labour supply chain.     

Job mobility and the gender wage gap in Italy

This paper investigates the contribution of gender differences in job mobility to the emergence of a gender wage gap in the Italian labour market. We show that over the first 10 years of labour market experience job mobility accounts for up to 30% of total log wage growth for men and only 8.3% for women, and that this difference is mainly due to differences in returns to mobility. The gender mobility gap is robust to the inclusion of individual, job and firm characteristics, to different ways of accounting for individual unobserved heterogeneity, and is mainly found for voluntary job moves. Looking at the characteristics of the jobs and the firms' workers move to, we find that moves to larger firms represent by far the main source of gender differences in returns to mobility. We offer two possible explanations for this finding; one which involves differences in bargaining behaviour and one which relates to the theory of compensating differentials.     

How low can U go?

• ? Although there is growing evidence that wage growth is building in response to low and falling unemployment in the advanced economies, there is scope for unemployment rates to fall further without triggering a pay surge.
• ? For a start, current unemployment rates in comparison to past cyclical troughs overstate the tightness of labour markets. Demographic trends associated with the ageing ‘baby boomer’ bulge have pushed down the headline unemployment rate – unemployment rates among older workers are lower than those of younger cohorts. And in a historical context, Europe still has a large pool of involuntary part‐timers.
• ? In addition, rising participation rates mean that demographics are less of a constraint on employment growth than widely assumed. In both 2017 and 2018, had it not been for increased activity rates (mainly for older cohorts), unemployment would have had to fall more sharply to accommodate the same employment increase. We expect rising participation rates to continue to act as a pressure valve for the labour market.
• ? Finally, unemployment rates were generally far lower during the 1950s and 1960s than now. If wages stay low relative to productivity, as was the case during that prior era, employment growth may remain strong, with unemployment falling further. In the post‐war era, low wages were partly a function of a grand bargain in which policy‐makers provided full employment in return for low wage growth.
• ? There is evidence to suggest that many post‐crisis workers have opted for the security of their existing full‐time job and its associated benefits despite lower wage growth, rather than change job and potentially earn more; the rise of the ‘gig economy’ has led some workers to value what they already have more. Put another way, the non‐accelerating inflation rate of unemployment (NAIRU) has fallen. So, the role of labour market tightness in pushing wage growth higher may continue to surprise to the downside.

     

Spatial changes in labour market inequality

We study spatial changes in labour market inequality for US states and MSAs using Census and American Community Survey data between 1980 and 2010. We report evidence of significant spatial variations in education employment shares and in the college wage premium for US states and MSAs, and show that the pattern of shifts through time has resulted in increased spatial inequality. Because relative supply of college versus high school educated workers has risen faster at the spatial level in places with higher initial supply levels, we also report a strong persistence and increased inequality of spatial relative demand. Bigger relative demand increases are observed in more technologically advanced states that have experienced faster increases in R&D and computer usage, and in states where union decline has been fastest. Finally, we show the increased concentration of more educated workers into particular spatial locations and rising spatial wage inequality are important features of labour market polarization, as they have resulted in faster employment growth in high skill occupations, but also in a higher demand for low wage workers in low skill occupations. Overall, our spatial analysis complements research findings from labour economics on wage inequality trends and from urban economics on agglomeration effects connected to education and technology.     

Surviving on the Margins of the Economy: Working Relationships in Small,Low‐Wage Firms*

abstract How do small low‐wage firms continue to survive on the margins of a modern economy? Continuous restructuring provides a set of spaces but what sorts of firm occupy them and how far do these firms exercise active choice? Four research projects, embracing data on 123 firms, have offered empirical analysis. The present paper draws together these projects and derives an analytical framework linking the product and labour market contexts of small firms with their family context. Survival reflects the continued supply of labour through kinship networks and the ability of firms to respond actively to product market opportunities. The value of the framework for small‐firm research generally is illustrated through discussion of further lines of inquiry.     

Seasonality and Wage Responsiveness in a Developing Agrarian Economy

This paper studies the wage responsiveness of labour supply and demand, simultaneously addressing the twin issues of the non-clearing of developing rural labour markets and seasonality. It employs a data set pertaining to south-central India, and limits itself to the agricultural market for daily-rated labour (by far the predominant form of wage contract in the sample villages). Estimating a theoretically robust and empirically justified disequilibrium model of the agricultural labour market, we find no evidence of backward-bending supply curves or 'vertical' demand curves, contrary to findings in the literature. Further, while the agricultural labour market appears to be in equilibrium during the kharif (or rainy) season, it manifests excess supply in the rabi (or post-rainy) season.