Literacy and the Migrant–Native Wage Gap

Being able to read and write is one of the most important skills in modern economies. Literacy frequently is a prerequisite for employment and its relevance for productivity and wages is magnified by the fact that it is only through literacy that many other skills become usable. More so than for natives, this argument applies to migrants: even those with high levels of human capital acquired in the country of origin often have it rendered worthless by the absence of literacy in the host‐country language. Using novel data from a large‐scale German adult literacy test (“leo.—Level‐One Studie”, or “LEO”), we investigate the determinants of literacy and show that migrants have systematically lower language skills than natives. We find that any observed raw employment and wage gaps between natives and migrants can be fully explained by these differences.     

Do Australian Qualifications Help? The Effect of Host Country Qualification on Migrant Participation and Unemployment*

The current Australian migration program rewards applicants for possessing Australian tertiary qualifications. This study examines whether such qualifications help mitigate the labour market disadvantages faced by immigrants in Australia. The effect of host country qualification on labour market assimilation is estimated by comparing the labour force participation and unemployment of natives with two groups of migrants: those holding foreign qualifications and those holding Australian qualifications. Controlling for factors such as level of education and experience, there is no evidence that Australian qualifications result in better labour market outcomes for migrants.     

SOCIAL DEPRIVATION OF IMMIGRANTS IN GERMANY

This paper investigates the extent to which immigrants in Germany are socially deprived compared to German natives. We demonstrate that when using a conventional definition of the social deprivation index typically applied in the literature, immigrants do not necessarily appear to be socially deprived. We propose a weighting scheme that weights components of social deprivation by their subjective contribution to an overall measure of life satisfaction. Using this weighting scheme to calculate an index of social deprivation, we find that immigrants experience a significant degree of social deprivation, confirming much of the economic literature examining the economic assimilation of immigrants in Germany. This result is driven by particularly high weights being attributed to employment. Also the size of the groups “in need” is smaller when using the innovative weighting scheme, allowing a more precise targeting of economic policy.     

The role of social networks in determining migration and labour market outcomes

This paper empirically examines social network explanations for migration decisions in the context of German reunification. Using longitudinal data from the German Socio‐Economic Panel, we first show that the presence of a family in West Germany is an important predictor for the migration hazard rate of East Germans. We then explore whether pre‐migration networks have a discernible impact on the economic and social assimilation of East German immigrants in West Germany. We find that East German immigrants are more likely to be employed and to hold higher paying jobs when socially connected to the West prior to emigrating.     

Parental Background Matters: Intergenerational Mobility and Assimilation of Italian Immigrants in Germany

We investigate the hypothesis of failed integration and low social mobility of immigrants. An intergenerational assimilation model is tested empirically on household survey data and validated against registry data provided by the Italian Embassy in Germany. Although we confirm substantial disparities between educational achievements of immigrants and natives, we find that the children of Italian immigrants exhibit high intergenerational mobility and no less opportunity than natives to achieve high schooling degrees. These findings suggest a rejection of the failed assimilation hypothesis. Additionally, we evaluate different patterns by time of arrival, Italian region of origin and language spoken at home.     

The effects of immigration in frictional labor markets: Theory and empirical evidence from EU countries

Immigrants are newcomers in a labor market. As a consequence, they lack host-country-specific labor market knowledge and other country-specific and not directly productive valuable assets affecting their relative bargaining position with employers. We introduce this simple observation into a search and matching model of the labor market and show that immigrants increase the employment prospects of competing natives. To test the predictions of our model, we exploit yearly variations between 1998 and 2004 in the share of immigrants within occupations in 13 European countries. We identify the impact of immigrants on natives׳ employment rate using an instrumental variable strategy based on historical settlement patterns across host countries and occupations by origin country. We find that natives׳ employment rate increases in occupations and sectors receiving more immigrants. Moreover, we show that this effect varies depending on immigrants׳ characteristics and on host country labor market institutions which affect relative reservation wages.     

Immigrant job search assimilation in Canada

Immigrant assimilation is a major issue in many countries. While most of the literature studies assimilation through a human capital framework, we examine the role of job search assimilation. To do so, we estimate an equilibrium search model of immigrants operating in the same labour market as natives, where newly arrived immigrants have lower job offer arrival rates than natives but can acquire the same arrival rates according to a stochastic process. Using Canadian panel data, we find substantial differences in job offer arrival and destruction rates between natives and immigrants that are able to account for three quarters of the observed earnings gap. The estimates imply that immigrants take on average 13 years to acquire the native search parameters. Due to immigrants facing much lower on‐the‐job offer arrival rates than natives, the model predicts that earnings growth through job search is minimal for immigrants prior to their job search assimilation.     

Assimilation,labour market experience and earnings profiles of temporary and permanent immigrant workers in Germany

We test the assimilation hypothesis, as initially proposed by Chiswick (1978), by making use of a rich panel-data set for Germany, which permits us to allow for unobserved population heterogeneity and potential selectivity bias arising from an individual's remigration decision and employment behaviour. To take into account the institutional aspects of the German guest-worker system we use information on an immigrant's expected duration of stay in Germany to distinguish between temporary and permanent migrants and to test for differences in earnings/experience profiles with respect to a foreigner's expected duration of stay. We find that years of schooling in Germany have a strong positive effect on earnings, that earnings/experience profiles of guest-workers differ by expected duration of stay, and that the renumeration of labour market experience in Germany is higher for natives than for most foreigners. The assimilation hypothesis is therefore not supported by the evidence for Germany.     

Education, credentials, and immigrant earnings

Abstract.  Using 1981 to 2001 Census data, we study how the human capital of immigrants is rewarded in Canada. We distinguish between years of schooling and degrees obtained in order to estimate 'sheepskin' effects – the gain in earnings associated with receipt of a degree, controlling for years of schooling. We find that immigrant years of schooling and immigrant work experience accumulated before arrival is valued much less than Canadian experience of comparable natives. However, for immigrants the increase in earnings associated with completing educational programs is generally higher than that of comparable natives. We provide both signalling and human capital interpretations of this finding.     

Employment, wages, and the economic cycle: Differences between immigrants and natives

In this paper, we analyse differences in the cyclical pattern of employment and wages of immigrants and natives for two large immigrant receiving countries, Germany and the UK. We show that, despite large differences in their immigrant populations, there are similar and significant differences in cyclical responses between immigrants and natives in both countries, even conditional on education, age, and location. We decompose changes in outcomes into a secular trend and a business cycle component. We find significantly larger unemployment responses to economic shocks for low-skilled workers relative to high-skilled workers and for immigrants relative to natives within the same skill group. There is little evidence for differential wage responses to economic shocks. We offer three explanations for these findings: an equilibrium search model, where immigrants experience higher job separation rates, a model of dual labour markets, and differences in the complementarity of immigrants and natives to capital.     

Patterns of Welfare Dependence before and after a Reform: Evidence from First Generation Immigrants and Natives in Germany

This paper studies the patterns of welfare dependence among first generation immigrants and natives in Germany before and after a substantial recent reform of the welfare system. Using data from the German Socio‐Economic Panel Study, the analysis presents life cycle trajectories of transfer receipt for immigrants and natives and studies the correlation between contextual factors and transfer receipt. We find no statistically significant differences in the probability of transfer receipt between immigrants and natives once socioeconomic characteristics are taken into account. Being a single parent, labor market status, and human capital are most closely correlated with the incidence of transfer receipt for both natives and immigrants. Interestingly, recent welfare reforms did not reverse prior patterns of welfare dependence.     

Local Labor Supply Responses to Immigration

How natives adjust is central to an understanding of the impact of immigration in destination countries. Using detailed labor force data for Malaysia for 1990–2010, we provide estimates of native responses to immigration on multiple extensive margins and rare evidence for a developing country. Instrumental variable estimates show that increased immigration to a state causes substantial internal inward migration, consistent with the fact that immigration increases the demand for native workers. Relocating Malaysian workers are accompanied by their spouses (three‐quarters of whom are housewives) and children who attend school. We find that these effects are concentrated among middle‐ and lower‐skilled Malaysians.     

Migration, unemployment and discrimination

This paper uses a dynamic efficiency-wage model to analyze the consequences of immigration for a small country when there is discrimination against immigrants in a dual labor market with unemployment. Discrimination is of the type ‘equal pay for equal work, but unequal work’ which is characteristic of economies with ‘guest-worker’ systems. The model exhibits three regimes for rising immigration levels. Immigration is most beneficial for natives in the intermediate regime. An analysis of regime switches shows that changes attributable to ‘globalization’ and technical progress are consistent with growing opposition to immigration.     

Is ethnic discrimination due to distaste or statistics?

Employing a vignette experiment, we test the empirical importance of key attitudes underlying the models of taste-based and statistical discrimination in explaining ethnic hiring discrimination. We find that employer concern that co-workers and customers prefer collaborating with natives drives discrimination.     

Cultural and economic integration of immigrant minorities: Analytical framework and policy implications

The cultural diversity that new immigrants bring to the host economy is potentially beneficial for the productivity of both immigrants and natives, but immigrants must assimilate to some extent for these benefits to be realized. In general, immigrants assimilate more slowly than natives would like, as they ignore the external material benefits of assimilation for natives and their resistance to foreign cultural influences. We develop a formal framework that highlights the complementarity between immigrants' cultural assimilation, economic integration, and investment in human capital, indicating the scope for mutually beneficial policies, offering immigrants material incentives to assimilate more rapidly.     

Assimilation to a Welfare State: Labor Market Performance and Use of Social Benefits by Immigrants to Finland*

This paper documents the economic performance of immigrants in a country characterized by an extensive welfare state and a short immigration history. Upon arrival, immigrants to Finland have substantially lower employment rates than comparable natives. While they experience rapid employment growth, only men from OECD countries catch up with natives. Despite the persisting employment and earnings differences between non‐OECD immigrants and natives, the differences in income transfers disappear in roughly 20 years. The immigrant–native employment gaps are larger in Finland than in Australia, Canada, or the US.     

Global labour markets,return, and onward migration

Abstract. There is increasing evidence that international migration is characterized by frequent return and onward migration. This has important consequences for the contribution of immigrants to the economy of the host country. Lack of longitudinal data has prevented much analysis of how frequently international migration involves a sequence of location decisions or how long the typical migrant stays in a host country. A newly available longitudinal data set covering all immigrants to Canada since 1980 provides the opportunity to address these issues. The results show that a large fraction of male immigrants who are of working age, especially among skilled workers and entrepreneurs, are highly internationally mobile.     

Wage Assimilation of Foreigners: Which Factors Close the Gap? Evidence From Germany

This study analyzes the development of the wages of male foreign workers from all important sending countries across time using longitudinal employment register data. A cohort analysis of the individuals entering the German labor market in the years 1999 to 2001 indicates that the raw wage gap of migrants compared to native Germans decreases by 14 log percentage points in the first eight years. The results of a decomposition method based on fixed effects regression models give evidence that this wage adjustment is mostly due to time‐varying observable characteristics. Selective return migration, and the trend effects play no role for the aggregate. We find that wage assimilation happens mainly through three channels: first, through the accumulation of firm‐specific human capital, which explains approximately 40 percent; second, search gains are approximately the same order of magnitude; and third, the accumulation of general human capital explains one‐fifth of the assimilation. We further demonstrate that the importance of these channels differs substantially by the origin groups.     

Expected job loss in East Germany shortly before German unification

We investigate expectations concerning future job loss in the former German Democratic Republic (East Germany) shortly before the economic, monetary and social union in July 1990. In order to model these expectations, we take detailed account of individual heterogeneity, the availability and interpretation of information, and the economic and social environment of the individual. Our data base is the Socio-Economic Panel (SOEP) East. We find that, with some exceptions, East Germans hold expectations comparable to those held by indivduals having experienced a market economy, which is surprising given the lack of such an economy in the previous German Democratic Republic.Since these expectations are only observed ordinally, an adequate estimation method is the ordinal logit model. The corresponding stochastic assumptions are tested extensively using pseudo-Lagrange multiplier tests against omitted variables, non-linearity, asymmetry of distribution and heterosedasticity. Furthermore, we apply Hausman tests to check the validity of the classification of the endogenous variable.     

Norm-Based Trade Union Membership: Evidence for Germany

Abstract. In the absence of closed shops and discriminatory wage policies, union membership can be explained by the existence of social norms. We describe a model, incorporating institutional features of the German labour market, which explicitly allows for social custom effects in the determination of union membership. Using panel data for Germany, we find evidence for according effects which restrict free‐riding. The impact of social norms tends to increase with net union density. Hence, observed reductions in the demand for union membership can weaken the impact of a norm and accentuate the free‐rider problem.