HOW TO MEASURE LABOUR MARKET EFFECTS OF IMMIGRATION: A REVIEW

Abstract.  This paper surveys available empirical evidence on labour market effects of immigration. Many different approaches have been used already to try to find out whether immigration hurts the labour market opportunities of natives. No doubt new approaches will follow in the future as globalization will keep the migration issue on the agenda. This literature review discusses the different approaches concentrating on both the methodology and the results. At the end, it tries to summarize available evidence.     

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.     

Immigration policy and market institutions in liberal market economies

This article examines how the regulatory character of market institutions shapes government responses to labour shortages, with particular reference to immigration policy. The period between the late 1990s and the late 2000s saw many advanced economies relax entry controls on select categories of foreign workers. This trend was most pronounced among states with liberal market institutions. The underlying reasons for these trends are analysed through an examination of the motivations for reform in Australia and the UK, two states that oversaw significant liberalisations of their labour immigration policies. It argues that the liberal character of key market institutions encouraged firms in these states to look to external rather than internal solutions for meeting their labour requirements. These findings suggest that perspectives from the comparative political economy scholarship, most notably the varieties of capitalism literature, may provide insights into the way that different modes of market regulation shape immigration policy preferences.     

Earnings inequality,returns to education and immigration into Ireland

We examine what has happened to earnings inequality and the returns to education in Ireland between 1987 and 1997. We find that while both increased between 1987 and 1994, the increases slowed dramatically between 1994 and 1997. We look to immigration as being a contributing factor to this pattern because a large group of skilled workers flowed into the Irish labour market between 1994 and 1997. We develop a model of the Irish labour market and use it to simulate the impact of an increase in skilled labour. The simulation suggests that immigration did indeed reduce earnings inequality. This result is an interesting corollary to work from the US that shows the immigration of unskilled workers' increasing earnings inequality.     

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.

     

The Effects of Immigration on Household Services,Labour Supply and Fertility

Fertility and female labour force participation are no longer negatively correlated in developed countries. At the same time, increased immigration affects supply and prices of household services, which are relevant to fertility and employment decisions. This paper analyses the effect of immigration on labour supply and fertility of native women in the UK. Adopting an instrumental variable approach, I find that immigration increases female labour supply without affecting fertility. My results show that immigration increases the size of the childcare sector, and reduces its prices, suggesting that immigrants may ease the trade‐off between working and child rearing among native women.     

Gender discrimination in education,health, and labour market: a voice for equality

The objective of the study is to examine the impact of gender discrimination in education, health, and labour market on economic growth in a panel of 20 high-income OECD countries for the period of 1980–2015. In addition, the study proposed an index of pro-equality growth, which is flared with education, health, and labour market initiatives to promote economic growth. The results show that gender parity index for educational attainment significantly promotes economic growth while health and labour market required substantial policy reforms to reduce health and labour market inequalities to sustain long-term economic growth. The results classified three countries as highly equitable growth, one country for equitable growth, two countries are moderate growth, four countries are less equitable growth while remaining 10 countries fall in the category of inequitable growth, where greater inequality promotes economic growth on the cost of education, health, and labour market inequalities.     

The eurozone crisis,German hegemony and labour market reform in the GIPS countries

This article argues that the eurozone crisis has led to Germany hegemony, a feature of which has been complete resistance to a genuinely European solution to the crisis. German political leaders have sought to make the eurozone a more stable currency area by demanding far reaching labour market adjustment in the debtor countries of Greece, Ireland, Portugal and Spain, GIPS countries. This article assesses why Germany's leaders elected to act as a coercive hegemon and examines the labour market reform pathways being travelled by GIPS countries. It argues that the austerity regime enacted under German hegemony has obliged the GIPS countries to introduce important labour market reforms. However, these reforms have not threatened the integrity of established national systems of industrial relations. As a result a Euro war of attrition has opened up between the European core and periphery.     

The economic impact of migration: productivity analysis for Spain and the UK

Over the past 20?years labour has become increasingly mobile and whilst employment and earnings effects in host countries have been extensively analysed, the implications for firm and industry performance have received far less attention. This paper explores the direct economic consequences of immigration on host nations?? productivity performance at a sectoral level in two very different European countries, Spain and the UK. Whilst the UK has traditionally seen substantial immigration, for Spain the phenomenon is much more recent. Our findings from a growth accounting analysis show that migration has made a negative contribution to labour productivity growth in Spain and a negative but negligible contribution in the UK. This difference is driven by a positive impact from migrant labour quality in the UK. This finding broadly holds across all sectors, but we note considerable variation in magnitudes. Labour productivity growth has a neutral contribution from migrant labour in construction and personal services in the UK, whilst in every case in Spain the effect is negative, most strongly in agriculture. Using an econometric approach to production function estimation we observe a positive long term effect on total factor productivity from migrant workers in the UK and a negative effect in Spain. Our findings suggest that either the UK is better at assimilating migrants or is more selective in terms of who is permitted to migrate.     

East German labour market in transition: segmentation and increasing disparity

The employment system of the former GDR–like that of other socialist countries–could be seen as an aggregation of ‘internal labour markets’ with long term employment, internal promotion and little external mobility. Consequently the rapid integration of the East German economy into the western market economy has led to structural problems of the labour market which combined with and intensified the general effects of the sharp decrease in the demand for labour.     

Shifts in the Demand and Supply of Skills in the OECD: A Single‐Index Model with a Continuous Distribution of Skills*

This paper proposes a one‐dimensional index for the gap between the demand and supply of skills; this index can be estimated based on the labour market performance of groups defined with characteristics (e.g. education) that are only imperfectly correlated with labour market skills. Using data from five European countries and the US, we find that the relative demand for skills has increased more than the relative supply in the US and UK during the 1980s but not in other European countries. However, the gap between relative demand and supply increased in Italy and the Netherlands from the early 1990s.     

THE ECONOMIC CASE FOR IMMIGRATION1

Immigration into the UK has increased in response to high labour demand in the recent past. This additional supply of labour has helped keep interest rates lower, and growth higher, than they might have been otherwise. The longer‐term impact of higher immigration may be an increase in trend productivity growth. Although the evidence on such long‐term economic effects is incomplete, there is no reason to believe market principles ‐ or fundamental freedoms ‐ are any less relevant when it comes to flows of people rather than goods or capital.     

Understanding Ageing Public Sector Workforces: Demographic challenge or a consequence of public employment policy design?

In all OECD countries, populations and workforces are ageing, with public services generally being older than broader labour markets. Governments are concerned at the looming capacity crisis and identifying policy responses. However, they have generally identified the problem as a simple change in demographics. This article adds a new perspective to this policy debate. Using a study of an Australian state public service, it identifies an association between changes in public employment policies and changes in the workforce age profile. It suggests that current employment policies, which replaced the traditional focus on youth recruitment with a more open public sector labour market, have made it inevitable that public workforces would age and be older than the general labour market. Policy responses to the older public workforce need to go beyond demographic explanations, to accept the older public workforce as the new norm, and align public employment policies accordingly.     

Distortionary Taxation and Labour Market Performance

Quarterly estimates of consumption, capital and labour tax rates are provided for six major OECD countries. We then use the 'stylized facts' methodology to evaluate the strength, sign and phase of cyclical comovements between tax rates and labour market variables. Labour taxes distort labour market de-cisions and help explain why the unemployment rate is so high in continental Europe. However, labour taxes cannot be the only determinant of diverging unemployment rates since the labour force is also reduced by higher taxes. Finally, we offer some preliminary structural evidence showing employment growth in particular to be negatively related to the taxation of labour.     

Complements or substitutes? Task specialization by gender and nativity in Spain

Learning about the impact of immigration on the labor market outcomes of natives is a topic of major concern for immigrant-receiving countries. Using data from Spain, where the immigrant population has risen from 4% to 13% within a decade, we find that immigration appears to have affected the task specialization of natives without affecting their employment levels. However, the impact of immigration on the relative task supply of natives is twice as great in Spain as in the United States. The magnitude of the immigration impact in a country with a large share of immigrants originating from Spanish-speaking countries suggests that host country language proficiency is not the sole factor driving the observed impact. Additionally, the analysis reveals significant gender differences in the impact of immigration on the relative task supply of natives, possibly resting on the occupational concentration of immigrants and native occupational segregation patterns by gender, among other factors.     

Skills and labour incomes: how unequal is Italy as part of the Southern European countries?

This paper performs a comparative investigation of the effects of the Great Recession on the labour market structure and wage inequality in certain countries in Southern Europe (Greece, Italy, Portugal, and Spain). By exploring the intensity of the decline of middle-skill jobs during the years 2005–2013, which makes it possible to sketch what the labour market structure has set for itself (i.e., job polarisation, upgrading or neither), the objective is to relate these changes to wage inequality and its leading determinants. Through the Recentered Influence Function regression of the Gini index on EU-SILC data, Italy is compared to each selected country in order to evaluate how much of the spatial inequality gap is accounted for by the endowment in employee characteristics (composition effect) rather than the capability of each country’s labour market to reward these characteristics (wage structure) and, second, to identify those factors that are quantitatively more significant in making differentials. In brief, Italy is less unequal than the other Southern European countries. A larger amount of its “inequality advantage” depends on the wage structure. That is, the capacity of the country’s labour market in rewarding individual endowments is more important than the ways in which they are distributed across space.     

Unemployment insurance and job turnover in Spain

The aim of this paper is to shed some light on the potential relationships between the unemployment insurance system and labour market turnover. This study assumes the incentives embedded in the unemployment insurance system have a heterogeneous impact, depending on the type of labour market transition (quits versus layoffs and recalls versus new job entrances) and on a worker's attachment to the labour market (gender and type of contract). The layoff hazard rate increases as workers qualify for unemployment benefits, whilst the quit hazard rate remains stable. Similarly, employment inflow increases sharply after the exhaustion of unemployment benefits. The timing and importance of the exit differ between recalls and new job entry and depend on a worker's attachment to the labour market. The results show that unemployment benefits appear to favour job turnover and both firms' and workers' decisions seem to matter.     

COMPETITIVENESS WITHIN THE EURO AREA: THE PROBLEM THAT STILL NEEDS TO BE SOLVED

Unsustainable public debt, low competitiveness and high current account deficits are major problems for the so‐called PIIGS countries. These countries experienced consumer price and wage inflation above the euro area average in the first decade of the euro, basically fuelled by buoyant capital inflows. The resulting real appreciation against low‐inflation countries led to a deterioration in their competitiveness, but rigid labour markets now prevent a quick market‐based readjustment of real wages to the changed situation. Thus, both public expenditure cuts and structural labour market reforms are urgent to reduce the likelihood of a euro area break‐up.     

Institutions and Wage Determination: a Multi‐country Approach*

We present an empirical analysis of the determinants of labour cost in OECD countries, with particular reference to the impact of labour market institutions from 1960 to 1994. We show that labour market regulations can explain a large part of the labour cost rise in OECD countries in the last few decades once we control for productivity. These results are consistent with the findings of a companion paper [ Nickell, Nunziata and Ochel (2005) Economic Journal, Vol. 115, pp. 1–27] where the effects of institutions on unemployment are examined. We present also a discussion of the econometric issues related to the estimation of a macro pooled model like ours. We focus, among other things, on the hypothesis of poolability and on the cointegration properties of the model. The explanatory power of the model is finally tested by means of a series of country by country dynamic simulations.     

Should I stay or should I go? The effect of gender,education and unemployment on labour market transitions

This paper re-examines the turnover behaviour of men and women using panel data from six European countries. It makes a distinction between job-to-job (JJ) and job-to-non-employment (JNE) transitions, and explores the role that education and unemployment play in gender differences regarding these mobility patterns. Low educated women have lower JJ transition probabilities but are more likely to exit to non-employment compared to the other groups, high-educated women and men of all educational levels. Furthermore, unemployment reduces the JJ turnover of male and female workers of all educational levels. There is a pro-cyclical response in the JNE transitions of the less-educated males and a counter-cyclical response in the JNE transitions of the less-educated females. Finally, there are remarkable similarities in labour market mobility across countries, although there are various institutional and other labour market differences.