How the great recession affected unemployment of non-Western Immigrants in the Netherlands

Jan van Ours 06 October 2013

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The labour-market position of immigrants in many European countries is weak – unemployment rates among immigrants are high, and employment rates are low (OECD 2011). There are various explanations for this. Immigrants often have lower educational attainment than natives, and fewer language skills. Furthermore, ethnic identity may be important.

Algan et al. (2010) study the economic situation of immigrants in France, Germany, and the UK in terms of education and labour-market performance. They conclude that immigrant children have lower gaps in education than their parents because the education systems seems to integrate the children of immigrants. For labour-market performance, they do not find similarly marked evidence of progress. Bisin et al. (2011) find that the ethnic identity and labour-market outcomes of non-EU immigrants in Europe are related. Immigrant children have a higher probability of being employed than their parents and, compared to natives, there does not seem to be any difference in terms of employment. The authors relate this to an economic integration process of immigrants.

When considering the labour-market position of immigrants, an important distinction is between Western and non-Western immigrants. Whereas in many European countries the labour-market position of Western immigrants is very much the same as for natives, the labour-market position of non-Western immigrants is often worse. Dustmann et al. (2010) find larger unemployment responses to economic shocks for immigrants relative to natives, in both Germany and the UK. These differences are particularly pronounced for non-OECD immigrants, and evident for both countries despite their rather different immigrant populations. Cerveny and Van Ours (2013) investigate how the Great Recession affected unemployment of non-Western immigrants in the Netherlands. Our main findings are presented below.

Immigrants in the Dutch labour market

On 1 January 2013, the Dutch population of 16.8 million consisted of 13.3 million native Dutch, 1.5 million Western immigrants and 2.0 million non-Western immigrants. The largest Western immigrant groups are from Germany (370,000), Belgium (100,000), and Poland (100,000). The largest non-Western immigrant groups are from Turkey (400,000), Morocco (370,000), Surinam (350,000), and the Antilles (150,000).

The labour-market position of Western immigrants is similar to the labour-market position of natives, while non-Western immigrants perform worse. According to Statistics Netherlands, in the first quarter of 2013, 75% of the native population of working age (16 to 65 years) had a job. Among Western immigrants this was 71%, while among non-Western immigrants it was only 56%. Also in terms of unemployment rates as a percentage of the labour force, the position of non-Western immigrants is very different. Whereas in the first quarter of 2013 the unemployment rate was 6.4% among natives and 8.2% among Western immigrants, it was 19.2% among non-Western immigrants. Since Western immigrants do not differ much from natives in terms of their labour-market position, our focus is on the differences in labour-market performance between natives and non-Western immigrants in response to the Great Recession.

The Great Recession

The evolution of the unemployment rates of prime-age (25 to 54) non-Western immigrant workers over the past decade is shown in Figure 1. The differences with prime-age native workers are substantial. Whereas the native male workers’ unemployment rate went up from 1.5% of the labour force in 2001 to 3.5% in 2004, over the same period it went up for non-Western prime-age males from 7% to 14%. After that, unemployment rates dropped to reach the lowest point in 2008 with 1.8% for natives and 6% for non-Western immigrants. In 2012 unemployment rates for prime-age individuals were up to 4% for natives and 14% for non-Western immigrants.

Figure 1. Unemployment rates of prime-age workers in the Netherlands, 2001–2012

Source: Statistics Netherlands.

To analyse the impact of the Great Recession on unemployment, we use data from the LISS (Longitudinal Internet Studies for the Social sciences) panel. This internet-based household survey was conducted in the Netherlands in between November 2007 and February 2013. It consists of 5,000 households, comprising almost 8,000 individuals. Figure 2 plots the evolution of unemployment rates as measured in the LISS panel. As the figure shows, the development of unemployment rates corresponds to the developments in the Dutch labour market during the observation period. At the beginning of the year 2009, unemployment rates started to rise. The unemployment rate of native workers went up from 5% to 8%, whereas the unemployment rate of non-Western immigrant workers went up from 12% to 20%. In absolute terms there is a big difference in the increase in unemployment. However, as Figure 2 suggests, in relative terms the increase was comparable.

Figure 2. Monthly unemployment rates in the LISS panel, November 2007–February 2013

Source: Cerveny and Van Ours (2013).

In Cerveny and Van Ours (2013), we investigate the impact of the Great Recession on unemployment in various ways. The main results are summarised in Table 1. The average probability to be unemployed over the period of investigation was 6.2% for natives and 17.8% for non-Western immigrants (age 16 to 64). An increase in national unemployment rates of one percentage point caused the probability to be unemployed to increase by 12.4% for natives, and 9.2% for non-Western immigrants. Although the effect seems somewhat smaller for non-Western immigrants, the differences are not statistically significant.

Table 1. Unemployment characteristics of natives and non-Western immigrants

Source: Cerveny and Van Ours (2013).

The job-finding rate for non-Western immigrants is almost 60% below the job-finding rate of natives. This leads to a probability of finding a job within a year of 65% for natives and 38% for non-Western immigrants. Unemployment has a big effect on the job-finding rate. Unemployed workers who enter unemployment at times of high unemployment face a longer unemployment spell. A one percentage-point increase in the national unemployment rate at the start of the unemployment spell causes the job-finding rate to go down by about 20%. In addition, if unemployment increases over the duration of the unemployment spell, the job-finding rates are further reduced. A one percentage-point increase in the national unemployment rate over the course of an unemployment spell causes the job-finding rate to go down by about 40%. However, there does not seem to be a difference in response to changes in the national unemployment rate between natives and non-Western immigrants.

Conclusion

The Great Recession affected the unemployment rate of non-Western immigrant workers in the Netherlands more in absolute terms than that of native workers. However, in relative terms there is not much difference between the cyclical sensitivity of the unemployment rates of non-Western immigrants and natives. Job-finding rates are much lower for non-Western immigrants than they are for native workers. The national unemployment rate also affects individual job-finding rates of native and non-Western immigrant unemployed workers. However, the cyclical sensitivity of job-finding rates does not differ between natives and non-Western immigrants. In combination, our findings suggest that the Great Recession did not have a different impact on the unemployment of non-Western immigrants and natives in the Netherlands. In short, in relative terms, the labour-market position of non-Western immigrants is bad but the Great Recession did not make it worse.

References

Algan, Y, C Dustmann, A Glitz, and A Manning (2010), “The economic situation of first and second-generation immigrants in France, Germany and the United Kingdom”, Economic Journal 120: 4–30.

Bisin, A, E Patacchini, T Verdier, and Y Zenou (2011), “Ethnic identity and labour market outcomes of immigrants in Europe”, Economic Policy 26, 57–92.

Boeri, T and J C van Ours (2013), The economics of imperfect labour markets, 2nd edition, Princeton University Press.

Cerveny, J and J C van Ours (2013), “Unemployment of non-western immigrants in the Great Recession”, CEPR Discussion Paper 9634; forthcoming in De Economist.

Dustmann, C, T Frattini, and G Lanzara (2012), “Educational achievement of second generation immigrants: an international comparison”, Economic Policy 69, 143–185.

OECD (2011), International Migration Outlook, Paris.

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Topics:  Labour markets Migration

Tags:  unemployment, migration, Netherlands, Great Recession

Professor of Applied Economics, Erasmus School of Economics, Erasmus University Rotterdam, The Netherlands Professorial Fellow at the Department of Economics, University of Melbourne; CEPR Research Fellow

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