Immigration a threat to previous immigrants, not native workers

Gianmarco Ottaviano, Giovanni Peri, Francesco D'Amuri, Mon, 03/10/2008

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Germany has the largest number of foreign individuals in Europe, and foreign workers represent around 10% of the total labour force. Labour market institutions are characterized by rigidity and generous unemployment benefits, which increase the potential for negative consequences due to immigration as newcomers are more likely to stay jobless and impose a cost on society. The authors of CEPR DP6736 measure the effects of the substantial immigration of the 1990s on the Western German labour market and find that it had no adverse effects on native wages and employment levels, but instead led to adverse effects on previous immigrants.

The results provide a full picture of the adjustment of the Western German labour market to migration in the period from 1987 – 2001. In terms of employment, the findings point to negative but moderate effects of new immigrants on previous immigrants, while no evidence is found of such effects on native workers. Reinforcing the view that there is stronger competition between new and old immigrants than between immigrants and native workers, it is also confirmed that natives and new immigrants are imperfect substitutes in production while new and old immigrants seem to be perfect substitutes. However, while employment effects are absent for all natives regardless of their educational attainment, wage effects show some variation as native workers with medium-low education face rising wages by 0.36-1.04% and workers with high education see their wages fall by –1.49%. This is due to the fact that in the period of observation, immigrants are more concentrated in the group with medium-high education than in the group with low education. As for the effects of new immigration on migrant workers already settled in West Germany (pre-1992), the authors find that on average new immigrants depress long-term immigrants’ wages by –1.64% and two long-term immigrants lose their jobs for every ten new immigrants employed. Overall, the analysis suggests that if the German labour market were as flexible as the UK’s, it would be more efficient in dealing with the effects of immigration.

Summarised by CEPR staff

DP6736 The Labour Market Impact of Immigration in Western Germany in the 1990's

 

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URL:  http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=6736.asp

Topics:  International trade Labour markets

Tags:  employment, wages, immigration, Skill Complementarities

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