Immigrants have a positive effect on native workers
New study disproves old economic theories about wages going down and native workers losing their jobs when immigrants take the low-salary jobs.
”They come here and take our jobs.”
This was a commonly expressed concern in Denmark following a large influx of non-EU migrant workers in the 1990s. And it’s true – but not necessarily in a negative sense.
Refugees and immigrants from the Balkans and Somalia did indeed take the Danish low-salary jobs, but that wasn’t a bad thing for the local workers.
The consequence was that the locals replaced their cleaning jobs with more advanced job functions and higher salaries, a new study reveals.
“According to classical labour market theory – i.e. the notion of supply and demand – more candidates for the same job will result in lower salaries. But this is a far too static way of looking at the world,” says Mette Foged, a PhD fellow at at the University of Copenhagen’s Department of Economics.
“The locals who had jobs that the immigrants could take have moved over to jobs that require Danish language skills or specific knowledge about Denmark. This also means that they’re getting paid more.”
The special way of classifying Danes according to their job function comes from the US. Since the US system does not use the same kind of registers as the Danish one, the American researchers had to resort to looking at e.g. individual cities – and that can lead to a more uncertain result.
”The literature generally focuses on the development of salaries,” says Mette Foged.
“This has been done by following cities over time or according to education and age groups. However, a lot can happen in a town or within an education group. There’s nothing that specifies that it’s the same citizens you’re following over a long period. A city’s demography can change. We, on the other hand, are following individuals and can thus keep this factor constant.”
This, she argues, makes the new study unique, reliable and accurate.
Foged’s study is unique since it covers the entire Danish workforce:
“Our findings are based on Danish register data. All Danish employees have a job code, and once a year the database registers which jobs each citizen is in,” she says.
“We used figures from 1991 to 2008 and looked at how the situation for the individual worker has changed in relation to factors such as job function, hourly wages, work hours and unemployment.”
Together with her research colleague, Giovanni Peri of the University of California, Davis, Mette Foged combined this data with American figures from the O*NET database to determine which skills are used in the various job functions.
”This data shows to which extent a job function requires communicative, analytic or manual skills. On this basis we could see that people have moved towards jobs that require more communication skills – e.g. in a call centre, as receptionists or hairdressers. This has led to a decreased competition for the low-salary jobs,” says Foged.
Results only apply to the private sector
The data also shows that the trend of immigration creating better jobs for native workers in low-paid jobs only applies to the private sector.
The researcher does not have a clear-cut explanation to why there is a difference in this respect between the public and the private sector. She does, however, have a few a few qualified guesses:
”There appears to be more flexibility in terms of restructuring the jobs in the private sector. At the same time there is a greater staff turnover in companies. We observed that people tend to transfer across jobs and firms – even industries,” she says.
“It may also have something to do with what is being produced. In the public sector the work tasks are more fixed than in the private sector.”
A flexible job market made it possible
It is far from certain that the Danish findings can be transferred to other societies, as the Danish labour market is known to be particularly flexible.
Traditionally, Danes have not had problems with getting fired. They have also dared to change jobs. A well-functioning system of unemployment benefits has meant that losing a job did not entail losing your home.
“In general, people outside of Denmark tend to think that we have a flexible labour market. This has turned out to be positive in this context, because it is easy for the labour market to adjust to new people coming in.”
The study ‘Immigrants and Native Workers: New Analysis Using Longitudinal Employer-Employee Data’ is published on the National Bureau of Economic Research website.
Translated by: Dann Vinther
- Mette Foged, Giovanni Peri. Immigrants and Native Workers: New Analysis Using Longitudinal Employer-Employee Data. NBER Working Paper No. 19315