LABOUR INSTITUTE FOR ECONOMIC RESEARCH Characteristics and labour market performance of East-European immigrants in Finland, Germany, the Netherlands and the United Kingdom (work in progress) Economic Impact of Immigration and Population Diversity International Workshop Wednesday 11 April – Friday 13 April 2012 University of Waikato Mari Kangasniemi* and Merja Kauhanen* *Labour Institute for Economic Research Part of a NORFACE project ”Migrant diversity and regional disparity”

LABOUR INSTITUTE FOR ECONOMIC RESEARCH The EU eastern enlargement In 2004 eight Eastern and Central European countries (Estonia, Hungary, Latvia, Lithuania, Poland, Czech Republic, Slovakia and Slovenia –EU8) together with Cyprus and Malta joined the union. In the beginning of 2007 Romania and Bulgaria were admitted to the union. -> Most EU15 countries experienced an increase in immigration from the new member states after the EU enlargement.  From year 2003 to year 2007 the number of foreign residents from the EU8 in the EU15 countries increased from almost 893,000 to more than 1.91 million (Brücker et al., 2009).  During same period foreign population from Bulgaria and Romania in the EU15 countries increased from 700,000 to 1.9 million (Brücker et al., 2009).

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Purpose of the study & motivation Purpose of this study is to investigate labour market performance of immigrants from NMS12 countries in four EU15 countries – Finland, Germany, the Netherlands and the UK after the enlargement - Besides differences in transitional arrangements these four countries vary with respect to the share of immigrant population, the length of tradition of immigration, language and cultural barriers, and institutional structures  We look at the characteristics of immigrants from the new EU member states (called NMS12 hereafter) – how they differ from other immigrants and the natives of the host country  And how they are faring in the host country’s labour market  Try to give explanations of differences in the performance between the four countries

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Earlier literature Determinants of East-West migration: higher income, better working conditions, opportunities of finding a suitable job (Fouarge & Ester 2007, Bonin et al. 2008, Kahanec and Zimmermann 2008) Linguistic and geographical distances, migrant networks (Kahanec and Zimmermann 2008) Borjas (1987): choice of the host country depends on the level of individual ability, how returns to ability are correlated between countries and how abilities are distributed in each country. - If the skills are transferable, immigrants from a lower inequality country should be positively selected and immigrants from a higher income inequality country negatively selected. McKenzie and Rapoport (2008): larger migration networks tend to increase the likelihood of negative self-selection with respect to education

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Earlier literature Immigrants’ labour market performance – most literature concentrating on North America (e.g. Chiswick 1978, Borjas 1985, 1999) The employment gap between immigrant and natives e.g. Amuedo- Dorantes and de la Rica (2007), Van Ours and Veeneman (1999), Dustmann et al. (2007) etc. Labour market performance from new member states: in UK (e.g. Drinkwater et al. 2006, Anderson 2006, Clark and Drinkwater 2008, Longhi 2011), in Germany (e.g. Brenke et al. 2009; Kogan 2010), in Ireland e.g.Barrett et al. 2007) Country comparisons to much lesser extent

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Transitional arrangements for free movement Allowed the EU member states to postpone the free movement of the workers up to seven years Three different phases: years

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Transitional arrangements for workers from NMS8 in Finland, Germany, the Netherlands and the UK (source: Brücker et al., 2009).

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Economic conditions in Finland, Germany, the Netherlands and the UK

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Data Micro level data drawn from the European Union Labour Force Survey (LFS) from years for the four countries LFS is a representative and continuous cross-sectional survey which includes information on a wide range of variables like household and personal characteristics, labour market status and education A high degree of comparability due to same set of characteristics in each country; a close correspondence between the EU list of questions and the national questionnaires; the use of the same definitions for all countries; the use of common classifications, and Eurostat centrally processing the data A prerequisite for participating in the survey is that a person has lived or has an intention to live in that country for at least a year.

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Definition of NMS12 immigrants Immigrants are defined according to the citizenship on which information is available for all four countries in the data Other alternative: country of birth (this information missing from Germany in the EU-LFS)

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Trend in the share of NMS12 immigrants of all immigrants

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Characteristics of NMS12 immigrants

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Labour market performance of NMS12 immigrants How immigrants fare with respect to labour market outcomes is influenced by the extent to which their existing levels of education, experiences and training are valued in the host country. Measures of labour market performance in this study:  Labour force participation rate  Employment rate  Type of employment (temporary/permanent; full-time/part-time; self employment)  Occupational structure

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LABOUR INSTITUTE FOR ECONOMIC RESEARCH Self-employed (share of all employed %)

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Temporary employment – share %

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Part-time employment – share %

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Duncan dissimilarity index across occupations where I k /I is the percentage of immigrants in occupation k and N k /N is the percentage of natives in occupation k - Ranges from one (total segregation) to 0 (total integration)

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Duncan dissimilarity index across occupations: NMS12 immigrants and native population

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Share in elementary occupations A possible explanation for the large share of immigrants in elementary occupations: poor skills of the local language, a lack of knowledge of institutions and deficiency of the host-country-specific capital in general (Zorlu, 2011). The degree of skill transferability may also have an impact on the occupational alternatives immigrants have in the host country labour market.

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Employment and labour force participation probabilities Method: estimate probit binary response models of the probability of being employed and participating in the labour force In the model control for a number of individual-specific characteristics such as gender, marital status, educational level, citizenship, dummy variables denoting the region of residence and year dummies

LABOUR INSTITUTE FOR ECONOMIC RESEARCH

LABOUR INSTITUTE FOR ECONOMIC RESEARCH

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Conclusions NMS12 immigrants are on average younger than natives, have higher education compared to all immigrants Work more often as self-employed or in less secure contractual arrangements compared to natives in Germany and the UK Compared to natives NMS12 immigrants are overrepresented in semi-skilled and elementary occupations. Of the four countries the share of NMS12 immigrants in elementary occupations is largest in the UK The results indicate that the relative performance of immigrants from the new member states varies by host country Have a lower probability of employment in all other countries except for the UK compared to natives. The employment differential varies from 4.9 percentage points in Finland to 14.2 percent points in the Netherlands

LABOUR INSTITUTE FOR ECONOMIC RESEARCH Conclusions Possible explanations for differences in labour market outcomes in these four host countries: Language, cultural barriers, institutional structures, assimilation policies Extensions:  Further investigate the reasons behind the differences, for example the role of labour market institutions in the sending and the receiving countries  Use country of birth instead of citizenship (except for Germany)