Academic journal article
By Constant, Amelie; Zimmermann, Klaus F.
National Institute Economic Review , No. 194
The European Union aims at a stronger participation by its population in work to foster growth and welfare. There are concerns about the attachment of immigrants to the labour force, and discussions about the necessary policy responses. Integrated labour and migration policies are needed. The employment chances of the low-skilled are limited. Whereas Europe could benefit from a substantive immigration policy that imposes selection criteria that are more in line with economic needs, the substantial immigration into the European Union follows largely non-economic motives. This paper discusses the economic rationale of a selective immigration policy and provides empirical evidence about the adverse effects of current selection mechanisms.
Keywords: Migration policy; ethnicity; migrant workers; asylum seekers; family reunification. JEL classification: F22; J15; J31; J61; J68; J82
The growth perspectives of European Union member countries are seen to be crucially related to the challenge of mobilising people to work. One issue is that non-economic migrants have more difficulties in economic performance and labour market integration, and provide a larger potential burden to the social security systems than economic migrants. Recent work on Denmark and Germany (see Tranaes and Zimmermann, 2004a, and especially Schultz-Nielsen and Constant, 2004) has provided new evidence, and found that an ever rising share of immigrants is not employed. Instead, immigrants arrive as refugees, asylum seekers or for family reunification purposes. Differences in labour market attachment might be due to differences in individual characteristics across ethnicities, or they can be associated with their legal status at entry.
Another European challenge of increasing importance is the rising deficit of high-skilled workers. This is a matter of size and intensity. Even in the long term, it will be difficult for European firms to hire the appropriate quantities on their local labour markets. Supply is not likely to keep pace with demand. A permanent effort will be needed to participate in the rising world market for flexible high-skilled workers. This international effort is a prerequisite for keeping the home-grown talents and the hired migrants of the European Union member countries. Appropriate policy instruments have to be found to enable companies to deal with this challenge.
Responses to these crucial challenges require evidence on the economic mechanisms of migrant selection and informed policy analyses about potential selection strategies. This could provide guidance for an integrated labour and immigration policy. A recent Green Paper by the Commission of the European Communities (2005) has recognised these challenges and puts concerns about admission procedures for the economic immigration of non-EU nationals in the forefront of their policy discussion. It has created a reform discussion and announced a policy plan on legal migration including flexible admission procedures by the end of 2005.
Our paper contributes to this policy debate. Its novel feature is that we aim to understand the role of the legal status of the migrant at the time of entry in the host country (work permit, refugee, and kinship) on work participation and earnings. We also investigate actual migration policy mechanisms reflecting explicit or implicit policy decisions and the related characteristics among the immigrants within the different channels of entry. Our research suggests that, even after controlling for skill level, non-economic migrants are less active in the labour market and exhibit lower earnings.
The paper is organised as follows: Section 2 summarises the economic framework for migration analysis and the empirical evidence for Europe, and analyses the policy stands of the European Union concerning migration and the vitalisation of the workforce. Section 3 presents new econometric evidence using fresh and unique survey data on immigrants from Germany and Denmark to study the determinants and economic effects of their legal status at entry. …