The Global Economic Crisis and The Effect of Immigrant Workers on Native‐born Employment in Europe

• Author: Olivier Damette,Vincent Fromentin,Benteng Zou
• Date: 01 June 2017
• Published date: 01 June 2017
• DOI: http://doi.org/10.1111/twec.12394

The Global Economic Crisis and

The Effect of Immigrant Workers on

Native-born Employment in Europe

Vincent Fromentin

1

, Olivier Damette

2

and Benteng Zou

3

1

CEREFIGE and CREA, University of Lorraine, Nancy, France,

2

BETA, University of Lorraine, Nancy,

France, and

3

CREA, University of Luxembourg, Luxembourg

1. INTRODUCTION

THE current economic crisis, which began in the third quarter of 2008, has had devastating

consequences for national economies and workers in industrialised and developing coun-

tries. Employers have begun to revise their recruitment plans, and several governments have

already taken measures to adapt labour migration patterns based on the evolution of the mar-

ket. In addition, EU Member States have adjusted their integration policies in response to the

crisis. Given the profoundness of the downturn, several destination countries have intensified

their immigration policies (Green and Winters, 2010).

In the EU, laws differ across member countries, and the selection of immigrants is often

based on domestic labour market characteristics. Some migrants are granted entry specifically

to work, while others are granted entry in order to join family members or as asylum seekers.

In countries where migration streams are strongly associated with family reunification and

humanitarian criteria, an economic downturn may have a lesser effect on migration inflows

than in countries where the primary form of immigration is economic immigration. Moreover,

immigrant workers may be especially vulnerable, as they often do not enjoy the same rights

and protections as nationals of destination countries.

The debate concerning the economic effects of immigration workers has received renewed

interest in traditional immigration countries (such as France, Germany and the UK) and in

new immigration countries (such as Italy, Ireland and Spain) since the onset of the economic

crisis. Overall attitudes towards immigration in target countries remained relatively stable

from 2008 to 2009, although slightly more respondents in Europe and the USA described

immigration as ‘more of a problem than an opportunity’ (German Marshall Fund of the

United States 2009). Economic considerations do appear to play a systematic role in shaping

public opinion (Facchini and Mayda, 2012).

Therefore, it is important to assess the impact of immigrants on the employment rates of

native workers in Europe at a time when Europe has recognised the importance of immigra-

tion for the future competitiveness of the Union (The EU Stockholm Programme and Europe

2020 Agenda). The labour market performance of immigrant workers is of considerable inter-

est for public policy. Over the last decade, several European countries have become recipients

of immigrants. Thus, demands for information on the impact of immigration into Europe have

notably increased. The impact of immigrant workers on host country labour markets has pro-

ven to be a topic of major concern in several immigrant-receiving nations.

We acknowledge Michel Beine and Gautam Tripathi for offering useful suggestions during the early

stages of this paper’s development. Fabrice Husson’s assistance is gratefully acknowledged. We thank

the Regional Council and the University of Lorraine for providing financial support.

©2016 John Wiley & Sons Ltd

1068

The World Economy (2017)

doi: 10.1111/twec.12394

The World Economy

Several economic studies have attempted to analyse and evaluate effects of immigrant

workers on host country labour markets. These empirical studies, conducted mainly in

Anglo-Saxon countries, conclude that the effects of immigrant workers on wages and

native-born worker unemployment are very limited (Okkerse, 2008; Longhi et al., 2010;

Ottaviano and Peri, 2012; Damette and Fromentin, 2013). Focusing on European countries,

Angrist and Kugler (2003) found that immigrant workers have slightly reduced native-born

worker employment rates, although this effect is more significant in countries with ‘rigid’

institutions.

Moreover, several recent studies have analysed the effect of recessions on migration

(Borjas, 2006; Ahearne et al., 2009; Fix et al., 2009; Papademetriou et al., 2009; Dustmann

et al., 2010; Findlay et al., 2010; Beine et al., 2013) and have shown that globally, immigrant

workers react more than resident populations to economic shocks such as recessions. Ahearne

et al. (2009) explore the influence of the economic cycle on labour mobility within the EU

using an econometrically calibrated simulation focusing on Ireland. Dustmann et al. (2010)

examine differences in the cyclical patterns of immigrant and native-born worker employment

and wages for Germany and the UK using data from the Institute for Employment Research

in Nuremberg and the British Labour Force Survey. These authors show that there are similar-

ities and significant differences in cyclical responses between immigrant and native labour in

both countries, especially among non-OECD labour immigrants and less-educated immigrants.

Borjas (2006) shows that wage trends among low-skilled minority workers are particularly

sensitive to business cycle fluctuations, with wages being more cyclically sensitive among

low-skilled immigrant men than among other groups. Beine et al. (2013) show that relative

aggregate fluctuations and employment rates affect bilateral migration flow levels. Papademe-

triou et al. (2009), Findlay et al. (2010) and the OECD (2012) present very detailed descrip-

tive analyses of the relationship between migration and economic conditions in several countries

and examine whethermigrant labour market conditions changed throughout the crisis.

However, empirical evidence generated in this area is not fully conclusive. Empirical

results appear to be time and country dependent. A variety of studies have found different

estimates for the labour market impacts of immigration on employment (Carrasco et al.,

2008). These conclusions differ depending on the context of the analysis (geographical, tem-

poral and methodological). Borjas (1994) emphasises that ‘the most important lesson is that

the economic impact of immigration varies by time and place and can be beneficial or harm-

ful’.

These findings lead us to the main motivation of this paper, which supplements the litera-

ture by examining the impact of immigrant workers on native-born worker employment dur-

ing the global economic crisis in European countries. The aim was to investigate whether this

impact is differentiated by skill level (three levels), gender and country of origin (immigrants

from European and non-European countries) in several sectors. Causes of native-born worker

responses to an increase in the share of foreign-born workers can differ considerably in differ-

ent countries.

In this sense, we expect the following:

the impact will differ depending on the country (France, Germany, Spain and the UK).

The relationship between immigration and native-born worker labour market outcomes

may vary across countries due to differences in labour market dynamics, institutions and

immigration policies; and

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