6 November 2013

Immigration creates better jobs in the Danish private sector


In retrospect there was no reason to fear neither unemployment nor salary cuts for those working in low paying jobs as a result of the immigration in the mid-1990s. This is what is concluded in an extensive study done at the University of Copenhagen. On the contrary the economists behind the study reach the conclusion that the immigration to Denmark has led to an increased job-specialisation, and thus higher salaries for Danes working in low paying jobs in the private sector.

"We expected that more immigrants on the labour marked would equal more competition over the same jobs for low-skilled Danes, and that this would result in unemployment, and salaries coming under pressure. But our results point in the quite opposite direction. The numbers show that the immigration has hardly had any of these negative consequences, but on the contrary resulting in progress for those working in low paying jobs in the private sector. They have moved to more specialised jobs, and for the first time we can document that the specialisation protected both salary and jobs," says Mette Foged, PhD student at the Department of Economics, University of Copenhagen.

Together with her research colleague Giovanni Peri from University of California , Davis, USA she analysed the effects on wage earners born in Denmark, working in the public and private sectors at the time of significant numbers of immigrants entering the Danish labour marked in 1995 after the last big wave of immigration in the 1970s. In the mid-1990s immigration to Denmark was driven by war and international crises in Bosnia, Somalia, Afghanistan and Iraq.

The young generation goes for specialisation

The researchers have analysed movements and developments in the Danish labour force over a period of 14 year from 1994 to 2008. They have also followed different groups of salary earners between the ages of 21 and 51 in 1994 during the same period of time across various municipalities, sectors and trades.

The data made it possible for the researchers to follow the job situation of the wage earners closely, and see if, for instance, their salary increased or decreased, or if they lost or changed their jobs.

"Especially the young people find new jobs that require more and different skills. They move from manual and routine-orientated jobs, to jobs which require more communication, for instance going from working on an assembly line to a call center. These jobs are generally better paid and can be difficult for immigrants to fill until they have the necessary language and cultural skills in place. The young Danes use their competitive advantage, but they also create space for immigrants to find jobs, and this creates a positive development in the private labour market," says Mette Foged.

The young people between the ages of 21 and 36 are more mobile than those with more experience, and they move more easily across sectors and trades. The young find new jobs in complex service industries like postal services, telecommunication, finance, insurance, real estate or rental services, according to Mette Foged.

No specialisation in the public sector

The researchers do not find the same trend towards more specialised jobs in the public sector as those found in the private sector. On the contrary they conclude that there is no specialisation in low paying jobs in the public sector.

There has been no increase in the salaries for the low paying jobs there either. The salary has either remained the same, or there has been a minor decrease in the salary.

"Our study shows that the specialisation of jobs happens more so in the private sector than public sector. We can see that the private industry constantly rethinks the process of production to adapt to new trends in development, and to focus on how to put the employees’ competences best to use," says Mette Foged.

The study, ”Immigrants and Native Workers: New Analysis Using Longitudinal Employer-Employee Data”, was recently published in the American National Bureau of Economic Research.

PhD-student Mette Foged
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