The Labor Market Impact of Immigration and its Policy Consequences

Abstract

Concerns that immigrants take jobs away from natives and reduce their wages are widespread and have a substantial impact on immigration policies. The financial crisis and the subsequent economic down-turn in most OECD countries have further fanned these fears. Albeit not uncontroversial, the overwhelming share of the recent empirical literature finds, however, that immigration has only moderate effects on wages and employment. More specifically, the empirical findings indicate that i. the aggregate effects of immigration on wages and unemployment are small, ii. most native workers tend to benefit from immigration in terms of higher wages and lower unemployment risks, iii. the already existing immigrant workforce suffers substantially from further immigration, iv. high skilled and older workers tend to benefit more from immigration than less skilled and younger workers. Immigration and integration policies can improve the welfare effects and mitigate adverse distributional effects by pursuing skill-selective immigration policies and policies which increases the competiveness of immigrants in the labor market: e.g. via language courses, the acknowledgement of occupational and other professional degrees.