How should immigrants be integrated into the labour market?

The OECD has published four new Social, Employment and Migration Working Papers which provide accounts of how Germany, Sweden, Australia and Denmark have have handled their post-war migrant intakes. Each have different histories and policy responses, and while none could be considered an unequivocal success, Australia seems to have done better than most. The Danish government has actively promoted integration but employers appear to treat even the children of OECD immigrants badly. Sweden is still stuck with the legacy of the scarring effect the 1980s economic crisis, while Germany faces high levels of inactivity amongst Turkish women and a 'second generation' problem. Here are long excerpts from the executive summaries:

No. 47. The Labour Market Integration of Immigrants in Germany (PDF) by Thomas Liebig

Germany is currently in the process of a major restructuring of its complex integration framework. Under the new Immigration Act which came into force on 1 January 2005, there is a uniform introduction programme for all permanent immigrants.

As in the past, integration services focus largely on language training. There is little evaluation with respect to the effectiveness of this kind of training and it is generally not linked to labour market needs. Indeed, the scarce empirical evidence suggests that language training in Germany may not be very effective as a means of labour market integration. In addition to the regular integration services, there is a multitude of innovative projects. However, these are often locally-based and time-limited, and seldom designed in a way that would enable proper evaluation.

With respect to employment and unemployment rates, and particularly given their low educational attainment and the current economic situation, the labour market integration of immigrant men is relatively favourable in international comparison. However, immigrant women, and particularly those of Turkish origin, have very low employment rates. This is partly an outcome of policies which limited the labour market access of spouses. Most of these legal obstacles have been removed under the new Immigration Act.

The situation of the so-called “second generation” is of concern, as they have very low educational outcomes. This hampers their access to vocational training, which appears to have an even stronger impact on their employment prospects than on those of natives. The low educational attainment of the second generation seems to be at least partly attributable to structural features in the German education system, such as the early streaming which puts migrants’ children in a lower track. Especially problematic is the relatively late starting age for kindergarten and the prevalence of half-day education in kindergarten and school, which limits exposure to the German language at a crucial age. Immigrants’ access to self-employment is hampered by legal obstacles and a lack of information and subsequent access to financial credits.

Despite positive experiences with temporary employment as a labour market integration tool for immigrants in other OECD countries, immigrants are not a focus group of the Federal temporary employment programme.

No. 48. The Integration of Immigrants into the Labour Market: the Case of Sweden (PDF) by Georges Lemaître

The past fifteen years have seen a higher share of humanitarian migration in Sweden than in the past. This is a form of migration for which labour market integration appears to be slower than for other forms of migration in all countries. At the same time there has been a growing diversification of migration away from “Western” countries to those with a greater cultural distance.

With 1985 came the introduction of social assistance for refugees for an eighteen-month introductory period, the transfer of responsibility for integration away from the Labour Market Board and the refugee dispersal policy in which refugees were assigned to municipalities throughout Sweden to relieve the pressure on the large agglomerations, with local economic conditions not always being taken into account. The dispersal policy had a negative effect on immigrant outcomes, particularly with respect to those arriving during the economic crisis, for whom the effects seem in many cases to be persistent.

With the severe economic crisis of the 1990s, asylum seeking in Sweden continued and those asylum seekers that were recognised and granted a residence permit were met with a labour market situation that was highly unfavourable and where considerable numbers of native-born Swedes with domestic formal qualifications and work experience were also looking for work. At the same time, the crisis struck immigrants already present and employed disproportionately. The re-integration of immigrants into the ranks of the employed was rendered all the more difficult by the fact that some two-thirds of jobs, in the Swedish labour market appear to be filled through informal methods.

The situation of immigrants has improved significantly since the trough of the economic downturn, especially for new arrivals. The relatively favourable impact on employment of a minimum amount of language training and of vocational training for this group and the relatively low take-up of these suggest that there is room for improvement with regard to labour market outcomes in the early years of residence, which can be expected to persist with continued residence.

The situation for immigrants having arrived since the mid-eighties and having suffered the brunt of the economic crisis of the nineties remains unfavourable. It is difficult to see how the continuing employment problems of this group can be turned around without a strong economic expansion, given the re-enforcing nature of further non-employment on both inactivity and employer perceptions. If targeted measures are politically infeasible, then general measures that provide especially favourable results for immigrants need to be encouraged and expanded.

...What employers recognise and reward seems to be Swedish work experience and successful integration tends to be associated with early contact with the labour market. Results seem to suggest that the benefits of early employment experience on later employment are much stronger than those of Swedish vocational education. Improving the efficiency of language instruction so as not to overly prolong labour market entry and ensuring that proficiency requirements reflect actual occupational needs are matters of some importance.

No. 49. The Labour Market Integration of Immigrants in Australia (PDF) by Thomas Liebig

Overall, the labour market integration of immigrant men in Australia can be considered to be relatively favourable in international comparison. This is partly attributable to selection policy and the prevalence of the English language in many parts of the world. Even with similar socio-demographic characteristics, skilled migrants tend to perform better than other migrant groups. In contrast to the positive outcomes for immigrant men, the labour force participation of immigrant women is not high in international comparison.

Given the skilled nature of the majority of Australia’s immigration intake, it is of particular importance that adequate use is made of the skills of the immigrants. This is not always the case, and overqualification is a problem.  ...Particularly effective in tackling overqualification seem to be temporary and assisted work placements in skilled jobs, but funding for these measures is regional and limited.

As all skilled migrants (principal applicants) need job-ready English and many of these also have Australian qualifications and/or a prior job offer, a large part of the immigrant intake can be considered to be partly pre-integrated. This is not the case for immigrants under the humanitarian programme who in turn receive a broad range of integration services to which other migrants do generally not have access.

About half of the humanitarian intake is sponsored by individuals and institutions in Australia, who often also provide part of the initial settlement services. These sponsored humanitarian migrants appear to have lower employment probabilities in the long run. The principal integration aid is provided in the form of language training, which is generally open to all immigrants in need of this. In spite of the comprehensive training provided, there is little measurement of its effectiveness with respect to employment. Furthermore, few settlement services are directly targeted at labour market integration.

The outcomes of the children of migrants are very favourable in international comparison. This does not only appear to be attributable to the skilled nature of the immigrant intake, but also to the settlement and integration perspective given to all non-temporary immigrants.

No. 50. The Labour Market Integration of Immigrants in Denmark (PDF) by Thomas Liebig

The labour market integration of immigrants has been a key issue both in the public debate and on the government agenda in Denmark, triggered by unfavourable employment outcomes of immigrants – the gaps in employment rates of immigrants compared to the native-born are among the highest in the OECD – and a rapid rise of the immigrant population during the past twenty years. Prior to the 1980s, immigration to Denmark was a very marginal phenomenon. Despite the rapid growth since then, with less than 7% immigrants in the population, Denmark still has one of the smallest immigrant populations in Western Europe.

Labour market outcomes for immigrants have been significantly below those of the native-born for more than two decades. This is partly attributable to the fact that immigration to Denmark has been strongly dominated by refugees and family reunification – groups whose labour market outcomes tend to be not as good as the native-born or economic migrants in all countries, particularly in the early years of settlement.

Since 2001, lower social assistance has been introduced for all persons who have been in Denmark for less than seven out of the past eight years because of concerns about the impact of Denmark’s relatively high social benefits on work incentives. In addition, participation in integration measures has been made obligatory. Finally, for more than a decade, there have been efforts to improve the labour market integration of immigrants, and these efforts have been enhanced recently.

However, the observed unfavourable labour market outcomes are not confined to non-OECD immigrants. Employment rates of immigrants from OECD countries are low in international comparison as well. In addition, a substantial part of the immigrant population in Denmark has tertiary educational attainment, yet this characteristic does not yield as large an impact on employment probabilities as one would expect, even if the qualification is obtained in Denmark.

The second generation is now gradually entering the labour market in larger numbers, and this group is of particular policy concern. Their educational attainment is well below that of comparable Danes without a migration background. This is mainly due to the fact that the dropout rates from vocational training for the second generation are more than twice as high as among persons of Danish origin. This, in turn, is at least in part attributable to the fact that persons with a migration background have more difficulties getting apprenticeship contracts with companies than comparable persons of Danish origin.

...About one third of total Danish employment is in the public sector, where immigrants are underrepresented, although the degree of underrepresentation seems to be lower than in other OECD countries. Indeed, a variety of measures have been taken to increase immigrants’ employment in this sector, because of its size and importance in the Danish context. The public sector is also viewed as having a role-model function.

...Considering the recent nature of most immigration, and the relatively small size of the immigrant population, the overall framework for integration in Denmark is highly developed and a significant amount is invested in integration efforts. This is mirrored by the fact that Denmark is among the few OECD countries which has a separate Ministry for Refugee, Immigration and Integration Affairs, in which immigration and integration policies are considered together. Under this framework, municipalities have to offer a three-year introduction programme to immigrants from outside the European Economic Area, which consists of language courses and a range of labour market integration measures. Indeed, the strong emphasis on labour market integration in the introduction programme is particularly noteworthy. There are strong financial incentives for municipalities to achieve rapid labour market integration of recent arrivals, and an elaborate benchmarking system is in place to monitor municipalities’ integration performance and facilitate the mainstreaming of effective policies.

There is some indication that current policies are having the desired effect, as labour market participation and employment of recent arrivals have increased. However, the unemployment rate for this group has also increased and it is getting lower social assistance. One way to escape from the resulting marginalisation is via self-employment, but few immigrants seem to succeed in pursuing this route. This may be linked with the fact that immigrants generally do not have access to loans before they acquire permanent residence, and requirements for permanent residence have been tightened. There is thus a case for better loan access for this group.

What is especially striking in the Danish context is the fact that employment gaps relative to the native-born are across-the-board – they are longstanding and they are found for both OECD and non- OECD immigrants and even for offspring of immigrants from both OECD and non-OECD countries, at all attainment levels. Even returns to Danish education are lower for children of immigrants than for children of non-immigrants. Outcomes seem to be improving recently, but the general backdrop remains. Some of this may be attributable to the fact that foreign qualifications and experience may not be recognised by employers in Denmark, as is generally the case elsewhere as well. But this should not be the case for offspring of immigrants born and educated in Denmark, who show poor performance relative to children of non-immigrants at all attainment levels.

In any event, the inadequate results for the second generation, whatever the geographic origin or qualifications of persons in this group, suggests that the benefit disincentive explanation often advanced for low immigrant employment rates is not an entirely satisfactory one. A mix of less developed personal networks, information asymmetries and discrimination seems to be part of the answer. These are generally difficult to disentangle as the former in practice have the effect of excluding equally skilled immigrants from certain jobs even where there is no ostensible discrimination. Nevertheless, testing results in the past have shown that immigrants and their children were, not infrequently, selectively ignored in the recruitment process, even when they had similar characteristics as native Danes. This phenomenon undoubtedly still exists. It needs to be more regularly monitored and publicised, and measures to diversify recruitment channels should be encouraged.

Given Denmark’s relatively high entry wages, the relative lack of networks and the information asymmetries about immigrant skills and qualifications, which may be more important in the Danish context with its recent immigration experience, one would expect measures which help to overcome hiring reticence and enable employers to evaluate immigrant skills to be particularly effective. Indeed, empirical evidence shows that company-based training and wage subsidies to employers have a strongly positive effect on labour market integration. Yet, relatively few immigrants profit from such measures currently. It is thus recommended to increase the scale and scope of these tools. First steps in this direction have recently been taken. There are also a variety of innovative networking projects in place which seek to set off this immigrants’ lack of access to networks, including a nationwide mentorship project, and these benefit from a strong involvement of the civic community.

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