- This article was originally published in the June 2021 edition of the 5 papers…in 5 minutes.
Skill shortages are a growing concern in the context of rapid technological change. They are generated by the economy’s increasing need for the technical competencies complementary to new technologies, which outweighs the quantity available in the labor market. In recent years, several Western countries have recurred to policies encouraging high-skill migration as a solution against them. The United Kingdom, for instance, implemented an immigration system favoring foreign workers with skills that are in shortage in the economy. Canada and Australia established a visa point system where university degrees and work experience facilitate the immigration process. Despite their popularity, however, there is still a lack of consensus on whether these policies are effective and on whether they can be detrimental to native workers facing an increase in competition.
To tackle these questions, Sara Signorelli studies the impact of a selective immigration reform introduced in France in 2008 with the aim of increasing firm access to workers within a list of occupations subject to skill shortages. The professions concerned mostly require a technical qualification from upper secondary or tertiary education, as for example different types of specialized industry technicians, as well as computer scientists. For the analysis, the author takes advantage of the fact that the same reform introduced a second list of occupations selected based on the same criteria, but where the access to foreign labor remained much more limited. This allows her to compare the evolution of the labor conditions across the two lists, using the second as a counterfactual to recover the effect of the policy. Results show that the reform was effective in increasing firm access to workers within the occupations targeted, since employment in these jobs increased by about 1.5% thanks to the policy. The growth in employment is entirely driven by additional hires of migrant workers, while the employment prospects of French nationals remained unchanged. The average wages paid in these jobs decreased by about 1% following the reform, signaling that the additional competition generated by migrants imposed a slight downward pressure on salaries. Nevertheless, the magnitude of the observed wage drop is more than twice larger among migrant workers than among French nationals, despite the fact that they are both employed in the same occupations.
In the final part of the article the author investigates what drives the differential response of native and migrant wages, and find support for two concomitant explanations. The first is that, even within the same profession, migrants and natives maintain a comparative advantage for specializing in different tasks, which partly protects native workers from the additional competition. The second reason resides in the fact that migrants have lower bargaining power to negotiate wages with employers relative to natives. This is due to the fact that their economic visa is tied to a given firm, which limits their outside options. Overall, this study suggests that selective immigration policies can be an effective tool to lessen skill shortages in the short run, while the additional burden that they impose on the competing French workers is limited. This does not exclude that in the longer run countries will also have to adapt their education systems to train the new generations with the skills most needed by the economy.
Original title of the article: Do Skilled Migrants Compete with Native Workers? Analysis of a Selective Immigration Policy
Published in: PSE Working Paper n°2019-05
Available at: https://halshs.archives-ouvertes.fr/halshs-01983071v3
This work has been awarded the 2019 Young Labour Economist Prize – EALE
* PhD Student (PSE, EHESS)
This synthesis has been published in the June edition of “5 papers… in 5 minutes!” dedicated to PhD students work.
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