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Migration into many European countries is causing widespread public concern and pressures to increase legal restrictions on immigration. The results of the many empirical studies for the US that have found the detrimental impact of increased migration on natives' wages to be small cannot be generalized to European labour markets, which have very different structures. In Discussion Paper No. 936, Research Affiliate Rudolf Winter-Ebmer and Josef Zweimüller assess the impact of migration into Austria, focusing on the young blue-collar native workers with whom the unskilled guest-workers that comprise most of the country's migrants compete most directly. Their initial estimates of natives' wage equations, which incorporate the shares of foreign workers at regional and industry levels, indicate that migration has no negative impact on their earnings. Winter-Ebmer and Zweimüller also estimate wage equations to assess the impact of migration at the firm level. Natives' bargaining power may be lower where the share of foreign workers is higher, if they are less strike prone and likely to replace natives in the event of industrial conflict, or if equally productive foreigners receive lower wages, employers recruiting them may gain rents which they then share with the native incumbents. The rent effect dominates the threat effect, as firms with 1% above the average proportion of foreign workers paid wages 0.2-0.4% above average. The authors also regress wage changes during 1988-91 on changes in the shares of foreign workers to eliminate any bias arising from the correlation of firm-, industry- or region-specific effects with the share of foreign workers. This procedure also captures better the effects of immigration in the short run, when the adjustment of the capital stock or the skill composition of individual industries remains incomplete. They find that wages fell for workers that remained in the same jobs but rose for those who changed, which suggests that mobile workers may even profit from an rise in the share of foreigners in the labour market. Further work is required, however, to model these adjustment processes more fully, which should focus in particular on workers' mobility within countries. Immigration and the Earnings of Young Native Workers Rudolf Winter-Ebmer and Josef Zweimüller Discussion Paper No. 936, April 1994 (HR) |