ministerie van sociale zaken en werkgelegenheid 1 strengthening eu competitiveness – potential of...

Ministerie van Sociale Zakenen Werkgelegenheid

1

Strengthening EU Competitiveness –Potential of Migrants on the Labour

Market

The Costs and Benefits of Economic Migration

A Dutch Perspective

Jos Jansen

(Ministry of Social Affairs and Employment)

February 26, 2009


2 Outline

•Migration in relation to key policy challenges

(1) Sustainability of welfare state

(2) Structural changes on the labour market

•Dutch experience

(1) Non-western immigration (from late1960s)

(2) CEEC immigration (from late 1990s)

•Conclusion


3 Broader setting: Key policy challenges

Due to ageing of population, globalization, technological advances, etc.:

•Sustainability of welfare state under pressure

Shorter working livesHigher old age expenditures (pensions, care)Declining working age populationHigher factor mobility

•Structural changes on the labour marketDemand: Sectoral shifts (e.g. care)Supply: Ageing of workforce, possibly decline


4

Working age population and dependency ratio, 2005-2050


5

NPV net contribution to welfare state by age of entry – red line


6 (1) Sustainability of the welfare state

•Policy approach along three tracks– Increase labour utilization (participation

rate, hours per worker, working life)– Decrease government debt– Adjust current welfare state arrangements

to reduce future spending (unemployment and disability insurance, social safety net, old age pension, long-term care)

•Key issue: Need for more workers, not more people

•What role for immigration?


7 Immigration and the welfare state

•Immigrants who workPay taxes and contributionsBut also accumulate rights on benefits

•Immigrants are in many cases also citizens, with additional consequences for the welfare state

Family reunionFamily formation (spouse from home country,

children)Duration, permanent residency

•Selection: Do generous welfare states attract immigrants with low potential (Cohen and Razin 2008)


8

(2) Structural changes on the labour market

•Effects of labour shortages and sectoral shifts may be mitigated by

– Adjustment of wages and wage structure– More imports– More outsourcing– Investment in employability, human capital– Investment in labour-saving technological

change– Activating untapped labour potential– Labour market institutions that support

flexibility

•What role for immigration?


9 Migration and the labour market

•Benefits– Increases labour supply, reduces tightness– Increases output– Better matching on the labour market (larger

pool)– Increases flexibility and dynamism on the labour

market– Increase of high-quality human capital at work in

case of highly-skilled immigrants

•But …– Not every immigrant is successful– Displacement of native workers (esp. low-

skilled)– No structural solution for future shortages


10 Dutch experience with immigration

Focus on economic and labour market impact

1. Immigration from outside the EU: Morocco, Turkey, Surinam, Netherlands Antilles and other non-western countries

2. Immigration from within the EU: CEEC


11

Immigration from non-EU countries, 1995-2007

0

10000

20000

30000

40000

50000

60000

70000

80000

95 96 97 98 99 00 01 02 03 04 05 06 07

Other

Asylum

Family

Work


12 Immigration – Part of the solution?

Impact on sustainability crucially depends on labour market integration of immigrants:

•Skill level

•Length of stay, remigration

•Cultural distance (language, cultural capital)

•Network effects

•Integration in society (mixed marriages, follow-up migration)


13

NPV net contribution to welfare state by age of entry – blue line


14

Gap in male employment natives and foreign born (%), 2005-2006

-20

-15

-10

-5

0

5

10

15

CH GE FR AT BE DK SD NO NL

low-skilled

high-skilled


15

Enrollment in higher education (% of age group 18-20)

1995 2000 2007

Native background

Men 43 48 52

Women 46 56 61

Non-western immigrant background

Men 28 34 50

Women 27 38 61


16

Number of workers from CEEC countries, January 1999 – December 2005


17

Economic impact of CEEC labour migrants (1)

•Estimates for 2008: 51,000 long-term and 107,000 temporary workers (3 months)

•Employment in 2005: 0.7% of total hours worked

•Displacement wrt jobs: None by long-term migrants; small effect by short-term migrants in expansion sectors (doubling their presence reduces number of ‘Dutch’ jobs by 0.08%)

•Displacement wrt wages: Reverse pattern

•The demand curve for labour is downward sloping


18

Economic impact CEEC labour migrants (2)

•Use of benefit schemes is at present very low

Based on rough calculations:

•Short-term migrants: small positive net contribution to Dutch welfare state

•Longer-term migrants (average): NPV of net contribution measured over duration of stay is modestly positive (1 yr state pension for 1 person)

•Net contribution: modest but positive (robust)


19

NPV net contribution to welfare state by age of entry – green line


20

NPV net contribution to welfare state by age of entry – 4 cases (HC RM): (- -) (- +) (+ -) (+ +)


21 Conclusion

•Migration by EU-nationals reduces labour shortages and modestly improves sustainability

•Same (probably) holds for knowledge workers

•Short-term immigrants from non-EU countries may under certain conditions have a positive impact on labour market and sustainability

•Long-term/permanent migration without integration may well hurt sustainability

•Domestic labour utilization is key to sustainability, not migration


22

Thank you for your attention


23 Immigration, 1995-2007

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

95 96 97 98 99 00 01 02 03 04 05 06 07

non-EU

EU


24

Employment rates after arrival, 1997 cohort

ministerie van sociale zaken en werkgelegenheid 1 strengthening eu competitiveness – potential of...

Documents

labour market benefits

labour market demand

labour supply

welfare state immigrants

labour market dutch

labour market larger

welfare state policy

s conclusion slide