Immigrants’ first experiences of the labour market can affect their employment and pay
for many years afterwards, according to new research by Olof Åslund and Dan-Olof
Rooth. Their study of 47,000 immigrants to Sweden, published in the March 2007 issue
of the Economic Journal, finds that refugees experience long-term earnings losses from
facing poor labour market conditions after arrival.
As European governments debate how many refugees to let in (and how to integrate
those who are allowed entry), these new results show that initial labour market
conditions – in both national and local labour markets – may be an important factor in
the labour market assimilation of immigrants.
The study is based on 47,000 individuals who received residence permits as refugees
during the period 1987-91. These people are followed from the time of immigration up
to 1998, that is, for at least seven years and at most for 11 years after immigration.
The investigation first makes use of the fact that Sweden was hit by a severe recession
in the beginning of the 1990s. Hence, the analysis compares refugee cohorts who
arrived before and during the recession.
Second, it makes use of a refugee settlement scheme, the so-called ‘whole of Sweden
strategy’, where individuals were located in different regions. Hence, the analysis
compares people who arrived in the same year but faced different regional conditions.
The study finds that:
• Refugees who arrived in Sweden when there were good labour market
opportunities in the country as a whole have higher employment rates and higher
earnings in a longer-term perspective compared with those who came to the
country in worse times.
• The same pattern is present at the local level. Those who settled in high
unemployment regions performed worse in a 10-year perspective compared with
those who settled in regions with more favourable conditions.
The results demonstrate that there are sizable effects of the initial conditions in the
labour market that persist even when the business cycle has moved into a different
phase. The effects are substantial and persistent.
Groups of people who settled in a region where the local unemployment rate was one
percentage point higher compared with an alternative region can be expected to have
four percentage points lower employment rates eight years after arrival. The effect on
earnings among those who do work is also large. The same comparison as above
indicates more than 10% lower annual earnings.
One conclusion from the study is that effective labour market policies for refugees are
even more essential in economic recessions. Governments that attempt to direct the
inflow of new immigrants should focus on regions with favourable labour market
prospects. The report shows that the first chances that individuals have to establish
themselves in the labour market may affect their position for many years to come.
ENDS
Notes for editors: ‘Do When and Where Matter? Initial Labour Market Conditions and
Immigrant Earnings’ by Olof Åslund and Dan-Olof Rooth is published in the March 2007
issue of the Economic Journal.
Olof Åslund is at the Institute for Labour Market Policy Evaluation, Uppsala. Dan-Olof
Rooth is at Kalmar University College.
For further information: contact Romesh Vaitilingam on 07768-661095 (email:
romesh@compuserve.com); or Olof Åslund via email: olof.aslund@ifau.uu.se