Labour market integration and labour market effects: Prospects and first evidence from Germany

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1 Labour market integration and labour market effects: Prospects and first evidence from Germany EU labour market integration of asylum-seekers and refugees: Challenges and opportunities Eurofound national-level seminar Berlin, November 29, 2016 Prof. Dr. Herbert Brücker IAB, Universität Bamberg, CreAM und IZA

2 Introduction Global stock of refugees numbered 65.5 millions in 2015, one-third of those residing in foreign countries Refugee migration is highly correlated with political persecution (Freedom House 2016), terror (Political Terror Scale, 2016) and the number of war facilities (Uppsala Universitet, 2016) The main crisis regions of the world are close or very close to Europe and the EU Germany: the EASY-reporting systems counted 1.1 million refugee arrivals, the core data system of the Federal Office for Migration and Refugees (BAMF) estimates actual arrival figure at around 890,000 due to double-counting. Net immigration can be estimated to be somewhat lower at about 810,000 (BMI, 2016) The number of arrivals per month has declined from peak of 205,000 in November 2015 to approximately 16,000 since closure of Balkan-route and Turkey- Agreement 2

3 Refugee arrivals, EASY-accounting system, weekly arrivals (1,000 persons) September 5, 2015 Merkel-decision March 9, 2016 Closure of Balkan-Route March 28, 2016 EU-Turkey- Agreement Source: EASY-System, own calculations.

4 The potential labour supply of refugees It is an open issue whether the closed-border-policies of the EU can be maintained since causes of refugee migration seem to increase rather than to decline. Nevertheless, we rely here on status-quo scenario Approximately 75 per cent of refugees are in employment age, acknowledgement rates of asylum applications can be estimated to stand at 60 to 65 per cent in 2016 Under this conditions, long-term labour supply will increase by 460,000 persons (1% of labour force) through refugee migration since 2015, peak will be achieved at 480,000 by end of 2017 Assumptions: 890,000 arrivals 2015, 250, and 170, (BAMF core data system) Acknowledgement rate: per cent Realistic assumptions on return migration, replacements, family reunification Labour force participation rate of 72 per cent (lower compared to population average) However, we do not know much about human capital characteristics of refugees and their prerequisites for labour market integration. First evidence from IAB- BAMF-SOEP-survey 4

5 Contents 1. Refugee migration: causes, costs and risks 2. Values and attitudes 3. Education 4. Labor market integration 5. Labor market effects 5

6 1. Refugee migration: causes, costs and risks Causes and motives of refugee migration are complex, i.e. it is driven both by causes of forced migration such as war, violence and persecution as well as economic rationales (Hatton, 2004) 60 per cent of refugees moved directly from origin countries to Germany, 40 per cent stayed for at least 3 month in transition countries Survey findings: war, violence and persecution are dominant motives Precarious economic conditions, discrimination, persecution and displacements are main causes for leaving transit countries Acceptance of human rights main motive for choosing Germany as destination Average costs for refugee migration numbers 7,100 EUROs, median costs 5,000 EUROs High individual risks of refugee migration (e.g. sea emergencies, violence, imprisonment) 6

7 Dominant refugee migration motive: war and persecution Reasons leaving home country Shares in percentage, multiple answers allowed Fear of violent conflicts and wars 70 Persecution 44 Poor living conditions 39 Discrimination 38 Fear of forced recruitment 36 Overall economic situation in the country 32 Social networks 20 Other reasons 17 Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. 7

8 Causes for leaving transition countries Reasons leaving transition countries Shares in percentage, multiple answers allowed Bad living conditions Discrimination Economic situation Persecution Displacement Family reunification Family moved away Friends moved away Family send me Other reasons Intention to stay Onward movement intention Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. 8

9 Motive for choosing Germany: acceptance of human rights Reasons choosing Germany as destination country Shares in percentage, multiple answers allowed Respect of human rights in Germany 73 German educational system Feeling of being welcome in Germany Social welfare Economic situation in Germany Asylum procedure in Germany Social networks Coincidence 9 Other reasons 12 Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. 9

10 Costs in Duration in days Costs and duration of travelling fall over time Costs in EURO and length of travelling since leaving the origin in days Costs and duration of travelling 1. Half-year 2013 till 1. Half-year 2015 (Date of departure) Total costs Duration in days Half-year Half-year Half-year Half-year Half-year Half-year Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. 10

11 Refugee migration experiences: high risks for life and health Experiences with risks of flight by gender Shares in percentage, multiple answers allowed Economic fraud/exploitation Imprisonment Physical assault Shipwreck Extortion Robbery Sexual harassment 4 15 Female Male Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. 11

12 2. Values and attitudes Refugees do not represent population average of home countries or regions Migration theory expects self-selection of refugees dependent on returns of human capital and other abilities, costs and risks of refugee migration (Borjas 1987; Chiswick, 1999) Selection in terms of values and attitudes is although reasonable since refugees migration is determined by policy rationales We compare here findings from refugee survey on values and attitudes with those from the World Value Survey on German population and populations in Arabic countries and other countries in origin regions We find many similarities to values and attitudes of German population and large differences to populations in Arabic countries and other sending country regions 12

13 High support of democratic values Attitudes towards form of government Consent in percentage One should have a democratic system One should have a strong leader, who does not have to deal with a parliament and elections. Attitudes towards democracy Consent in percentage People vote their government in free elections. Civil rights protect people from state repression The government taxes the rich and relieves the poor Women have the same rights as men Religious leaders ultimately determine the interpretation of the law Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. Refugees Germans Origin countries

14 Gender equality Working is the best opportunity for a woman to be independent. Consent in percentage Women Men If a woman earns more than her partner, this necessarily leads to problems. Consent in percentage Women For parents, the vocational training or university education of their sons should be more important than the vocational training or university education of their daughters. Consent in percentage Men Women Refugees Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. Germans Men

15 3. Education and educational aspirations of refugees 55 per cent of refugees have attended schools for 10 years or more, 58 per cent have attended schools, vocational training and universities for 10 years and more (Germans: 88 per cent) Polarisation of general education (shares in per cent) Upper secondary education: 37%, (32% completed) Secondary education: 31% (22% completed) Primary education: 10%, no school: 9% Average years of schooling: 10.4 years Low share with vocational training or college / university education 31% have attended universities / colleges, 19% completed 9% have attended vocational training, 6% completed High aspirations: 46% want to obtain schooling-, 66% vocational training- or academic degrees in Germany 15

16 School-, university- and vocational education Shares among 18+ cohort in per cent School attendance and degrees Shares of aged 18 and older in percentage No schooling In school Elementary school Middle school Secondary school Other schools School attendance School degree Vocational education/university Shares of aged 18 and older in percentage No Vocational training In training University Attendance With degree Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted.

17 Educational aspirations by gender and child status Shares among 18+ cohort in per cent Educational aspirations Shares in percentage Total Female Male Total Female Male School degrees Vocational or university degrees Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted.

18 4. Labour market integration Labour market integration is at its beginning, but tends to increase over time 14 per cent of refugees who have arrived after 2013 are employed or selfemployed Share increases over time Evidence from IAB-SOEP-migration survey for refugee migration since 1990s Similar education background and other human capital characteristic Approx. 50 per cent are employed or self-employed 6 years after arrival Recent refugee migration may deviate in one direction or another from past experiences Higher investment in language, education and integration compared to the past Large influx of refugees increases competition in specific labour market segments Better state of the German economy compared to the past 18

19 Employment rate of refugees by arrival year Share of employees, self-employed, participants in vocational training and interns in 18+ cohort Employment rate by years since migration Shares in percentage before Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. 19

20 Employment rate of refugees and other immigrants in the past employment rate in % of population in employment age according IEB Employment rate by years since migration Shares in percentage Other arrivals Arrival as refugee or asylum seeker Years since arrival Source: IAB-SOEP-Migration Survey, IEB. 20

21 Median earnings as % of median earnings of Germans of same age and in same year Median earnings of refugees in per cent of median earnings of Germans Employment rate by years since migration Shares in percentage Other arrivals Arrival as refugee or asylum seeker Years since first employment in Germany Source: IAB-SOEP-Migration Survey, IEB.

22 High shares of refugees with work experience before arrival Work experience before arrival: 73%; employed in Germany: 14% Occupational status before migration and in Germany Before migration: 75% with working experience in Germany: 14% working selfemployment 27% civil servant 5% blue-collar worker 30% civil servant 29% blue-collar worker 32% white-collar worker 38% selfemployment 2% white-collar worker 37% Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. 22

23 Job search channels of refugees Job-search channels for the first occupation in Germany by educational degree, shares in percentage Others Private job placement Families, friends, relatives Newspapers and internet Employment agency, Job Total No vocational or university education No vocational or university degree with vocational or university degree Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. 23

24 Participation in language programs, labour market advice and other integration measures Participation in language courses, labour market programmes and counseling Shares in percentage BA-vocational counseling 15 BA-general labor market counseling 23 BA-Perspective for Refugees 4 BA-language programm 8 ESF-BAMF-language course 5 BAMF-integration course 33 Source: IAB-BAMF-SOEP-Refugee Sample 2016, weighted. 24

25 Labour market integration: what helps? First evidence Significant correlations between completed integration courses, ESF- BAMF-language classes and BA-entry courses on the one hand and employment on the other Significant correlation between qualification profiling programs, labour market advice by employment agencies and job centers on the one hand and employment on the other This is not yet causal evidence Future research will provide further evidence 25

26 4. Labour market effects: replacement of Germans? Employment subject to social security contributions has increased by 1.62 Mill. workers in the last three years Some 660,000 or more than 40 per cent of those work in less-skilled occupations, although this labour market segment accounts only for 13 per cent of employment in Germany Immigrant employment subject to social security contributions has increased by 700,000 workers during last three years, 320,000 (45%) in less-skilled occupations Native employment subject to social security contributions has increased by 920,000 persons during last three years, 340,000 (37%) of these in less-skilled occupations Native unemployment has declined in less-skilled segment, immigrant unemployment has slightly increased (composition effect) 26

27 Wage and employment effects by labour market segments Simulation of wage and employment effects based on an empirically estimated model featuring imperfect labour markets and unemployment (Brücker et al., EER 2014) Estimation of elasticities of wage-setting curve by labour market segments Distinguishing education, work experience and migration status Simulation of increase of labour force by 1% (460,000) at given skill level of immigrants Short-term: fixed capital stock Long-term: complete capital stock adjustment (fixed capital-output-ratio) 27

28 Aggregate effects Wage: in %; unemployment rate: in %-points Unemployment rate 0,14 0,29-0,13 Wage 0,00 Long-term Short-term Source: Own simulations based on Brücker et al. (2014). 28

29 Long-term effects on native labour force Wage: in %, unemployment rate: in %-points -0,01 With university degree 0,04-0,10 With vocational degree 0,09 Without vocational degree 0,04 0,00-0,08 All 0,07 Unemployment rate Wage Source: Own simulations based on Brücker et al. (2014). 29

30 Long-term effects on immigrant labour force Wage: in %, unemployment rate: in %-points With university degree 2,00-2,34 With vocational degree 0,42-0,19 Without vocational degree 4,18-0,78 All 1,73-0,70 Unemployment rate Wage Source: Own simulations based on Brücker et al. (2014). 30

31 Conclusions (I/II) 1. Refugee migration will increase German labour force by 1 per cent if EU-Turkey-Agreement and/or closure of Balkan-Route will be maintained 2. Findings of our survey suggest that war, violence and persecutions are main motives for leaving origin countries 3. Refugee migration involves high costs and risks. As a consequence, refugee population is likely to be highly selective in terms of demographic characteristics, resources and skill levels 4. Refugees are obviously also highly selective in terms of values and attitudes, i.e. much more close to German population than to populations in sending areas 31

32 Conclusions (II/II) 5. General education levels of refugees are highly polarised, shares vocational training very low. Educational aspirations are however very strong 6. Labour market integration is at the beginnings, but it increasing over time 7. Two-thirds of refugees have participated in language classes, one-third in integration courses 8. The range of labour market policy measures seem to be limited as well 9. However, the available evidence suggests that both language programs and integration programs increase employment participation 10. Refugee migration does not involve replacement effects for native workers, but increases competition for immigrant labour force. Aggregate labour market effects are rather neutral 32

33 Many thanks for your attention! Herbert Brücker Institute for Employment Research (IAB) University of Bamberg CreAM, IZA Contact:

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