Immigrants to the UK from the eight East European countries that joined the EU in 2004 are more skilled than natives on average, but end up earning less over time due to being in jobs for which they are over-qualified. That is the central finding of research by Anna Rosso, presented at the Royal Economic Society''s 2014 annual conference.
Her study examines developments in the skill distributions of UK of immigrants from the EU8 and natives between 1998 and 2008, exploring the extent to which differences in wages between these two groups are explained by the changing attributes of immigrants and natives, or by differences in returns to skills, over two periods (before and after 2004).
Among the findings:
· The wage distribution of EU8 immigrants has shifted, increasing the wage penalties they experience compared with natives, despite their high education levels (which are higher than natives'').
· This penalty is likely to be because of occupational downgrading – taking jobs that are less well paid and require lower skills than those that the immigrants are qualified to do.
· Occupational downgrading is caused by poorer skill transferability between destination and sending countries, compared with other immigrant groups especially immigrants from other EU countries.
· Occupational downgrading can explain up to 20% of the wage gap between EU8 immigrants and natives. This number compares with 2-4% before 2004 for the same group and almost zero for immigrants from other European countries (those that already had access in 2004).
Anna Rosso comments:
''Given that most of the occupational downgrading is a consequence of poor skill transferability, the two countries could collaborate to improve the quality of education, in particular by, for example, making qualifications more transferable across countries, so that education can be more easily exported to other destinations.''
''Furthermore, a more direct intervention of the destination country government that could enhance labour market integration and opportunities of immigrants from Eastern European countries would be to provide language classes to improve their communication abilities.''
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This study examines developments in the skill distributions of UK immigrants from New Accession countries (EU8) and natives between 1998 and 2008, exploring the extent to which wage differentials between these two groups are explained by the changing attributes of immigrants and natives, or by differences in returns to skills, over two periods (before and after 2004).
The main findings show that the wage distribution of EU8 immigrants has shifted, increasing the wage penalties compared with natives, despite their high education levels (higher than natives). This penalty is likely to be ascribed to occupational downgrading.
Occupational downgrading is therefore caused by poorer skill transferability between destination and sending countries, compared with other immigrant groups, especially immigrants from other EU countries. Interestingly, these results only apply after the enlargement leaving a puzzle as to why poor skill transferability was not observed before.
The results of higher wage penalty and larger occupational downgrading than other immigrants are confirmed at all points of the wage distribution and also when looking at immigrants who arrived in the country recently. Occupational downgrading can explain up to 20% of the wage gap between EU8 immigrants and natives. This number compares with 2-4% before 2004 for the same group and to almost zero for immigrants from other European countries (those that already had access in 2004).
Why was the same occupational downgrading not observed before enlargement?
The EU enlargement in 2004 has changed the selection and nature of migration, by changing the cost of migration. From the perspective of the destination country, immigrants from EU8 countries became more temporary (they accept lower wages and occupational downgrading) and less likely to speak English compared with other immigrant groups.
From the sending country perspective, it is true that emigrants are likely to be more educated than non-emigrants, but the enlargement has, above all, changed the regional distribution of emigrants in the source country. Before enlargement, a large fraction of (legal) emigrants from Poland lived in richer regions (like the region of Warsaw), while after the enlargement a larger portion come from more agricultural regions.
Differences in the quality of institutions within source countries could justify differences in the labour market performance of immigrants before and after enlargement in the destination country.
What are the policy implications?
Given that most of the occupational downgrading is a consequence of poor skill transferability, the two countries could collaborate to improve the quality of education, in particular by, for example, making qualifications more transferable across countries, so that education can be more easily exported in other destinations.
Further, a more direct intervention of the destination country government that could enhance labour market integration and opportunities of immigrants from Eastern European countries would be to provide language classes to improve their communication abilities.
''Skill Premia and Immigrant-Native Wage Gaps'' by Anna Rosso
