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Introduction Facts and data Results Conclusion Appendix
Skill Premia And Immigrant-Native Wage Gaps
Anna Rosso1
1University College London and NIESR
The Labour Force Survey: past, present and future
BIS, 28th November 2013
1 Anna Rosso
Introduction Facts and data Results Conclusion Appendix
Introduction
I Eastern European immigrants have become one of the largest
immigrant group in the UK labour market, after 2004 Figure 2
I Changes in the migration policies a�ect the composition and
quality of immigrants (Antecol, Cobb-Clark and Trejo, 2004 )
I The 2004 accession has changed the scale and composition of
immigration in the UK (Pollard et al, 2008)
I Large literature on EU8 migration and labour market
performance: better educated than natives but very high wage
penalty.
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Introduction Facts and data Results Conclusion Appendix
The migration theory
I Country-speci�c human capital (Chiswick, 1980 Bell, 1997)
I Transferability of education and labour market experience
I Empirical evidence for other countries on Eastern European
migration
I Temporary migration: lower reservation wages (Dustmann
2000), less investment in country-speci�c human capital
I No evidence of poor skill transferability before the
enlargement: why?
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Introduction Facts and data Results Conclusion Appendix
This paper
I Review and extensions of previous results: compare EU8 with
EU14 and other immigrants
I Analysis of the immigrant-native wage gaps at di�erent
percentiles of the distribution: immigrants' performance varies
widely at the top and the bottom of the distribution (Hunt,
2012)
I Try to identify skills acquired in the source country and
destination country (in addition to education, foreign vs British
labour market experience)
I Apply the unconditional quantile regression to analyse migrant
wages (Firpo, Fortin, Lemieux, 2010)
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Introduction Facts and data Results Conclusion Appendix
Overview of results
I Decrease of return to education, but within industries and
occupations no statistically signi�cant changeI Substantial lower returns to foreign experience compared to
other groupsI Higher wage penalty a the top of EU8 wage distribution (most
unexplained)I Recent immigrants results: EU8 immigrants more similar to
other immigrants, yet occupational downgrading larger for EU8I Lack of skill transferability explains why secondary and tertiary
educated �nd jobs in low-paid occupations (especially at the
top)I What happens to the bottom: downgrading but better wage
structure than natives (relative advantage of immigrants in
manual-intensive tasks - Peri and Sparber, 2009; Peri et al,
2013; D'Amuri and Peri, 2013)5 Anna Rosso
Introduction Facts and data Results Conclusion Appendix
EU8 immigrants in the UK
I Before 2004
I Immigration Act of 1971 and EU8 labour immigrants in theUK were subject to immigration controls (work permits limitedto period and employer)
I In the 90's the EU Association Agreement to establish business
I After 2004
I Free to move and work in the UK only need to register withthe WRS
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Introduction Facts and data Results Conclusion Appendix
EU8 immigrants in the UK
I Before 2004
I Immigration Act of 1971 and EU8 labour immigrants in theUK were subject to immigration controls (work permits limitedto period and employer)
I In the 90's the EU Association Agreement to establish business
I After 2004
I Free to move and work in the UK only need to register withthe WRS
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Introduction Facts and data Results Conclusion Appendix
Data
I British Labour Force Survey - 1998 to 2008
I Immigrants variables: country of birth, year of arrivalI Education: years of education (not quali�cation) as more
representative for immigrants (Saleheen and Shadforth, 2006;Manacorda, Manning and Wadsworth, 2012)
I Earnings: log hourly gross wages (in real terms)I Sample of individuals aged 16-64, employed
I Data issues
I Immigrants may be underrepresented and selected sample,especially this particular group (Saleheen and Shadforth, 2006;Gilpin et al, 2006)
I More likely to exclude short-term migrants
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Introduction Facts and data Results Conclusion Appendix
Some descriptivesBefore 2004 After 2004
UK natives EU8Other
immigrantsEU14 UK natives EU8
Otherimmigrants
EU14
log hourly gross realwage
2.25 2.17 2.32 2.32 2.34 1.99 2.38 2.42
British labour marketexperience
22 14 15 13 23 3 14 13
Foreign labour marketexperience
4 4 3 6 5 4
males (%) 50% 37% 51% 46% 50% 55% 52% 49%Education
Primary 57% 12% 26% 30% 51% 8% 21% 25%Secondary 27% 47% 36% 33% 29% 51% 36% 33%
Tertiary 16% 41% 37% 37% 20% 41% 43% 42%Years of education 11 14 13 13 12 14 14 14Cohort of arrival
before 1998 73% 84% 81% 7% 59% 64%arrival 1998-2003 27% 16% 16% 15% 28% 23%arrival 2004-2008 78% 13% 12%
Age 39 38 38 36 40 30 39 37Marital status
Single 30% 29% 28% 42% 32% 55% 28% 43%Married 58% 58% 61% 47% 55% 36% 61% 46%
Other 12% 13% 11% 10% 13% 9% 11% 10%
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Introduction Facts and data Results Conclusion Appendix
Some descriptives (cont'd)Before 2004 After 2004
UK natives EU8Other
immigrantsEU14 UK natives EU8
Otherimmigrants
EU14
OccupationLegislators and managers 14% 0% 14% 15% 15% 3% 13% 17%
Professionals 15% 6% 21% 21% 14% 5% 20% 21%Technicians 11% 3% 11% 10% 13% 4% 15% 15%
Clerks 18% 9% 16% 16% 16% 8% 12% 12%Service and sales workers 15% 38% 16% 18% 16% 17% 17% 16%
Agricultural and fishery workers 1% 0% 0% 0% 1% 1% 0% 0%Crafts and related trades workers 9% 0% 5% 5% 7% 9% 4% 4%
Plant and machine operators 8% 13% 7% 5% 7% 20% 6% 4%Elementary occupations 9% 31% 9% 9% 10% 34% 12% 11%
Industrya-b: agriculture & fishing 1% 1% 0% 0% 1% 2% 0% 1%
c,e: energy & water 1% 0% 1% 1% 1% 0% 1% 1%d: manufacturing 19% 14% 15% 15% 14% 27% 12% 12%
f: construction 5% 6% 2% 3% 6% 6% 3% 3%g-h: distribution, hotels & restaurants 18% 23% 20% 21% 17% 25% 19% 20%
i: transport & communication 7% 3% 7% 7% 7% 11% 7% 7%j-k: banking, finance & insurance etc 15% 15% 19% 20% 15% 11% 20% 21%
l-n: public admin, educ & health 30% 24% 30% 27% 34% 11% 34% 30%o-q: other services 5% 13% 5% 6% 5% 5% 4% 5%
workplace outside uk 0% 0% 0% 0% 0% 0% 0% 0%
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Introduction Facts and data Results Conclusion Appendix
Changes in the distribution
Figure : Immigrant-Native wage gap by percentile-.
6-.
4-.
20
log
diff
20 40 60 80 100perc
before after
A8 immigrants
0.0
5.1
.15
log
diff
20 40 60 80 100perc
before after
All other immigrants
0.0
5.1
.15
log
diff
20 40 60 80 100perc
before after
EU14
by percentile in the two periods
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Introduction Facts and data Results Conclusion Appendix
Decomposition methods
I Mean wage decomposition and quantile decomposition:
Oaxaca-Blinder decomposition
∆t = W It −WNt = (X It −XNt)βNt︸ ︷︷ ︸explained
+ (βIt −βNt)X It︸ ︷︷ ︸unexplained
I Explained component: di�erences in characteristics
I Unexplained component: di�erences in the wage structure
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Introduction Facts and data Results Conclusion Appendix
Mean decomposition - EU8Model 1 Model 2
Before 2004 After 2004 Before 2004 After 2004Raw (unadjusted) gap -0.079 -0.369 -0.079 -0.369
British Experience -0.146 -0.339 -0.107 -0.248Education 0.267 0.223 0.131 0.107Marital Status 0 -0.016 0 -0.01Female -0.033 0.012 -0.026 0.009Location 0.089 0.028 0.076 0.024Occupation - - -0.017 -0.168Industry - - -0.018 -0.019
Total Explained 0.18 -0.093 0.039 -0.306
British Experience 0.007 0.023 -0.041 -0.001Foreign Experience 0.089 0.071 0.042 0.042Brit-foreign exp interaction -0.064 -0.019 -0.05 -0.005Education -0.498 -0.713 -0.401 -0.332Marital Status 0.006 -0.029 -0.046 -0.019Female -0.052 0.035 -0.023 0.018Location -0.143 0.028 -0.093 0.031Occupation - - -0.058 0.177Industry - - -0.221 -0.047Intercept and other variables 0.395 0.327 0.773 0.073
Total unexplained -0.259 -0.276 -0.118 -0.063
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Introduction Facts and data Results Conclusion Appendix
Quantile decomposition- EU8Model 2
20th 50th 90thBefore 2004 After 2004 Before 2004 After 2004 Before 2004 After 2004
Raw (unadjusted) gap -0.047 -0.192 -0.050 -0.393 -0.017 -0.589
British Experience -0.083 -0.193 -0.101 -0.240 -0.132 -0.295Education 0.060 0.052 0.111 0.099 0.248 0.187Marital Status 0.000 -0.006 0.001 -0.013 0.000 -0.016Female -0.026 0.009 -0.028 0.009 -0.026 0.009Location 0.060 0.015 0.087 0.028 0.083 0.032Occupation -0.043 -0.150 -0.021 -0.223 -0.010 -0.141Industry -0.027 -0.034 -0.026 -0.028 0.002 0.003
Total Explained -0.055 -0.307 0.025 -0.368 0.173 -0.222
British Experience -0.174 -0.015 -0.070 -0.007 0.166 -0.001Foreign Experience -0.033 0.012 0.021 0.003 0.051 0.115Brit-foreign exp interaction -0.006 0.000 -0.022 0.005 -0.070 -0.023Education -0.286 -0.117 -0.585 -0.393 -0.559 -0.587Marital Status 0.062 -0.005 -0.062 -0.009 -0.141 -0.059Female -0.024 0.048 -0.058 0.027 -0.067 -0.001Location -0.074 -0.035 -0.113 0.102 0.152 -0.059Occupation -0.058 -0.032 0.040 0.010 0.373 0.056Industry -0.035 0.171 -1.573 0.523 0.233 0.477Intercept and other variables 0.636 0.088 2.348 -0.286 -0.329 -0.286
Total unexplained 0.008 0.115 -0.074 -0.025 -0.191 -0.367
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Introduction Facts and data Results Conclusion Appendix
Recent immigrants - descriptives
EU8 EU14Other
Immigrantslog hourly gross real wage 1.87 2.34 2.28
British Experience (year since migration) 1.65 1.47 1.68Foreign experience 6.62 7.41 8.96
males (%) 60% 52% 57%Education
Primary 9% 10% 10%Secondary 53% 29% 33%
Tertiary 38% 60% 57%Years of education 14 16 15Age 28 31 32Marital status
Single 61% 68% 43%Married 32% 28% 53%
Other 7% 4% 5%
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Introduction Facts and data Results Conclusion Appendix
Recent immigrants - quantilesEU8 EU14 Other immigrants
20th 50th 90th 20th 50th 90th 20th 50th 90thRaw (unadjusted) gap -0.216 -0.437 -0.750 -0.059 0.089 0.183 -0.100 -0.068 0.087
British Experience -0.218 -0.270 -0.329 -0.221 -0.275 -0.334 -0.217 -0.269 -0.328Education 0.049 0.093 0.176 0.082 0.157 0.295 0.065 0.123 0.233Marital Status -0.007 -0.016 -0.019 -0.008 -0.019 -0.022 -0.002 -0.004 -0.003Female 0.017 0.018 0.018 0.006 0.006 0.006 0.015 0.015 0.015Location 0.005 0.008 0.009 0.045 0.084 0.106 0.038 0.073 0.088Occupation -0.172 -0.255 -0.164 0.001 0.002 0.003 -0.024 0.008 0.016Industry -0.033 -0.027 0.002 -0.008 0.063 0.088 -0.021 -0.016 0.018
Total Explained -0.358 -0.448 -0.307 -0.104 0.017 0.141 -0.146 -0.069 0.039
British Experience 0.023 0.037 0.001 0.012 -0.058 -0.005 0.008 0.023 -0.002Foreign Experience 0.015 -0.012 0.059 0.126 0.160 0.567 0.047 0.129 0.408Brit-foreign exp interaction -0.001 0.014 -0.003 -0.065 -0.082 -0.194 -0.005 -0.044 -0.144Education -0.118 -0.409 -0.837 -0.199 -0.009 -0.163 -0.245 -0.393 -0.577Marital Status -0.006 -0.010 -0.039 -0.017 -0.021 0.064 -0.015 -0.066 -0.003Female 0.046 0.039 0.027 0.064 0.053 0.016 0.052 0.073 0.050Location -0.036 0.059 -0.009 0.078 0.371 0.156 0.082 0.134 0.080Occupation 0.201 0.439 0.738 -0.150 0.220 -0.015 -0.186 -0.142 -0.161Industry -0.024 -0.034 -0.529 -0.119 -0.120 1.165 -0.130 -0.339 -1.227Intercept and other variables 0.041 -0.111 0.149 0.316 -0.443 -1.550 0.440 0.625 1.625
Total unexplained 0.141 0.011 -0.443 0.045 0.071 0.042 0.046 0.001 0.048
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Introduction Facts and data Results Conclusion Appendix
Summary
I Decrease in wage levels for EU8 immigrants after 2004, at the
mean and at all percentiles, despite high education levels
I Occupational mix and lack of British experience
I EU8 immigrant-native wage gap has increased more at the top
of the distribution
I Change in the wage structure (high negative unexplainedcomponent)
I British experience accumulated is much less valued
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Introduction Facts and data Results Conclusion Appendix
Summary
I Return to education is much lower for all immigrants
compared to natives, especially at the top
I Lower values attached to foreign labour market experience and
education acquired in the source country: poor skill
transferability
I Increase in the wage penalty also at the bottom where they are
more likely to compete with natives for more low-skilled
occupations: temporary migration?
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Introduction Facts and data Results Conclusion Appendix
Conclusions
I Downgrading as a result of poor skill transferability:
I Collaboration across countries?I Increase in the quality of education: indirect positive e�ects
through higher remittances and skill and technologyacquisition on the source country if skills are better matched.
I Lack of knowledge of English? language courses to improvetheir communication abilities (Clark and Drinkwater, 2008)
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Introduction Facts and data Results Conclusion Appendix
Thank you!
email: a.rosso@niesr.ac.uk
twitter: annac_rosso
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Introduction Facts and data Results Conclusion Appendix
Appendix - Employment, unemployment and participation
UK natives EU8Other
immigrantsEU14
Before 2004Participation rate 78% 67% 71% 79%Employment rate 74% 62% 65% 75%
Unemployment rate 5% 7% 8% 6%After 2004
Participation rate 79% 87% 73% 81%Employment rate 75% 81% 68% 77%
Unemployment rate 5% 6% 7% 5%
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Introduction Facts and data Results Conclusion Appendix
Appendix - country distribution
Before 2004 After 2004
%meanwages %
meanwages
Hungary 20% 2.07 3% 2.05Poland 43% 2.31 67% 1.98Czech Republic 12% 1.96 6% 2.10Estonia 2% 2.30 1% 2.08Lithuania 9% 2.19 9% 1.88Latvia 3% 2.22 3% 1.90Slovak Republic 10% 1.73 10% 1.89Slovenia 1% 2.60 0% 2.30
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Introduction Facts and data Results Conclusion Appendix
Appendix - occupational distribution
Natives Recent All Recent All Recent AllLegislators and managers 5.57 0.51 0.85 5.19 6.29 3.01 4.59Professionals 2.89 0.26 0.66 3.46 5.06 3.02 3.4Technicians 6.19 1.4 1.69 8.23 7.33 3.92 5.47Clerks 22.13 3.06 4.41 12.12 18.85 9.05 15.03Service and sales workers 27.34 17.73 21.69 30.74 30.81 37.19 31.12Agricultural and fishery workers 0.88 0.13 0.28 0.36 0.1 0.31Crafts and related trades workers 7.66 8.04 7.51 5.19 5.27 2.61 5.29Plant and machine operators 10.27 20.92 19.53 9.09 7.43 9.75 11.63Elementary occupations 17.06 47.96 43.38 25.97 18.6 31.36 23.16
Natives Recent All Recent All Recent AllLegislators and managers 33.33 3.56 9.82 32.52 34.7 27.71 28.75Professionals 37.52 11.88 21.19 47.97 44.8 46.68 47.24Technicians 14.8 6.41 9.17 13.82 12.3 17.84 14.08Clerks 4.63 5.94 11.76 4.07 4.16 3.61 4.95Service and sales workers 3.18 9.5 8.27 0.81 1.59 1.33 1.76Agricultural and fishery workers 0.03 0.26Crafts and related trades workers 3.99 12.35 10.47 0.81 1.65 1.71 1.82Plant and machine operators 1.63 25.18 13.57 0.43 0.19 0.75Elementary occupations 0.9 25.18 15.5 0.37 0.95 0.65
20th
90th
EU8 EU14 Other Immigrants
EU8 EU14 Other Immigrants
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Introduction Facts and data Results Conclusion Appendix
Figure 1
Slide 2
Figure : Total number of immigrants in the UK (in thousands)
2500
3000
3500
4000
4500
Oth
er im
mig
rant
s
020
040
060
080
0E
U8/
EU
14
1998 2000 2002 2004 2006 2008Year
EU8 immigrants EU14 immigrantsOther immigrants
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