The Impact of Immigration on Native Wages and Employment

Abstract

This paper investigates the immigration impact on native outcomes using microlevel data for France. I find that immigration does not affect the wages of competing natives, but induces adverse employment effects. This finding is consistent with a wage structure that is rigid in France. The quality of the data allows to dig more deeply into the interpretation of the immigration impact. First, I show that immigrants displace native workers because they are more willing to work at lower wages due to lower outside options. Second, I find that natives on short-term contracts, who are less subject to wage rigidities, do experience wage losses due to immigration.

How do rigid labor markets absorb immigration? Evidence from France

“…Moreover, these supply shifts did not affect all age groups within these populations equally. The immigrant supply shock experienced in the highly and medium-educated groups was mainly concentrated in cells with more than 10 years of experience and below 35 years of experience (Edo 2015).…”

“…For instance, in the case where immigrant wages are less inflexible than native wages, an immigrant-induced shift in labor supply should reduce immigrant wages by more than native wages leading firms to substitute away from natives. Moreover, firms may be encouraged to replace natives by immigrants as the latter tend to have lower reservation wages and exert more effort in production than equally productive natives (Galor and Stark 1991;Constant et al 2011;Malchow-Møller et al 2012;Edo 2015). As explained in Section 2.1, one important source of wage rigidities in France lies in the type of job contracts.…”

“…I deflate the wage data using the French Consumer Price Index provided by the INSEE and compute the mean log monthly wage at the skill-cell level, as suggested in Katz and Murphy (1992) and Borjas (2003Borjas ( , 2012. 10 As in Edo (2015), I use the sample of native workers in full-time employment (representing 96.3 % of all native workers) to have a homogenous population of workers. Second, I compute the log of hours worked per week by natives for each skill cell.…”

“…As explained in Section 2.2, firms may replace the natives under indefinite-term contracts who leave their jobs by immigrants. This substitution mechanism could be profitable for firms, especially because immigrants tend to accept lower wages and exert more effort in production than equally skilled natives (Malchow-Møller et al 2012;Edo 2015).…”

“…When focusing on skill groups between 10 and 35 years of experience (specification C3), the wage elasticity becomes stronger than in the basic regression (specification C1). One explanation lies in the fact that the immigrant supply shock has been mainly concentrated within these specific experience groups (Edo 2015). Thus, the relationship between immigration and the wages of natives under fixed-term contracts may be better captured in specification C3.…”