Unionization, licensure and workplace variation in pay inequality between immigrants and natives

Abstract

Organizational research has revealed considerable variation in immigrant–native pay inequalities across workplace contexts. However, less is known about how broader labor market institutions intersect in the local dynamics of wage setting between employees of immigrant and native backgrounds. We argue that union density and higher shares of employees in licensed occupations in workplaces constrain organizational opportunity structures for unequal pay according to immigrant backgrounds. Our analysis of longitudinal linked employer–employee administrative data for the Norwegian labor market shows that the wage gap between immigrants and natives decreases with increasing workplace unionization, but almost exclusively for immigrants who are union members. Next, licensure raises pay at the individual and workplace levels, although any reduction in immigrant–native pay gaps is contingent on immigrants’ access to licensed jobs. Our findings support the claim that institutional regulation in the workplace reduces the organizational scope of unequal pay based on immigrant status.

Wage Disparities across Immigrant Generations: Education, Segregation, or Unequal Pay?

“…Lack of proficiency in the dominant language in the host country is a central barrier to labor market success among foreignborn workers, especially for the newly arrived (McManus, Gould, and Welch 1983;Dustmann and Van Soest 2002;Chiswick and Miller 2009). Immigrants can also experience lower economic returns to educational degrees obtained abroad due to both lack of recognition and lower quality of schooling in less-developed nations (Kanas and Van Tubergen 2009;Lancee and Bol 2017;Li and Lu 2023;Drange, Helland, and Hermansen 2024). Sojourner orientations and plans of return migration can also lead immigrants to make different labor market investments than natives (Dustmann 1993).…”

“…According to this meritocracy hypothesis, the labor market for college-educated professionals is more meritocratic because higher qualifications provide powerful signals to employers that leave less room for social networks and non-productive factors. Thus, immigrant-native pay gaps should be smaller among workers with college education and within professional occupations, which often require advanced degrees (i.e., master's or PhD) (Drange et al 2024). For example, a recent meta-analysis of 97 field experiments reports that ethnoracial hiring discrimination is, on average, lower among job applicants with postsecondary degrees compared to applicants with less education (Quillian et al 2019).…”

“…Large private companies, however, often exhibit more bureaucratic organizational structures and more often adopt formalized employment procedures, which are likely to reduce the scope of discriminatory organizational processes (Marsden, Cook, and Kalleberg 1996). Moreover, prior research has shown that unionization and more centralized and standardized wage bargaining reduce immigrant-native wage differentials (Peters and Melzer 2022;Drange et al 2024). According to these arguments, immigrant-native wage disparities should be lower in more bureaucratized organizational contexts.…”

“…We consider the labor market in Norway to be especially interesting because of the combination of an ethnically stratified workforce and a well-regulated labor market, with a large public sector, strong labor unions, and high levels of centralized wage determination. These institutional characteristics contribute to a compressed wage inequality and are assumed to equalize employment protection and remuneration of immigrant-background workers (Barth, Moene, and Willumsen 2014;OECD 2019;Drange et al 2024). The centralization of wage bargaining agreements does, however, vary across the labor market segments.…”

“…Regardless of entry criteria, however, immigrants from Eastern Europe and low-income non-European countries often arrive with low levels of formal education, earn less, and over time experience declining employment rates and increased social insurance dependency compared to natives (Bratsberg, Raaum, and Røed 2014;Drange et al 2024). Today, the labor market in Norway is highly segregated by ethnicity and low-skilled immigrants are disproportionately concentrated in industries dominated by manual and routine occupations, where wages often are low, such as construction, hotels, restaurants, cleaning, and care work (Friberg and Midtbøen 2019;Lillehagen and Hermansen 2022;Østbakken et al 2023).…”