Unskilled Immigration To Denmark Increased Wages For Low-Skilled Danish People

A blog about business and economics.
Aug. 29 2013 3:42 PM

Unskilled Immigration To Denmark Increased Wages For Low-Skilled Danish People

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COPENHAGEN, DENMARK: Mogens Lykketoft, leader of the largest Danish opposition party, the Social Democrats, speaks and makes strong remarks in favor of immigrants rights at a Copenhagen school 07 February 2005.

Photo by SVEN NACKSTRAND/AFP/Getty Images

It's a dogma among immigration restrictions that either immigration in general or low-skilled immigration in particular is bad for native-born American workers, but the actual evidence for this proposition is extremely weak and restrictionists never seem very interested in wrestling with the data. Obviously research from Denmark can't be simplistically applied to the United States, but this new study of immigration to Denmak by Mette Foget and Giovanni Peri is one of the most detailed examinations of the issue that we've seen and it finds that Danish workers benefit from an inflow of complementary immigrants:

Using a database that includes the universe of individuals and establishments in Denmark over the period 1991-2008 we analyze the effect of a large inflow of non-European (EU) immigrants on Danish workers. We first identify a sharp and sustained supply-driven increase in the inflow of non-EU immigrants in Denmark, beginning in 1995 and driven by a sequence of international events such as the Bosnian, Somalian and Iraqi crises. We then look at the response of occupational complexity, job upgrading and downgrading, wage and employment of natives in the short and long run. We find that the increased supply of non-EU low skilled immigrants pushed native workers to pursue more complex occupations. This reallocation happened mainly through movement across firms. Immigration increased mobility of natives across firms and across municipalities but it did not increase their probability of unemployment. We also observe a significant shift in the native labor force towards complex service industries in locations receiving more immigrants. Those mechanisms protected individual wages from immigrants competition and enhanced their wage outcomes. While the highly educated experienced wage gains already in the short-run, the gains of the less educated built up over time as they moved towards jobs that were complementary to those held by the non-EU immigrants.
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Tada! A lot of people have twisted themselves into a position where this kind of result strikes them as contrarian or counterintuitive. But if you think about population dynamics in a non-immigration context you'll see that this is the conventional wisdom. If a deadly virus killed five percent of the population of Chicago, incomes would fall not rise. Chicago isn't populated by subsistence farmers imperiled by land scarcity. Its residents participate in a 21st century service economy where they benefit from complex complementarities and an elaborate division of labor. That's why big cities are engines of opportunity. Adding people does as much or more to bolster those tendencies as to undermine earning power by increasing the total number of workers.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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