The consequences of EU eastern enlargement on human capital accumulation and wages in Germany

The eastward enlargement rounds of the European Union (EU) between 2004 and 2007 represent a broad regulatory expansion of the European labor market that facilitated the recruitment of individuals from new member states. We focus on the effects of EU enlargement on human capital accumulation and wages in Germany. The analysis employs linked employer-employee data from 2004 to 2017 to investigate the association between the immigration of apprentices from new eastern and central European member states and wages in the German labor market. Descriptive statistics reveal a clear and continuous increase in the number of foreign apprentices from new member states in the years following the removal of transitional restrictions. We find strong positive selection effects, as these immigrants were better educated and subsequently employed in higher-paying establishments compared to individuals who entered the German apprenticeship market prior to EU enlargement. Moreover, the study provides the first extensive evidence of apprentice wage developments in the context of immigration. As apprenticeship graduates eventually become skilled workers, we also analyze indirect effects of migration on the labor market, highlighting the temporal dimension of considerations around the substitutability between foreign and domestic workers.