Immigration and the Labour Market: An Empirical Investigation of Wages, Productivity and Workers’ Substitutability

Labour market integration of migrant workers is key to show the integration of migrants in developed countries. Consequently, the literature regarding this topic has expanded during the last decades to better understand their situation. In this context, the main objective of this Ph.D. thesis is to fulfil gaps in the literature by investigating several aspects of the labour market integration of migrants on the Belgian labour market, namely i) the determinants of the origin-based wage gaps, and ii) the impact of migrants on natives’ employment.Chapter 1, based on a paper co-authored with Benoît Mahy, François Rycx and Mélanie Volral, estimates wage discrimination against non-EU15 workers depending on their region of origin, their tenure and the product market competition faced by the firms they work in. Using a merged employer-employee panel dataset of more than 13,000 firms relative to the Belgian private sector for the 1999–2010 period, results highlight large disparities in wage discrimination against foreign-born migrants depending on their countries of birth (especially against workers born in Asia, Eastern Europe and Africa) and hence confirm the adequacy of dividing non-EU15 workers into subgroups, as they appear to be treated very differently in the Belgian labour market depending on their regions of birth. They also suggest that wage discrimination against migrants vanishes as their firm-specific labour market experience (i.e. tenure) increases and tends to disappear in highly competitive product market situations, these results being in line with statistical and monopsonistic discrimination theories.Next, Chapter 2, based on a paper co-authored with Benoît Mahy and François Rycx, examines the influence of firm’s upstreamness (i.e. the average distance from final use, to be understood as the average number of steps/transactions before firms’ production of goods and/or services meets either domestic or foreign final demand) on wages according to workers’ origin. Based on a unique linked employer-employee cross-sectional dataset regarding the Belgian manufacturing industry covering the 2002-2010 timespan, our estimates show that firms that are further up in the value chain pay higher wages, even after controlling for a large set of worker and firm characteristics, and time fixed effects. However, the wage premium associated with upstreamness is also found to vary substantially depending on workers’ origin along the wage distribution. Unconditional quantile estimates further suggest that those who benefit the most from being employed in more upstream firms are (high-wage) workers born in developed countries, whereas workers born in developing countries, irrespective of their earnings, appear to be unfairly rewarded. Quantile decompositions further show that, while differences in average values of upstreamness according to workers’ origin play a limited role, differences in wage premia associated with upstreamness account for a substantial part of the origin-based wage gap, especially at the top of the wage distribution.Finally, Chapter 3, using detailed Belgian matched employer-employee panel data covering the 1999-2016 period, investigates whether 1st- and 2nd-generation migrants and natives are complements or substitutes in the production function at quite disaggregated micro levels of the labour market, i.e. at the firm and firm-occupation levels. Our estimates show that 2nd-generation migrants have a significant and positive impact on the employment of natives, regardless of the level of aggregation under analysis. Next, our findings suggest a smaller complementarity in the hiring and lay-off of 1st-generation migrants and natives. Moreover, our findings suggest that the complementarity between 1st- and 2nd-generation migrants and native workers is only observed when they have the same level of education, and that their positive relationship is even greater when workers have a higher level of education. For workers with different levels of education, results rather suggest a segmentation of the labour market. Next, the complementarity is stronger when 1st- and 2nd-generation migrants originate from developed countries and when a higher level of skills is required for a particular occupation.