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Skill structure and labor market integration of immigrants in Europe

Across European countries, immigrants are disadvantaged in labor market attainment relative to natives: foreign-born individuals are less likely to be employed and more likely to be unemployed. Previous research indicates that immigrants’ employment chances are better when the share of low-skill jobs in the labor market is large. Upgrading of the job structure, which has taken place in many countries over recent decades, might therefore have hurt immigrants’ employment prospects. However, an exclusive focus on skill demand neglects another important development in the skill structure of advanced economies: educational expansion. The rapid rise in skill supply has tended to outpace the decline in the low-skill job share with increasing over-education as a consequence, potentially leading to crowding-out of immigrant workers from employment. Based on data from the European Union Labour Force Surveys (EU-LFS) 2004-2016, we perform analyses that jointly consider the demand and supply sides of labor markets. Our results indicate that the size of the low-skill job sector is positively related to immigrants’ employment if and only if those employed in the low-skill sector have low qualifications. In economies with high rates of over-education, where many well-educated natives occupy low-skill jobs, the labor market prospects of immigrants deteriorate.