Research notes · Migration

What happens when the arrivals are near-perfect substitutes for the workers already there?

What the authors found

Braun and Mahmoud use the same expellee episode for a different question. Because expellees were ethnic Germans, not selected on skills or job prospects, they were unusually close substitutes for native West German workers — the case where displacement effects should be largest if they exist anywhere. The authors find significant adverse employment effects on natives, concentrated where the inflow was largest, which is a different answer from most of the modern immigration literature and for an identifiable reason.

What our data adds

Modern migration is generally not this. Among sizeable economies the highest foreign-born shares are the United Arab Emirates at 74.0 per cent, Singapore at 48.7, Jordan at 45.7 and Saudi Arabia at 40.3 — labour systems built around workers who differ from nationals in occupation, legal status and career path, and who are therefore complements rather than substitutes across much of the labour market. The condition that makes this paper's result what it is rarely holds today.

What this cannot show

Substitutability is a property of skills and occupations, not of national origin, and nothing in a foreign-born share reveals it — the argument above is inference from what those labour markets are known to be like, not something our data measures. This note and the one on the Clemens and Lewis H-2B lottery reach opposite-sounding conclusions from different settings, and that is the actual state of the literature rather than a contradiction to resolve.

The data behind it

Related notes

• If you shut a border to protect domestic workers, do their wages actually rise?
• When seven million people arrive at once, who gains and who loses?
• If firms cannot hire foreign workers for low-skill jobs, do they hire local ones instead?

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