Last week, I discussed Denmark’s immigration experience. New research by Mette Foget and Giovanni Peri found that a surge of less-skilled immigration in the 1990s led to gains for less-skilled natives as they shifted towards more complex work that complemented less-skilled immigrants. I offered thoughts on how we might interpret Foget and Peri’s findings, and what implications they might have for the United States. One issue that I raised is that while less-skilled natives might benefit, earlier waves of immigrants might not benefit. This is more relevant to the U.S., where 13 percent of the population is foreign-born, than it is to Denmark, where the foreign-born share of the population is 9.3 percent, and 6.2 percent of the population is comprised of foreign citizens (and 4 percent is comprised of foreign non-EU citizens).
Denmark’s less-skilled influx was not the product of an immigration policy that welcomed less-skilled labor migrants. Rather, less-skilled migrants to Denmark arrived through family and humanitarian channels, and more recently through the expansion of the European Union to include various central and eastern European states. Denmark’s EU membership and its treaty obligations have limited its ability to control this influx. In 2007, the OECD released an analysis of the labor market integration of immigrants in Denmark over the preceding two decades, and its findings were sobering:
The labour market integration of immigrants has been a key issue both in the public debate and on the government agenda in Denmark, triggered by unfavourable employment outcomes of immigrants – the gaps in employment rates of immigrants compared to the native-born are among the highest in the OECD – and a rapid rise of the immigrant population during the past twenty years. Prior to the 1980s, immigration to Denmark was a very marginal phenomenon. Despite the rapid growth since then, with less than 7% immigrants in the population, Denmark still has one of the smallest immigrant populations in Western Europe.
Labour market outcomes for immigrants have been significantly below those of the native-born for more than two decades. This is partly attributable to the fact that immigration to Denmark has been strongly dominated by refugees and family reunification – groups whose labour market outcomes tend to be not as good as the native-born or economic migrants in all countries, particularly in the early years of settlement. Since 2001, lower social assistance has been introduced for all persons who have been in Denmark for less than seven out of the past eight years because of concerns about the impact of Denmark’s relatively high social benefits on work incentives. In addition, participation in integration measures has been made obligatory. Finally, for more than a decade, there have been efforts to improve the labour market integration of immigrants, and these efforts have been enhanced recently. [Emphasis added]
The report also raised concerns about the children of Danish immigrants:
The second generation is now gradually entering the labour market in larger numbers, and this group is of particular policy concern. Their educational attainment is well below that of comparable Danes without a migration background. This is mainly due to the fact that the dropout rates from vocational training for the second generation are more than twice as high as among persons of Danish origin. This, in turn, is at least in part attributable to the fact that persons with a migration background have more difficulties getting apprenticeship contracts with companies than comparable persons of Danish origin. There have been a series of recent measures to address this issue. However, even for those with upper secondary or tertiary education, employment rates of the second generation are significantly lower than for the native-born. This also holds for the offspring of immigrants from the OECD.
Moreover, the report provided some context for the fact that natives fared relatively well during this period:
About one third of total Danish employment is in the public sector, where immigrants are underrepresented, although the degree of underrepresentation seems to be lower than in other OECD countries. Indeed, a variety of measures have been taken to increase immigrants’ employment in this sector, because of its size and importance in the Danish context. The public sector is also viewed as having a role-model function. Private employment is largely dominated by small- and medium-sized enterprises, but immigrants do not seem to be less present there than in large companies – in contrast to other OECD countries.
By way of contrast, public sector employment represented 17.3 percent of total employment in the United States as of 2010. The overrepresentation of natives in the public sector might have contributed to the fact that less-skilled natives fared relatively well during Denmark’s 1990s-era influx of less-skilled immigrants.
And Denmark’s integration difficulties haven’t reflected a lack of interest or investment:
Considering the recent nature of most immigration, and the relatively small size of the immigrant population, the overall framework for integration in Denmark is highly developed and a significant amount is invested in integration efforts. This is mirrored by the fact that Denmark is among the few OECD countries which has a separate Ministry for Refugee, Immigration and Integration Affairs, in which immigration and integration policies are considered together. Under this framework, municipalities have to offer a three-year introduction programme to immigrants from outside the European Economic Area, which consists of language courses and a range of labour market integration measures. Indeed, the strong emphasis on labour market integration in the introduction programme is particularly noteworthy. There are strong financial incentives for municipalities to achieve rapid labour market integration of recent arrivals, and an elaborate benchmarking system is in place to monitor municipalities’ integration performance and facilitate the mainstreaming of effective policies.
There is some indication that current policies are having the desired effect, as labour market participation and employment of recent arrivals have increased. However, the unemployment rate for this group has also increased and it is getting lower social assistance. One way to escape from the resulting marginalisation is via self-employment, but few immigrants seem to succeed in pursuing this route. This may be linked with the fact that immigrants generally do not have access to loans before they acquire permanent residence, and requirements for permanent residence have been tightened. There is thus a case for better loan access for this group. [Emphasis added]
The report goes on to offer a number of hypotheses as to why Danish immigrants haven’t fared particularly well — “a mix of less developed personal networks, information asymmetries and discrimination seems to be part of the answer” — and the report identifies strategies like company-based training and wage subsidies to employers as possible remedies.
The OECD’s analysis tends to reinforce the argument that Denmark’s immigration experience is not relevant to the United States, where the institutional environment is quite different and immigrants represent a relatively small share of the population. Recently, one of my interlocutors suggested that whether or not immigrants to affluent market democracies like Denmark experience unfavorable employment outcomes, we ought to keep in mind that they are better off than they were in their native countries — this, I’m told, is the relevant counterfactual. I don’t doubt that many migrants would much prefer to be unemployed in Denmark than employed in a poorer country. It is not obvious to me that this is an attractive outcome from the perspective of a member of the Danish political community, and I continue to think that this is the most relevant question.