Migration Policy and Immigrants’ Labor Market Performance

Abstract

This article studies whether migration policy is a suitable tool to improve the inefficient use of immigrants’ human capital. This line of investigation complements the traditional analysis of migration policy as a tool to manage labor supply. The effect of migration policy is studied, using a policy change that occurred in Australia in the late 1990s that tightened the selection applied to certain economic immigrants. The empirical analysis, based on data collected by the Longitudinal Survey of Migrants to Australia, confirms that the policy change raised, on average, the human capital of the affected group. It also, however, consistently reveals that the change had no detectable impact on indicators measuring immigrants’ skill utilization. This result suggests that migration policy, by itself, may not be best suited to address issues related to the efficient use of foreign talent in the labor market. Better coordination with employment policy may alleviate this problem. Additional research on migration policy’s effect on efficiency-related issues is also called for.