The immigrant-native wage gap in Germany revisited

Kai Ingwersen,Stephan L Thomsen

doi:10.1007/s10888-021-09493-8

Abstract

This study provides new evidence on the levels of economic integration experienced by foreigners and naturalised immigrants relative to native Germans from 1994 to 2015. We decompose the wage gap using the method for unconditional quantile regression models by employing a regression of the (recentered) influence function (RIF) of the gross hourly wage on a rich set of explanatory variables. This approach enables us to estimate contributions made across the whole wage distribution. To allow for a detailed characterisation of labour market conditions, we consider a comprehensive set of socio-economic and labour-related aspects capturing influences of, e.g., human capital quality, cultural background, and the personalities of immigrants. The decomposition results clearly indicate a significant growing gap with higher wages for both foreigners (13.6 to 17.6%) and naturalised immigrants (10.0 to 16.4%). The findings further display a low explanation for the wage gap in low wage deciles that is even more pronounced within immigrant subgroups. Cultural and economic distances each correlate strongly with wages. A different appreciation of foreign educational qualifications, however, widens the wage gap substantially by 4.5%points on average. Moreover, we observe an indication of deterioration of immigrants’ human capital endowments over time relative to those of native Germans.

Highlights

The recent inflow of migrants into Europe has reinforced the opposing currents in the societies of European countries
From the experience of previous waves of immigration to Germany1 and its problems experienced in the integration process, critics of immigration are supported by the fact that the benefit system is demonstrably claimed by a growing number of foreigners (Riphahn et al 2013)
The development of inequality in terms of wages has stagnated in recent years (Biewen et al 2017), research shows that especially low-skilled workers and immigrants are increasingly being negatively affected by wage inequality in Germany (e.g., Algan et al 2010; Gernandt and Pfeiffer 2007)

Summary

Introduction

The recent inflow of migrants into Europe has reinforced the opposing currents in the societies of European countries. From the experience of previous waves of immigration to Germany and its problems experienced in the integration process, critics of immigration are supported by the fact that the benefit system is demonstrably claimed by a growing number of foreigners (Riphahn et al 2013). This public concern is fuelled by a perception of rising levels of income inequality (Roth et al 2017). We aim to expose a number of key influencing factors For this purpose, we are adding a previously disregarded comprehensive set of socioeconomic and labour-related aspects, such as the human capital quality, the cultural background, and the personalities of immigrants

Objectives

Methods

Findings

Conclusion