The Impact of Immigration on Local Labour Markets in the Netherlands

92 

Full text

(1)

The Impact of Immigration on Local Labour Markets in the Netherlands

By Wouter de Krom

An Applied Dissertation Submitted to the faculty of Governance and Global Affairs in Partial Fulfillment of the Requirements for the Degree of Msc Economics and Governance

Thesis advisor Dr. A. Afonso

(2)

The Impact of Immigration on Local Labour Markets in the Netherlands

Abstract

(3)

The Impact of Immigration on Local Labour Markets in the Netherlands

Acknowledgement

With this dissertation I hope to combine all that I have learned during my Bachelor and Master studies in an independent research project of my own. Here, I learned how to combine

(4)

The Impact of Immigration on Local Labour Markets in the Netherlands

CONTENTS

1. Introduction 5

1.1 Relevance………..………6

1.2 Research question………..……...7

1.3 Dutch immigration policy……….………8

2. Literature review 9

2.1 Unemployment………10

2.2 The substitution hypothesis……….…11

2.3 Short and long-term effects………...…..17

2.4 Vulnerable groups………...18

2.5 Immigration as a complement to the native workforce……….. 20

2.6 Opportunities of immigration………..21

2.7 Hypotheses………..…26

3. The data 30

3.1 Explanatory variables………..32

3.2 Control variables……….34

4. Research design 40

5. Descriptive statistics 47

5.1 Immigration in the Netherlands………..47

5.1 The refugee crisis………50

5.2 Descriptive statistics………51

6. Empirical analysis 60

6.1 Assumptions checks………62

6.2 Reverse stepwise regression results………65

6.3 Variants of the dependent variable………..69

6.4 Discussion of the results………..73

6.5 Limitations………..74

7. Conclusion 76

Bibliography 79

(5)

The Impact of Immigration on Local Labour Markets in the Netherlands

1 Introduction

Due to increasing globalization and violence persisting in several regions around the world, migration and refugee issues are highly relevant phenomena in the present day. This research will try to determine what the effects of the most recent migration flows on the local labour market of an advanced economy like the Netherlands are because it is still unclear what exactly determines these effects and how the existing findings can be generalized. These grey areas of uncertainty could fuel heated and uninformed political debates as well as lead to ineffective policymaking. It is up to the world of political economic research to provide more answers and facts for politicians to work with. Migration has occurred throughout history, but people’s perceptions of its opportunities and threats on the long term are subject to change. Both senders and receivers of migrants are affected by international migration especially in regions which particularly attract people looking for a more promising future or safe refuge. When socio-economic, cultural and demographic differences between the native population and immigrant groups grow larger, concerns especially among the natives tend to arise and politicians respond to the perceptions of migration threats among the public. (Longhi et al., 2010) A recent strong growth in permanent as well as temporary migration contributed to the attention scientists, policy-makers and the public pay to the effects of migration on the labour market. “The number of foreign-born residents in countries worldwide almost doubled to 200 million in the period

1985-2005”. (Longhi et al., 2010:356) Because many migrants already reside in advanced

economies and the phenomenon continues to be on the rise, carefully examining the impact of migration on host economies and natives is essential. (Jaumotte et al., 2016) Therefore, this research will do just that and will focus on the unemployment rate in the local labour markets as the outcome variable.

1.1 Relevance

(6)

The Impact of Immigration on Local Labour Markets in the Netherlands

Survey (ESS) reports that Eurobarometer surveys on attitudes towards minority groups in the European Union show increasing numbers of Europeans see minorities as threats to society and welfare.1 The number of immigrants moving to and settling in Europe is increasing. However, according to this survey, the openness of European civilians towards migrants and refugees is increasing too.

Existing research on the socio-economic effects of migration shows differing results. These results generally could support either the substitution thesis or the view of migrants as a compliment to the existing workforce. The fact that this debate still needs to be settled could already be a justification for this research. Many scholars in the past measured data at a country level. However, countries have very different characteristics and the differences in which the migration statistics or economic indicators are measured could be quite large. This heterogeneity could be a weakness of national-level comparisons. This research will use geographical-differences data from within a country which has more homogeneity. The outcomes are hopefully generalizable at least for advanced Northern European economies depending on the assumptions checks. It could also give insight into whether people in advanced economies should or should not actually worry about their fellow workers having a foreign background (of course, altruistic considerations set aside). More studies will be seen in the literature have measured the within-country effects in the Netherlands. One has focused on macro-economic considerations and measured the effects per immigrant for the country as a whole. (Roodenburg et al., 2004) However, local labour markets could pose an additional view on the effects of movements towards certain areas within a country. Another study used a similar research setup as this one, but the data has aged since then. (Galloway and Jozefowicz, 2008) Changing times and a new refugee inflow calls for a renewed investigation. Therefore, this study will measure the effects right after the peak of the 2015 refugee crisis. As will be explained in detail in the research design section of this piece, additional measurements will be included to provide more insight into what groups within labour markets are more or less vulnerable. This research will try to add to the literature by answering this question through area differences in the Netherlands.

1.2 Research Question

1

(7)

The Impact of Immigration on Local Labour Markets in the Netherlands

The two groups that are affected mostly by migration are the migrants themselves (migration will be defined properly in further sections) as well as the people working in local labour markets. This study will be a source of information especially for the latter group. Table 1 shows the different categories of effects of migration for each subject involved. This study will focus on the economic labour market effects for the host country. The dynamics involved in this interplay will be set out in detail in the literature section. In any case, “the Netherlands is the country par excellence for such a research framework”. (Van der Waal, 2012) To answer

the research question noted below, this thesis will make use of statistical tools which will be described in the research design section and further elaborated on in the empirical analysis. This will mainly consist of an OLS regression of the year-to-year municipality level data differences using readily available data provided by the Central Bureau of Statistics in the Netherlands. Its research question therefore will be the following:

“To what extent does the change in immigration rates in local labour markets in the

Netherlands affect the difference in the local unemployment rate?”

(8)

The Impact of Immigration on Local Labour Markets in the Netherlands

Table 1. Roodenburg et al. (2004:17)

1.3 Dutch immigration policy

As will be seen in the literature, governments in different countries respond differently to migration flows and this affects its implications. In the Netherlands, The Modern Migration Policy Act (MMPA) and the National Visa Act took effect from June 2013 onwards. A new feature was the amending of the Aliens Act 2000 with a new emphasis on sponsorship. It also combined the permit application process for the temporary ninety-day residence permit and the permanent or long-term permit into a single procedure. With the new law, the Dutch Immigration and Naturalisation Service (Immigratie- en Naturalisatiedienst, IND), which assesses the applications for residence permits, issues new obligations for both migrants and sponsors including providing information and keeping records to provide for the government. According to the Dutch government website “immigrants are people who come from other countries to reside in the Netherlands for employment, family reunification or other

purposes.”2 Note that the CBS defines immigrants slightly differently. This will be elaborated on in the further sections of this thesis. To receive a permit, one must fall into certain conditions like having a partner with a sufficient income in the case of a family reunification.3 For nationals of EU countries and Liechtenstein, Norway, Iceland and Switzerland, no residence permit nor a report to the IND is needed and all you do need is your passport or identity document. In case of a longer stay than four months, a registration of details in the Personal Records Database (BRP) is sufficient. For Romanian and Bulgarian nationals, employers no longer need an employment permit since 2014. Croatian nationals still require an employment permit however. For non-EU residents the application procedure is more difficult.

2 https://www.loc.gov/law/help/immigration/Netherlands.php (visited 09/04/2018) 3

(9)

The Impact of Immigration on Local Labour Markets in the Netherlands

The MMPA laid down that migrants who are likely to contribute to the Dutch economy, culture or science have higher chances of being admitted. The Netherlands wishes to participate more effectively in the global economy, therefore certain special treatments are made for entrepreneurs and post-doctoral academic staff to create new jobs or improve the quality in the research institutes. Highly skilled migrants who do not hold a nationality within the EU need a recognised sponsor and must be paid an income above a certain threshold.4 Foreign investors with a capital over 1.25m€ can obtain residence more easily.5 In order to obtain a residence permit an asylum seeker needs to meet a set of conditions regarding the nature of the reason one seeks refuge. These include for instance recognized reasons for fear of persecutions, execution or torture, harm by armed conflict or a close family member receiving an asylum permit. When a residence permit is received, migrants might be obliged to enter the integration process. This will be finalized and tested in a civic integration examination, which must be passed within 3 years. After this period the residence permit might be revoked.6

Now that the relevance of the research topic as well as the policy context has been laid out, the upcoming literature review will go in-depth in the scholarly understanding of the phenomenon of immigration and how it benefits or affects socio-economic indicators. The previous section has shown how exactly a migrant wishing to participate in the Dutch labour market can enter the country and which procedure it needs to follow. The descriptive statistics chapter will further present the numbers on exactly which migrant groups have indeed done so and how this changed over time. What the entering of migrants into the Dutch labour market exactly means, will be the research topic of this dissertation.

4 https://ind.nl/en/work/Pages/Highly-skilled-migrant.aspx (visited 09/04/2018)

5 https://www.government.nl/topics/immigration/options-for-entrepreneurs-and-employees-from-abroad (visited 13/04/2018)

6

(10)

The Impact of Immigration on Local Labour Markets in the Netherlands

2

Literature review

This chapter will pose an overview of the scientific research scholars have conducted in the past to clarify what process leads up to the formulation of the research question, as well as the multiple aspects building up to the hypotheses and research design. According to Toshkov (2016), theories make assumptions to model the complexity of the social world around us. Since immigration and its effects are a highly complex matter, it would be of the utmost important to distinguish what exactly is investigated and why. As will be seen in the literature review, most studies start with hypotheses derived from classic economic literature. The outcomes show a large variability of the political and policy outcomes which are all relevant to know for both the research setup and its relevance. This section will also give an insight in the mechanisms that lead up to the causal relationships between the variables used in this research. (Toshkov, 2016) The literature splits into sections briefly describing the literature on the outcome variable, before diving deep into the scholarly immigration debate. Many has been written and different research designs, insights and conclusions emerge from this pool of research. Therefore, these studies are structured into two main sections. The first including the studies that find evidence on the substitution hypothesis. The second includes those scholars that found beneficial effects of migration. This dichotomy will be elaborated on further. Finally, this information will be summarized into hypotheses that can be tested in the empirical analysis chapter.

2.1 Unemployment

(11)

The Impact of Immigration on Local Labour Markets in the Netherlands

still lower than expected since the people that pulled out of the job market during the crisis have been slow to return), the rising pension age, the lifting of taxes on labour by the government and last but not least in relation to this research, the asylum influx. Until now though, the number of job opportunities are still increasing faster than the labour supply increases. This is a result of the economic growth. Employment opportunities in 2017 will rise with two percent (measured in the employment opportunities in hours). This rise can be detected especially in the market sector.7

An OECD publication describes the aspects and effects that come along with unemployment. In the first place, households will encounter strain on their finances because there is a lack of sufficient income. This also accounts for the public finances because it will receive less tax income and on the other hand the government might need to spend money on unemployment benefits. Additionally, on the individual level, unemployment might have serious demoralising effects and it could diminish any future career prospects. Young people that are unemployed might therefore especially be affected by being jobless for too long. Unemployment can be a transient or a persistent phenomenon, depending on the country in which it is measured. Unemployment in OECD countries surged during and after the crisis but has since seen a steady decrease in most countries including substantial falls in Estonia, Latvia, Spain, Portugal and Hungary. The first two even halved their unemployment rate since then and the others have lowered unemployment for around 5 percentage points. In most countries however, the youth unemployment rate is double the adult unemployment rate. (OECD, 2016) As will be seen in the descriptive statistics section of this research, the Netherlands fares relatively well in their unemployment rate. For the main part of this research, the unemployment rate will make up the dependent variable.

That unemployment carries with it negative effects to any society is clear. As will be seen in the literature section however, some societies’ social economic characteristics respond differently to an inflow of migration than others. The next section will provide an overview of the studies that relate migration to (among wages and GDP) unemployment in the receiving labour markets. Any negative effects due to a ‘brain drain’ on the labour markets where migrants tend to leave, will not be taken into consideration. This falls outside of the scope of this research which will solely focus on immigration and the share of foreigners.

2.2 The substitution hypothesis

7

(12)

The Impact of Immigration on Local Labour Markets in the Netherlands

This literature section will pose an overview of studies that focus on the immigration question. In this chapter these will be sorted according to the nature and focus of these studies, and eventually the hypothesis section will link the existing theory to several predictions which will be tested in the empirical analysis. The dynamics regarding this phenomenon will be elaborated, as well as the threats and opportunities that might come along with it. First, the negative consequences of the inflow of labour workers from abroad will be set out in the upcoming paragraphs. The next section will pose alternative views on the immigration phenomenon. In the overall narrative different research setups will also be discussed to show that the literature includes a diverse range of strategies, although with often recurring methods like the area analysis which will eventually be used in this research. This could also be relevant to discuss since some studies write that the variety of models could explain the different findings, along with country-specific policies. Then, the final section of this chapter will conclude the general ideas and devise testable hypotheses, based on the literature.

(13)

The Impact of Immigration on Local Labour Markets in the Netherlands

modelling starting with a null model to show the variation of unemployment for lower educated people at both the city and time levels. He also uses the variables producer services and share of lower educated in relation to the unemployment level which both yield negative significant coefficients, underlining the statement that there is a high demand for low-skill workers. Their settlement is not labour market driven completely, because several cities have higher unemployment level than several others. Van der Waal (2012) uses several control variables in a multilevel regression analysis including the working population, share of lower educated, and ten-year age groups ranging from the age of 15 to 54. One of the conclusions resulting from the models is that urban regions with a high employment share in advanced producer services see a weaker impact of immigration on unemployment, compared to regions with a low employment share in this sector. Overall resulting from this study is the fact that the substitution hypothesis holds up, but that it largely depends on the skill categories of workers and policies. Immigrants compete mostly with lower-educated natives and former waves of immigrants which in turn see their wages decline. Van der Waal (2012) further states that future studies that take note of these aspects of urban economies, like the fact that these economies differ in labour demand while the logic of immigrants is not necessarily based on market logic because they also settle in cities with low employment demand, will find more meaningful results especially in the Netherlands.

(14)

The Impact of Immigration on Local Labour Markets in the Netherlands

minimal wage increase was detected alongside a small rise in low educated native employment but no changes in the employment of middle- or high-skilled workers.

These studies were examples of scholars that found evidence to support the substitution thesis. An extensive amount of research has been done on the labour effects of immigration. Many different research techniques have been used to define the natives’ labour market position after labour competition increases. Most of it have been used to assess the recipient national economies. This is mainly due to the EU enlargement, more globalization, and an increasing overall global migrant labour flow over the past fifty years. In the EU, the accessions of the eight Central and Eastern European countries and the refugee crisis have led to a larger controversy concerning the labour market, fiscal and macroeconomic impacts on both the exporting and receiving economies. According to Pouliakas (2014), studies that focus on whether migration harms native employment and wages could see the most significant impacts on the sub-national level, while most studies are conducted on a national level. Migrants would be drawn to high-density population areas where better employment opportunities, higher wages and less traditional lifestyles are more common. (Pouliakas, 2014; Blanchflower et al., 2007; Phimister, 2005)

One common denominator of most studies on this topic is the baseline neoclassical economic model of supply and demand which is referred to the literature sections. The neoclassical model of supply and demand explains the uncertainty that comes with migrant inflows for natives in the labour market, because immigrants raise the price of factors they complement and lower those which they perfectly substitute. This uncertainty often leads to popular fears of the adverse consequences of immigration also regarding unemployment rates may rise due to an excess labour supply. (Pouliakas, 2014) Okkerse (2008) also concludes that most studies find negative consequences of immigration. The higher fractions of migrants in specific labour markets could lead to lower wages and higher unemployment rates. Language barriers and cultural misunderstandings could diminish any positive total welfare advantages or effects of a more diverse workforce due to migration. (Brunow and Benzel, 2012) These language and cultural barriers are thought to be more pronounced for non-Western immigrants, because non-Westerners are logically further removed in this sense than are Westerners when they come to a Western country. This of course does not mean that they cannot integrate and become stellar citizens. It might however lower their chances compared to Western immigrants. This idea will be referred to in the hypothesis section.

(15)

The Impact of Immigration on Local Labour Markets in the Netherlands

further in this literature review). But these claims are often based on assumptions that could easily be violated. (Coleman and Rowthorn, 2004) These are that immigration usually consists of relatively young working-age people. Another is that they perform just as well as natives, and this claim is usually false in advanced economies, according to Coleman and Rowthorn (2004). They find that consequences of large-scale immigration are negative or affect certain vulnerable group’s interests, and that economic or fiscal benefits do not outweigh these effects. They find no evidence that in the UK anyone other than the immigrants themselves would benefit from migration and that solely altruistic considerations could make an argument for the more immigration-supporting policy changes in the UK in 1997. These findings contradict with other studies done by Winkelmann and Zimmermann (1993) and De New and Zimmermann (1994a), which will also be elaborated on further in this section.

The fact that the probability of losing your job as a native to foreign labour (displacement risk), and the risk that these workers will not find new employers because the increased relative unemployment leads to increased competition (job-search effectiveness), might rise due to immigration often leads to responses from the public. The perceptions people have of these risks often leads to negative public opinion. (ESS) This might be justified in some cases. Winter-Ebmer and Zweimuller (1999) for instance find that natives could indeed be displaced by immigrant workers in the case of Austria. These public responses to immigration flows were also seen in the country of analysis of this study, the Netherlands. The Central Plan Bureau (CPB), an institution that often makes predictions of policies as well as recommendations to the central government, responded to these developments by publishing an article about the effects of additional migration to the workforce on a macro-economic level. This study will be described in the following section.

(16)

The Impact of Immigration on Local Labour Markets in the Netherlands

however focus on the impact on the Dutch economy and assess the impact of immigration on the labour market as well as the public sector within the Netherlands. They too address the assumptions needed to improve fiscal impact on the long run. They state that indeed migrants need to be as productive as natives to improve the host country situation. Therefore, the immigration of labour is not exactly effective in posing solutions for the ageing problems in the Netherlands. The fiscal impact of immigrants depends on the age of entry and the socio-economic status. Their study finds that immigrants form a burden to the government budget balance even when the immigrant’s social economic characteristics are equal to those of the non-Western residents, while families result in a larger burden. During times of increased public pressure coming from interest parties like employers and the immigrants themselves, the Dutch authorities need to make hard decisions and, according to Roodenburg et la. (2004), a selective restrictive policy regarding providing access to the Netherlands and its welfare arrangements is necessary in order to achieve a successful policy. They argue that the immigration of labour on the large scale is not an effective tool to counter the effects of ageing on the financial balance as long as there are no improving labour market effects to be measured due to immigration. Until the time of the CPB report, the government had correctly used this argument to defend its stance on migration policy. They back this line of thought with a few findings. First of all, the domestic income of the country increases. On the long run, those natives that possess skillsets similar to the immigrants will win. Capital owners will win too. However, these wins will disappear on the long term. The rise of domestic income of the country benefits mainly the immigrants due to the wages they receive. Those natives that have similar skillsets as the immigrants will lose. Overall, the general net gain in income will probably be small and might even be negative. Roodenburg et al. (2004) find that usually non-Westerners (besides the Surinam migrants) have higher dependency ratios on social transfer programmes including disability and unemployment benefits and welfare. A main factor for this relatively high dependency is a lack of education, which explains one third of the difference in employment rates, as well as differing age and sex compositions. They stress the importance of the language problems since 70 percent of the Turkish and 60 percent of the Moroccan migrants experience issues with the Dutch language while preferring to speak their mother tongue in their private circles. An external factor Roodenburg et al. (2004) touch upon is discriminatory behaviour by potential employers.

(17)

The Impact of Immigration on Local Labour Markets in the Netherlands

the benefits and losses of an additional migrant. Many studies have taken different approaches. The level of analysis affects the outcomes because it changes assumptions and dynamics between the variables. When these assumptions and dynamics change, so does sometimes the rather pessimistic outcome, as will be seen in the next paragraph. The year in which the CPB rapport was written could also mean that it is slightly outdated. In any case this study will too focus on the Netherlands, like the CPB study, but it uses a completely different approach.

2.3 Short and long-term effects

That conclusions on this topic are most certainly not straightforward and all-defining, is an idea that is established when we compare several specific studies. Some articles, for instance, find differences between measuring the effects of immigration on the short and the long term. We already saw this in the conclusions Roodenburg et al. (2004) made. On the short term, Winter-Ebmer and Zweimuller (1999) find that natives indeed could be displaced by immigrant workers in Austria. However, on the long term these effects are less severe because these natives are able to move between industries or regions. Sufficient mobility therefore could be said to eliminate the threat of structural replacement. The authors looked at differences in two fixed points in time, during the 1988-1991 period when a large influx of foreign workers was taking place. They find that even though the results were modest, certain subgroups like already employed immigrants or seasonal workers, were especially affected by the inflow of migrants (even though these effects were not always significant). The increase of immigration share with a percentage point leads to an increase unemployment duration by about 5% or 5 days and was especially pronounced in the case of young workers. These young workers were the focus group of their research and comprised of workers until the age of 35. (Winter-Ebmer and Zweimuller, 1999)

(18)

The Impact of Immigration on Local Labour Markets in the Netherlands

explain the between-countries effects that results from the literature. However, the large differences in the results regarding the thesis that labour migration is a substitution for the native workforce still need to be explained properly. Winter-Ebmer and Zweimüller (1999) regressed in a pooled cross-section the immigration and the displacement of natives under 35 years old while controlling for unemployment rates, wages, education, seasonal workers and the industry foreign share, and found only a minor impact of immigration on the unemployment risk of natives on the short term. Gross (2002) investigates the effect of immigration on the French labour market. The immigrant flows increase unemployment slightly similar in terms of increased competition to an increase in the native labour force in accordance with economic theory that states that a larger sudden supply of labour will lead to unemployment in the short term under unchanging market circumstances. Also, the characteristics of migration flows matter, and the migration flow composition matters including those coming from the European Union and those originating from countries outside of the EU, as well as the distribution between more and less skilled workers. This needs to be properly balanced. On the long run however, all types of immigrant workers lower the unemployment rate, according to the time-series methods employed in these studies. This includes policy measures or the tendency of migrants to gravitate towards certain areas, as the upcoming sections will show. This dissertation will mainly look at the short-term effects of immigration. This choice will be further explained in the research design section. Gross (2002) further elaborates on policy implications including the screening of immigrants before they enter the country of destination in order to adapt the composition of the labour market. Therefore, not all studies reach conclusions that are pessimistic regarding migration. More studies like this will be described in the next paragraph. As stated before, the effects of migration could depend on the context.

2.4 Vulnerable groups

(19)

The Impact of Immigration on Local Labour Markets in the Netherlands

large differences in the results regarding the thesis that labour migration is a substitution for the native workforce still need to be explained properly.

Musterd and Muus (1995) assess the spatial settlement differences among five groups of immigrants including labour migrants, asylum seekers, migrants from rich countries, migrants from EU countries and migrants from former colonies. They find that many immigrants arrive in large cities because they look for cheap housing opportunities, but their chances of finding a match within the labour market in these same urban areas are bad. There are only scarce employment opportunities within these areas for newcomers which leads to mismatches. Due to these mismatches many policies like the Act on Equal Employment Opportunities from 1993, which should have improved the participation rates among immigrants, lost their value.

Longhi et al. (2010) find that the employment impact of immigration in Europe is stronger than in the United States. Demarcation across geographical differences and skill matters and according to them, rigid wages enhance the employment impact on natives. They note that most studies on the international migration effects analyse at a national level while between-regions or cities evaluations are relatively rare. Immigrants and emigrants are often spatially clustered. Migrants are also subject to a high level of heterogeneity, which is why there is evidence of differences in socio-economic impact of immigrants. Examples of characteristics that lead to this heterogeneity are education, skills, gender, age, cultural background, motivation and welfare position. The wage and employment impacts of immigration shocks are interdependent through the wage elasticity of demand and supply of labour. A meta-analysis results in a .029% native wage decrease and a .011% native employment decrease because of a 1% increase of the share of immigrants in the local labour market. The impact of other workers on a labour supply increase depends on the extent to which different labour types are substitutes in production and the change in the output composition of firms on the supply side. On the demand side, public expenditure on health and social security payments will depend on the characteristics of the migrants, the location and whether education or health sectors were operating at full capacity.

(20)

The Impact of Immigration on Local Labour Markets in the Netherlands

small regional economies were relatively unable to adjust to the inflow of low skilled labour supply. Therefore, the skilled wage premium was widened. These findings correspond with those by Borjas et al. (1997), Ozden and Schiff (2005) and Østbye and Westerlund (2007).

2.5 Immigration as a complement to the native workforce

As seen in the previous paragraph, many studies with very different research designs and setups warn for the negative influence of additional workers from abroad on the current workforce and public finances. This usually fuels sentiments among the public that the politicians should create protective policies to preserve the economic and labour market conditions that people are used to. However, as in many sensitive study topics, one could argue in favour and against certain phenomena, preferably backed by scientific evidence. This paragraph will nuance the findings of the studies presented above. This should eventually set the stage for the current research and show how exactly it contributes to the debate. There have been numerous studies that show that migration might have benefits for a country or at least argue that certain factors mitigate the findings that support the substitution hypothesis. When the public tends to quickly form its opinion on these matters, academic achievements could make for a more well-thought out and balanced policymaking environment. Note that this study focuses on the measurements of economic indicators, and that any discussion of public opinion merely provides context. The negative public opinion towards immigration, like the ESS investigates, is usually made up of perceptions of risk. These natives fear for losing their job (displacement risk) and the risk of not being able to find a new employer when part of the unemployed due to increased competition from foreign workers (job-search effectiveness) is higher.8

In Austria the risk for natives losing their jobs to increased competition was highest for young workers because they made up the largest part of the unemployment entries while at the same time low-wage workers face higher probabilities of joblessness. (Winter-Ebmer and Zweimuller, 1999) However, the job-search effectiveness risk associated with immigration is larger for older workers that become unemployed by chance. Politicians that argue foreign workers will replace natives on a one-to-one ratio, do three assumptions that could easily be violated. One of them is that the new workforce will not affect economic growth, if the job possibilities or the number of jobs remains the same. Furthermore, another assumption is that

(21)

The Impact of Immigration on Local Labour Markets in the Netherlands

the wages for the incoming foreign workforce are lower than those for native workers. The last assumption is that foreigners and natives are perfect substitutes. Another view could be that immigrants take jobs that native would not do, and instead the natives could see prospects of better job opportunities and therefore complement the existing workforce without any substitution taking place. However, both views would be unrealistic and empirical results probably show different stories. (Winter-Ebmer and Zweimuller, 1999)

2.6 Opportunities of immigration

Even though the native workforce might often see migration as a threat, it could also pose opportunities for countries to boost their GDP, employment rates and lower the public deficits. Additionally, many models produce outcomes that are quite dependent on the assumptions of the models or the research design. Changing its assumptions could lead to different conclusions, like assuming that capital is internationally mobile. These capital flows could lead to a balancing of the capital-labour ratio which leads to no effective changes of immigration compared to the pre-migration period. Intersectoral capital mobility could also affect results. In a multisector model, immigration will decrease the wage rate when factor price insensitivity no longer applies. Finally, the openness of an economy could affect the impact of immigration. (Okkerse, 2008; Borjas, 1999; Rivera-Batiz 1983)

(22)

The Impact of Immigration on Local Labour Markets in the Netherlands

on wage or unemployment levels. Immigrants could choose to settle in destinations with the better labour market conditions, which is the opposite causality which this model is looking for. The correlation between the two variables could be a sign of net effects instead of a causal relationship. Ordinary least squares (OLS) estimates require independent variables to be exogenous, which means that the ratio or numbers of immigrants on a regional level cannot be influenced by the wages/unemployment rates. (Okkerse, 2008) According to Gurak and Kritz (2000) this is quite unlikely since regions with strong economic growth attract higher numbers of migrants. Therefore, to avoid these biases due to endogeneity problems this study will incorporate a simple solution. Okkerse (2008) poses one technique to solve this problem using instrumental variables (IV) estimation. A possible instrument would be the regional share of immigrants at the beginning of the period, relating it to the change in migrant shares. The reasoning is that an originally higher number of immigrants tend to attract more migration due to a larger information availability and the connections to friends and family. However, as can be read in the research design section, this research will incorporate different techniques to avoid endogeneity problems.

A second problem with geographical differences analysis comes from the fact that labour or capital could be moved to other areas by natives, which could lead to nothing being measured locally but there would be effects. (Borjas, 1999) Several studies on these balancing outflows show several results. Inwards migration of natives is lower in areas with higher numbers of immigrants. Higher levels of recent immigration also lead to lower chances of receiving or keeping native workers. Finally, another study finds that higher numbers of immigrants in an area lead to low native in-migration and high native out-migration. (Filer, 1992; White and Liang, 1998; Frey, 1995; Borjas, 2005) Several researchers dealt with the problem of native migration responses by using occupation, industry, experience groups or education as the units of analysis instead of the geographical areas. It would be more difficult to switch sectors or industries than areas in times of increased competition on labour markets. (De New and Zimmermann, 1994; Camarota, 1998; Card, 2001; Orrenius and Zavodny, 2003; Borjas, 2003)

(23)

The Impact of Immigration on Local Labour Markets in the Netherlands

economies. The share of the working-age population may be increased. The labour productivity per worker could also be affected in both positive and negative ways, to the extent that their skill sets are complementary to the native workforce. The study analyses the effects on income levels in advanced economies, the difference in impacts as a result from different skill levels of migrants, and the way the gains are shared across the population. Included in their econometric models are robustness tests to address the risk of reverse causality and effects of control variables. They find that immigration through raising the labour productivity has a positive effect on the GDP per capita of host economies. A one percentage point increase in the migrant share leads, according to them, to a two percent increase in the GDP per capita on the long term. This effect can be seen for both high- and low-skilled migrants because the existing skill set within the society becomes more diverse. They also find that immigration gains are broadly distributed among the population. The positive effects are a result of a balance between on the one hand young and dynamic migrants complementing the labour force and solving the problem of the ageing population and thus helping to sustain public expenditures. On the other hand, if immigrants have a hard time integrating or if they lead to the displacement of natives, this could lead to political backlashes because of the increasing social tensions due to culture and language differences and added pressure on social security. (Jaumotte et al., 2016)

(24)

The Impact of Immigration on Local Labour Markets in the Netherlands

Brunow and Brenzel (2012) take a view on the effects on immigration through increased demographic diversity. Their unit of analysis is the region on an EU level and their outcome variable is the GDP per capita. The increased diversity, according to Brunow and Brenzel (2012) might lead to increases of productivity since they have a positive effect on skill diversity within the population while working together with natives. The sole fact that an inflow of workers leads to an increase in the working population cou ld pose advantages too, especially in times of demographic changes like the ageing of society. They combine Eurostat regional data with the European Labour Force Survey and describe the regional classification through the NUTS levels 1 and 2 of aggregation, which, compared to NUTS level 3 overcomes strong spatial interdependencies. They find that an increase in the cultural diversity within a region improves the per capita GDP through the increase of the proportion of foreigners and the diversity between the foreign-born population alongside a tendency towards dominant groups, which leads to higher incomes due to lower integration costs. Brunow and Brenzel (2012) see immigration as an opportunity to balance out future labour shortages, and that usual measurements of participation and employment rates have too little concern for productivity gains.

Cummer et al. (2015) studied the improvement of general human capital due to migration in Canada resulting from new laws focused on changing the composition of skills. They examine the following immigrant entry earnings. After the initial earnings improvements of immigrant cohorts, further policy changes eliminate these improvements. Immigrants, following the policy changes, are subject to higher chances of periodic unemployment compared to natives. The cultural diversity factors explain these changes, like language barriers or their status of minority. Furthermore, increasing levels of immigration in the Canada workforce are concentrated in certain regional labour markets and skill groups. These results support the idea of policy implementation that matches immigrants with employment opportunities before landing.

(25)

The Impact of Immigration on Local Labour Markets in the Netherlands

under 35 years old while controlling for unemployment rates, wages, education, seasonal workers and the industry foreign share, and found only a minor impact of immigration on the unemployment risk of natives on the short term. Venturini and Villosio (2006) researched the time it took for workers to find work after being unemployed to examine the displacement risk of natives as a result of immigration. They found that in Italy, foreigners and natives are compliments for job effectiveness and displacement risks.

Pischke and Velling (1997) analysed the impact of migration on the employment outcomes of natives using country-level variables in Germany. They adapted the 328 countries to 167 regions in order to utilize more meaningful labour market regions. They use the change in the share of migrants and the net flows of immigrants to an area within one year. They also condition on historical labour market outcomes in order to tackle the problem of immigrant selection of labour markets, which, they write, allows for mean reversion in unemployment rate. Two sets of regressions are included in their research. The first one compares changes within the years 1985 and 1989 and the other looks at variables in year-by-year regressions. They use two dependent variables, namely the unemployment and employment rates. They do not include wages as a dependent variable due to the country situation because at the time unions were successful in implementing similar wages across country regions. After analysing substitution effects between natives and immigrants and accounting for the unemployment rate and employment-to-population ratio dynamics, they find no significant effects of immigration and neither do they find evidence to support the hypothesis concerning the native migration patterns evening out any displacement effects. The unemployment rates show no meaningful difference or effect stemming from migration patterns. Other studies found different conclusions. Winkelmann and Zimmermann (1993) and De New and Zimmerman (1994) for instance do find a negative relation between the share of foreigners, the employment share and wages within industries. Pischke and Velling (1997) explain that the difference stems from the fact that De New and Zimmerman (1994) differentiate for blue- and white-collar workers, but state that this is too rough of an indicator for skill. Low-skilled white-collar service workers are not considered. Another difference with this study is the fact that De New and Zimmerman (1994) look at static levels of the variables instead of changes.

(26)

The Impact of Immigration on Local Labour Markets in the Netherlands

Native workers both benefited and suffered from the inflow of foreign labour depending on the characteristics of the subgroups.

The choices of settlement within certain urban areas made by immigrants have been subject to several studies as well. Bauer et al. (1991) use individual-level data combining economic and demographic postcode level data to analyse the effects of immigration on employment probabilities and wages in Germany. They employ an instrumental variable method to analyse any negative effects of migration on the labour market and differentiate between low- and high-skilled natives. They investigate the hypothesis that migration negatively affects wages and employment and build on similar studies, and actually find that immigration has no-or an irrelevant-effect on employment and wages of natives. (Borjas, 1999, 2003; Friedberg and Hunt, 1995; Longhi et al., 2005; Traca, 2005; Zimmermann, 2005) Bauer et al. (1991) also write that clustering of migrants with the same backgrounds could have positive as well as negative implications. On the one hand, it could facilitate the integration and settlement process as well as making things easier for people exposed to new surroundings. However, it could have drawbacks for integration incentives like studying languages. This cultural diversity could also be related to the productivity and thus the labour probabilities of natives in either a positive or negative sense, but theoretical models often neglect this fact. Effectivity might be increased due to more diversity, innovation and creativity. Indeed, most studies find positive effects on the productivity of natives. (Ottaviano and Peri, 2006; Südekum et al., 2009) They use local labour markets as their level of analysis, defined by Kropp and Schwengler (2008). In this study this leads to an aggregation to 103 labour markets from 1682 postcode regions. Findings indicate that there is a positive relation between employment and share of foreigners, but no significant one between immigration and wages of natives.

The dispersion of the migrant settlement records in different areas leads to interesting research possibilities. The research design section of this study will go into more detail as to how this will be used in the analysis. The next section will link the literature to the hypotheses.

2.7 Hypotheses

(27)

The Impact of Immigration on Local Labour Markets in the Netherlands

section into workable hypotheses. From the literature there are usually central tendencies we can derive in order to come up with proper hypotheses. The first would be the effect of overall immigration on employment rates in the receiving regions. A lot has been written about it and this section will summarize these ideas into the main hypotheses. On the one hand, studies find that immigration has a positive effect on unemployment rates. This could be attributed to several causes.

In general scholars refer to the neoclassical model of supply and demand within the labour market. A higher supply of labour leads to more severe competition, all other things equal. Some studies indicate that an increase in the foreign labour force has a similar impact on unemployment as an increase of the native labour force. Other studies say foreign labour has a stronger negative effect. However, most studies conclude that migration is not beneficial for the labour market situation especially on the short term. Any possible welfare advantage resulting from a labour force increase due to immigration is often hard to achieve in practise due to the difficult cultural integration process. Also, migrants often do not perform as well as natives in terms of productivity. As seen in the literature review, this could have multiple explanations like the settlement in areas with poor chances for these same migrants or the fact that cultural integration and social separation are additional obstacles for entering the labour market. (Van der Waal, 2012; Coleman and Rowthorn, 2004; Roodenburg et al., 2004, Musterd and Muus, 1995; Winter-Ebmer and Zweimuller, 1999) The hypotheses will be tested according to geographical-differences analyses, like many other scholars have done as well. (Pouliakas, 2014; Blanchflower et al., 2007; Phimister, 2005; Van der Waal, 2012; Bauer et al., 1991, Musterd and Muus, 1995; Longhi et al., 2010) What makes this research relevant however is described further in the previous section. Especially on the short term most studies find unemployment numbers to increase. (Jean and Jiménez, 2011; Winter-Ebmer and Zweimuller, 1999) But more evidence is needed on a subnational level. (Pouliakas, 2014) Therefore;

H1: An increase in the year-to-year difference in the share of the people with a foreign

background within the labour force increases unemployment measured on municipality level.

(28)

The Impact of Immigration on Local Labour Markets in the Netherlands

these backgrounds to the local labour market. Brunow and Benzel (2012) also write that non-Western immigrants face more barriers. Corluy et al. (2014) find that natives and EU immigrants are better off on the labour market due to their improving educational background. Cummer et al. (2015) find that cultural barriers lead to higher chances of periodic unemployment. A recent Dutch Social Cultural Plan Bureau (SCP) for instance notes that the latest large inflow of refugees coming from Syria has many difficulties to overcome. They say themselves that learning the Dutch language is hard. Only 12 percent of the large group of Syrians has a paid job, and most of those are in low-skilled work or a temporary employment agreement.9 This study could be an illustration of the findings that stem from the literature.In any case, this line of thought will lead to the following presumption. The second hypothesis will be;

H2: An increase in the year-to-year difference in the share of the people with a non-Western foreign background within the labour force increases unemployment on a municipality level

more than a rise in the same share but with a Western background.

To expand any possible findings of this research, the share of the non-Western population as a share of the total population within a municipality will be included in this research. The theory that non-Westerners have more trouble integrating into the local labour market and therefore might have a stronger negative effect on the unemployment rate than migrants from Western countries could be shown to be more robust when an additional measurement of the non-Western inflows are included in the model. Therefore, the next hypothesis will be a variation of the previous one;

H3: A year-to-year increase in the non-Western population as a share of the total population within a municipality increases the local unemployment rate.

Additionally, several studies have suggested that there are certain groups within the labour force that are more vulnerable to increased labour competition due to immigration. Blackstone et al. (1998) and Coleman and Rowthorn (2004) write that workers could benefit and suffer from increased competition depending on their subgroups’ characteristics. Winter-Ebmer and Zweimuller (1999) for instance found that effects could be more severe for the workers within

9

(29)

The Impact of Immigration on Local Labour Markets in the Netherlands

the young age groups. They explain this through the low amount of built-up firm-specific capital that young workers possess, which makes for an easier consideration for the companies they work at. Van der Waal (2012) saw more pronounced effects in the low educated groups, just like Pocher (2011) saw in the UK. This hypothesis could give additional insight into the dynamics of the integration of additional migration flows into the local labour market. Therefore, the final hypothesis will be:

H4: Any higher unemployment effects as a result of immigration are more pronounced in the share of the labour force with the age of 15 to 25 and in the share of the labour force with a

low education background.

These hypotheses will be tested in the empirical analysis chapter. The conceptualization of these hypotheses and the description of the measurements and definitions will follow in the next chapter.

(30)

The Impact of Immigration on Local Labour Markets in the Netherlands

The data

This section will set out the concepts as well as describe the way the data is retrieved and how it is structured. According to Toshkov (2016), conceptualization requires a detailed nature, structure and definition of concepts to prepare ground for analysis. Therefore, each variable will be described as precisely as possible, using the sources that provide them, as well as the concepts and/or expectations underlying them, which in general will be based on the literature review. Toshkov (2016) distinguishes between the conceptualization of the background concept, the operationalization into indicators and the scoring of cases which basically describes the measurement and its outcomes. Usually, variables and observations can be described in two ways, through the most abstract one towards the precise concept or the other way around. (Toshkov, 2016) This chapter will include the precise description of the variables and how they are included in the dataset, because for some variables manual calculations and selections were necessary, and then shortly summarized as to why they are included and how the previous sections build towards them.

(31)

The Impact of Immigration on Local Labour Markets in the Netherlands

because the differences on the scale among any fixed interval is equal and the measurements can take any value on the scale that is used. Because the zero point is not exactly meaningful, but it just means that there are is nothing of the measured variable to measure these measurements do not fall into the category ratio variables, as Field and Miles (2010:8) explain in their statistical handbook. This book will be used as a guideline for this thesis and will return every now and then to explain statistical tools, reasonings and methods used. Furthermore, the bulk of the data will range from 0 to 100 because all measurements are either directly provided as a share or percentage by the CBS StatLine website or the shares are calculated manually using absolute numbers and dividing for instance a part of the labour force with the total labour force.

The main statistical model in this research will comprise of a multiple OLS regression using municipality-level data to enhance the variance in the data. This research will investigate 384 municipalities taken from the combined 2016 and 2017 municipality lists to regress the differences between the unemployment rates and relative immigration numbers. The eventual 384 municipalities are the result of the exclusion of several municipalities out of the dataset due to missing data for certain years or the two municipality lists being slightly different. Due to missing data, the Dutch municipalities Berg en Dal, Gooise Meren and Fryske Mare will be left out in the research model, while Meierijstad, Schijndel, Sint Oedenrode and Veghel will be excluded due to municipality lists over the years differing. The incompatibility of municipality lists is due to several changes in the municipality structures. These changes are unique for every municipality and according to the Dutch government website these are sometimes needed to adapt to local or regional circumstances, developments and context.10 The combination of leaving out the municipalities because of several missing datasets and the incompatibility of municipality lists per year leads to a total of n=384 municipalities to examine, which is larger than the number of observations Pischke and Velling (1997) use since they use aggregated data on economic regions and have an n=167. The number of observations could be increased by using cross-section measurements including geographical and time-differences. this could multiply the data by a large amount, like Van der Waal (2012) did in his research. However, since there is already quite a large n to work with, and a single year-to-year differences measurements means a more clean and elegant model, this research will stick to that design. Also, the exclusions of the municipalities listed above could be increased because municipality lists over the years could differ even more. The main differences this research is

10

(32)

The Impact of Immigration on Local Labour Markets in the Netherlands

looking for is the spatial difference and excluding more municipalities would lower the within-country area differences. Then regarding the notion of creating economic ‘areas’, combining the municipality-level data into economic level data however leads to a much lower number of observations, which is why the municipality level data stays the base of this research. However, an additional analysis will be done using economic regions within the Netherlands to see whether there are any significant measures to be found despite the low number of observations. This level of measurement will further be explained in the following section.

3.1 Explanatory variables

As the literature section describes, unemployment may have different negative implications on a society. However, the Netherlands is doing quite well compared to for instance Southern European countries in reviving the employment rates post-crisis. There are still some complications though including forecasts of a stronger competition for employment. Measuring unemployment will be quite straightforward and the CBS provides readily available data for it. On the outcome variables side, this study will include data on the (un)employment among people with several characteristics, including level of education, Western/non-Western background and a few others in order to find out whether any population groups in particular are affected, like the study by Van der Waal (2012) implies. The unemployed population is described by the CBS as people without a job, who have tried to find one recently and are currently readily available to be employed, within the Netherlands. These people are usually included in the age groups of 15 to 75 years old. The unemployment share comprises of the unemployed as a percentage of the total labour force (employed and unemployed combined). Galloway and Jozefowicz (2008) also take Pischke and Velling’s (1997) article as their reference and analyse the Dutch labour market from 1996 to 2003. They include lagged year-to-year differences variables and include control variables including the job skill level per region and the fraction of female workers. They also include part-time employees, the number of labour force participants over the age of 55 and the population density as well as educational backgrounds.

(33)

The Impact of Immigration on Local Labour Markets in the Netherlands

useful information. The immigrants with a ‘non-Western’ background are those that have a migration background in Africa, Latin-America or Asia-excluding Indonesia and Japan-or Turkey. The latter are sorted into the ‘Western’ category due to economic and socio-cultural positions. This mainly includes the people born in the Dutch Indies and employees of Japanese companies along with their families. The non-Western immigration numbers will be included as an additional explanatory variable in the model. In order to provide more context in the analysis, an additional model will separate those immigrants coming from the different continents around the world, including Africa, America, Asia, Europe and Oceania. The migration rates will be calculated as following. The immigration and non-Western immigration share will be taken over the year 2015, readily available and provided by the CBS, as a percentage of the average total population in that year. For the other explanatory variables, the share of the working population with a migration background will be included. The CBS defines these persons as those of which at least one parent was born in a foreign country. The CBS further separates these people in those that have been born abroad themselves (the first generation) and persons that have been born in the Netherlands (second generation). They also differentiate between people with a Western migrant background and people with a non-Western migrant background. These differentiations will be included in this research. Not just the share of the working force with a foreign background will be included however, but the difference in these shares between 2015 and 2016. Finally, this research will also include the

(34)

The Impact of Immigration on Local Labour Markets in the Netherlands

3.2 Control variables

Winter-Ebmer and Zweimuller (1999) include variables related to the structure of the employment in a region or industry as instruments for their outcomes. A few examples of these variables are the structure of the jobs that workers are employed in, the share of blue-collar workers and the share of women. This study will include similar variables which could explain better the outcome of the OLS regression and these will be described in the following section. Furthermore, inspiration will be drawn from Galloway and Jozefowicz (2008) who use comparable control variables in a similar research design, although with less variation in the explanatory and outcome variables.

One of the control groups included in the model will comprise of the education level of the working population, which the CBS presents per municipality per year in absolutes times a thousand. These numbers will be taken as a share of the total working population per municipality and show what percentage of the labour force has received a low, medium or high education. In this case, ‘low-educated’ includes those people that received education in primary school, the vmbo, the first three years of havo/vwo or the assistant education (mbo-1). On the other hand, people who received high school education at havo/vwo level, mbo-2, mbo-3 and mbo-4 education will be included as the ‘middle-educated’ group. The ‘high-educated’ will have finalized either hbo or wo (university) level education. These education levels could have an effect on the unemployment rates when there is a higher labour demand for a certain type of workers. When for instance there is a higher need for IT personnel because of a digitalizing private sector, there could be a higher unemployment level if a high number of people is low-educated and does not have the necessary tools to perform the tasks at hand. Inversely, a large share of the higher educated could lead to a lower unemployment rate in the same scenario.

(35)

The Impact of Immigration on Local Labour Markets in the Netherlands

the job in relation to the characteristic tasks at a professional level, 2) the required level of education for a sufficient execution of the job according to the ISCED97, and 3) the for a related job relevant work experience and/or on-the-job training. This study will use the four levels of profession provided by the CBS ranging from ISCO-level 1 to 4. ISCO-level 1 encompasses simple tasks with a routine nature and requires elementary or lower education. These jobs include those that could be done using simple physical labour and simple tools, from hand-held tools like spades to machines like the driving of non-motorised vehicles or picking fruit or vegetables. ISCO-level 2 includes little to middle-level complex tasks and requires a lower or high school education level to execute properly. These includes any labour tasks that need basic knowledge and skill as well as advanced language and calculations knowledge. Examples of employees at this level could be butchers, bus drivers or police officers. ISCO-level 3 jobs are more complex and require middle or high education levels as well as excellent linguistic and mathematical skills, good communication skills and the ability to understand complex written information, presentations and soft skills. Examples could be executive, medical laboratory personnel or IT-support. Finally, ISCO-level 4 jobs are complex specialized jobs which require higher or scientific education and the ability to solve complex issues using the expansive theoretical and practical knowledge and experienced in a specialized field. These jobs require approximately 3 to 6 years in higher education (ISCED level 5a or higher) and might include managerial jobs, civil engineers or specialized medical personnel. In order to improve the comparability of these job-levels and the sum of their effects on the outcome variable, these four ISCO levels will be pooled into two levels of ‘low-skilled’ and ‘high-skilled’ jobs. The first group will comprise of all the worker shares of the labour population included in the ISCO-levels 1 and 2. The second higher skilled group will comprise of those included in the ISCO-levels 2 and 3.

(36)

The Impact of Immigration on Local Labour Markets in the Netherlands

remaining non-commercial services assigned with the letters O to U and include the categories education, health, culture, government and other services. In all, the data used in this research could be summarized in table 2.

As seen in the literature review, immigrants tend to gravitate toward densely populated areas. This could change their market performance, and this should therefore be controlled for in the regression. Therefore, the population density will be included in the model as a control variable. The relative number of female workers in comparison with the total municipality population will be included in the model. The natural logarithm is taken to simplify the data and to make it more comparable since comparing the absolute numbers in terms of population density could lead to mathematical faults since some areas are so much denser populated than others, the numbers are not quite comparable.

Another control variable that might have a strong effect on the labour market is the share of the female workforce in relation to the total population. The female workforce might substitute, or complement, men in the local labour force. (Galloway and Jozefowicz, 2008)

(37)

The Impact of Immigration on Local Labour Markets in the Netherlands

municipalities. Instead, this research will utilize a single imputation method. Being fully aware that this affects the correlation and covariance estimates in the data because it basically means that a few relationships in variables will be ignored, this will be the least impactful method to still get solid outcomes. Before running the data into a statistical specific program, in the case of missing variable lists the mean of these variables will be calculated. Because the mean is used, there will be as little as possible disturbances in the outcomes. This method can be defended by putting the problem of missing data into perspective. There is no good way to handle these missing values because it is virtually impossible to ‘fill in’ these values by doing measurements in the past over. There is only a least bad way of handling this issue. The method to deal with this issue will be that of mean imputation. Additionally, the large-n type of analysis leads to a relatively low impact of a few missing variables. To be sure, there are just a few cases in which this is necessary. Also, using the means of the total municipality measurements per variable per moment of measurement in time has an added benefit of the measurements most likely being closest to representing the actual trends over time when the differences are calculated. Even though there are numerous statistical packages specifically designed to deal with multiple imputation within data, this research will ‘keep it simple’, especially due to the relatively low number of missing statistics. (Horton and Lipsitz, 2001) Therefore, in case of a missing measurement, the mean of the variables will manually be calculated and then infused into the gaps.

Variable Definition

Outcome variable

UNEMP 2016-2017 change in the regional unemployment rate Variations in the outcome variable

UNEMP15-25 2016-2017 change in the regional unemployment rate among the age groups of 15 to 25 years

UNEMPLOWEDU 2016-2017 change in the regional unemployment rate among the low education group

Main explanatory variables

FORWP 2015-2016 change in the share of the labour force with a foreign background

(38)

The Impact of Immigration on Local Labour Markets in the Netherlands

non-Western foreign background

NWFORP 2015-2016 change in the share of the total population with a non-Western background as a share of the working and non-working population

IMMPROMILLE 2015-2016 immigration difference as a share of the total population

NWIMMPROMILLE 2015-2016 non-Western immigration difference as a share of the total population

Control variables

AGRIC Share of labour force in agriculture, foresting and fishery sectors in 2017

INDSTRY Share of total working population in industry and energy sectors in 2017

COMM Share of total working population in commercial services in 2017

NONCOMM Share of total working population in non-commercial services in 2017

LOWSKILLED Share of total working population in ISCO-levels 1 and 2 in 2017

HIGHSKILLED Share of total working population in ISCO-level 3 and 4 in 2017

FLF Share of total female working population in the total population in 2017

LOWEDU Share of total working population that received primary school, vmbo-level, first three years of havo/vwo or assistant education in 2017

MEDIUMEDU Share of total working population that received high school education at the havo/vwo level, mbo-2, mbo-3 and mbo-4 level education in 2017

HIGHEDU Share of total working population that received hbo or wo level education in 2017

Figure

Updating...

Related subjects :