Matching Economic Migration with Labour Market Needs

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18 Sep 2014
9789264216501 (PDF) ;9789264216372(print)

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This publication gathers the papers presented at the "OECD-EU dialogue on mobility and international migration: matching economic migration with labour market needs" (Brussels, 24-25 February 2014), a conference jointly organised by the European Commission and the OECD. It provides new evidence on the role that international migration has played in Europe and in selected other OECD countries over the past decade in terms of labour force; educational attainment; and occupational changes. It analyses the availability and use of migrants’ skills based on an in-depth literature review as well as new data analyses for Europe and the United States, Canada and the OECD as a whole, taking advantage of the International Survey of Adult Skills – PIAAC. Finally, several chapters discuss the potential role of international migration in meeting current and future labour market needs in Europe, in the United States and in the European Union. This work shows that although migration can make an important contribution to labour force growth, its role in counterbalancing the effects of population ageing will depend on the capacity of countries to match labour needs to migrants’ characteristics.

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  • Foreword

    The European Commission and the OECD have carried out a joint project over three years on "Matching economic migration with labour market needs". The key questions behind this project are as follows: What policies and practices are needed to ensure that migration and free movement contribute to meeting the labour market shortages that are expected to arise over the short-to-medium term? How can we make a better use of migrants’ skills? What are the lessons learnt from non-European OECD countries, particularly in the management of labour migration?

  • Executive summary

    How can governments ensure that migration and free movement of workers contribute to meeting the labour market shortages that are expected to arise over the next 50 years? How can societies better use the skills of their migrants? What lessons can non- European OECD countries offer Europe, particularly regarding labour migration management? It was to address such questions that the European Commission and the OECD jointly carried out a three-year research project on "Matching economic migration with labour market needs". Its findings are presented in this report.

  • Editorial

    This year marks a turning point for the European labour market in many ways. Firstly, after many years of debate about the expected effects of population ageing on the European labour markets and welfare systems, in 2014 for the first time the working age population (15-64) of the European Union starts declining. Over the next twenty years, according to the most recent Europop projections, it will decrease by about 21.7 million persons, or 6.5% in the EU28. This will potentially generate a decline in the labour supply and potential economic growth, unless European countries manage to mobilise under-utilised labour resources as well as promote faster technological progress and productivity growth. But immigration will need to play a supporting role as well.

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  • Expand / Collapse Hide / Show all Abstracts Demographic context

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    • Demographic trends, labour market needs and migration

      The contribution of migrants to receiving countries is a controversial issue. Statistics on the demographic contribution of migration can be presented from different perspectives on flows or stocks, taking into account first generation of immigrants or also their children. These figures reflect different time perspective on the contribution of migration to population growth and age structure. In terms of demographic growth, migration is in balance with the baby boom and increased life expectancy, and the effects of these two phenomena are often overlooked. In the case of France, from 1946 to 2014, international migration contributed to approximately one third of population growth.

      Can migration counterbalance the effects of population ageing in terms of labour needs? Although the utilitarian case for immigration commonly argues the capacity of migrants to counter population ageing, labour migration can only play a limited (as in many longstanding immigration countries family and humanitarian migration are relatively much more important) and a temporary role (as migrants age).

      The history of migration over the three last centuries reveals a permanent tension between two extreme visions: migration restricted to work migration adjusted to shortterm economic needs, versus settlement migration. The main challenge for migration policy is to find a form that conciliates both.

    • Demographic change and the future of the labour force in the EU27, other OECD countries and selected large emerging economies

      Starting with a wider perspective on long-term demographic trends worldwide, this chapter concentrates on the evolution of the working-age population to 2020 and then discusses the implications regarding the evolution of the workforce. It then briefly considers the role of alternative policy instruments, including international mobility, in responding to the challenges posed by population ageing.

    • Current and future skills of the workforce

      This chapter examines the demographic and education structure of the labour force in OECD countries since 2000 and its evolution over the next decade, paying special attention to the role of international migration. It shows the increase in educational attainment of both native- and foreign-born individuals in the labour force and estimates a continuing increase in the near future, although at lower rates than in the past. In parallel, it projects a shrinking of the share of the lower-educated labour force, with migrants nonetheless accounting for a large share of entries. The chapter projects that the labour force will grow on average 4% in the OECD over the period 2010-20, much less than in the previous decade. It points as well that projected migration inflows will account for all this observed positive labour force growth, even if those inflows will be significantly lower than in the previous decade. The chapter shows how migration will continue to make a positive contribution to labour force growth over the decade even under more limited migration scenarios.

    • The demography of occupational change and skill use among immigrants and the native-born

      Over the past decade, high-skilled occupations have generally grown strongly, lowskilled occupations somewhat less so, while medium-skilled occupations have declined or stagnated.

      In rapidly growing occupations, there was a large surplus of new entrants over retirees in new jobs, for which there were many domestic candidates. But many new immigrants were also hired into these jobs, indicating that domestic sources were not sufficient to satisfy all of the needs. At the same time, new immigrants replaced only a fraction of retiring workers in declining occupations. This suggests that observed and future labour and skill shortages are not a simple function of demographic imbalances in the labour force, but depend significantly on the changing nature of demand for particular skills and the extent to which these can be filled from existing sources of supply.

      For some immigrants, low levels of education constrained their occupational choices to low-skilled jobs and for others, the education and work experience earned abroad made them sometimes ill-prepared to compete with the skills of recently graduated young workers and of prime-age workers already having made their way in the labour market. EU migrants more often enter higher skilled occupations than non-EU migrants, but the high-skilled share of entries varies across countries. Finally occupational change over the 2000-10 decade shows a tendency towards a feminisation of high-skilled jobs and a greater presence of women in growing than in declining occupations. There were also proportionally more men in strongly declining occupations. The same pattern was observed for immigrants, whether from EU countries or not.

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  • Expand / Collapse Hide / Show all Abstracts Migrant skills

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    • Immigrant skills, their measurement, use and return: A literature review

      This chapter compares immigrant and native skills in OECD countries and discusses whether immigration policy is effective in attracting immigrant skills to the host countries. It reviews the academic literature on the returns to immigrant skills in terms of labour market outcomes: employment, skill mismatch and wages, and emphasizes the importance of taking into account different measures of skills as well as the country where the skills were acquired. The chapter reviews two sets of explanatory factors for the lower returns to immigrant than to native skills: on the one hand, immigrants with similar skills to natives may in reality be less productive in the host country; and on the other hand, employers may prefer to hire natives than immigrants. The conclusion puts forward key policy questions and challenges.

    • The qualifications of immigrants and their value in the labour market

      This chapter provides a systematic overview of the qualifications of the foreign-born and their returns in the labour market, both in Europe and the United States, compared with the native-born with similar demographic characteristics living in the same countries. Immigrants with foreign qualifications have on average lower educational attainment levels than the native-born. The differences are larger in the United States than in Europe, and are also larger for immigrants who have been longer in the country. Immigrants with foreign qualifications have lower returns to tertiary education than the native-born in terms of employment and in terms of job quality. There are also large differences in the qualification levels of immigrants and their returns on the labour market depending on their migration category, with labour migrants having higher qualifications and better outcomes than humanitarian and family migrants. Immigrants who report language difficulties have lower employment and higher overeducation than otherwise similar immigrants who do not. Finally, immigrants who have their foreign degrees recognised have significantly lower overeducation rates than immigrants who do not, even after accounting for the origin of the qualifications and the field of study.

    • The international portability of migrant human capital

      Post-migration skill utilisation is fundamental to the successful economic integration of immigrants in a receiving country. Essential to the process are both the role of diverse economic actors in influencing skill relevance and credential/qualification recognition, and the growing understanding that the value of certain skills (e.g., education) in the labour market is conditional on the presence of other skills (e.g., receiving country language ability) together with the incorporation of this understanding into policy. This chapter explores recent developments in Canada, focusing primarily on immigrant selection policy related to skill portability. Canada is in the midst of a major reform of its immigrant selection system that is strongly influenced by a desire to facilitate skill portability leading to labour market success, and which seems to align with recent research findings. However, unanticipated responses to public policy initiatives are common, and there is a need to monitor ensuing developments to ensure that the observed changes in outcomes align with the policy goals.

    • Migrants' skills: Use, mismatch and labour market outcomes – A first exploration of the International Survey of Adult Skills (PIAAC)

      The purpose of this chapter is to explore the newly available Survey of Adult Skills (PIAAC) to provide a detailed picture of migrants’ literacy and numeracy skills and how they compare with those of natives, and how they are utilised and valued in the labour market. The chapter provides a description of the Survey of Adult Skills and the differences between migrants and natives in terms of their literacy and numeracy proficiency levels. A discussion follows on the extent to which language and foreign qualifications explain part of such differences. Moreover, the chapter analyses the labour market outcomes (employment, incidence of overqualification and wages) of migrants relative to natives and discusses how these differ across migrant groups as well as the role played by literacy proficiency and other relevant factors. The analysis of wages pays special attention to the returns to schooling, literacy and numeracy proficiency as well to professional experience, distinguishing between the experience acquired abroad and that acquired in the host country. The chapter concludes by summarising the main findings and their relevance for policy and makes proposals for future work.

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  • Expand / Collapse Hide / Show all Abstracts Labour shortages and migration

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    • Projected labour market imbalances in Europe: Policy challenges in meeting the Europe 2020 employment targets

      This chapter investigates the extent to which the economies of EU member states are likely to encounter aggregate skill imbalances by the year 2020, and assesses the necessity of appropriate policies (e.g. activation, migration) for addressing such imbalances. The baseline projections of Cedefop’s European skills forecasting model are used to examine the nature of anticipated discrepancies between the supply and demand for labour in EU member states. The chapter subsequently examines the implications for "sustainable" activity rates based on the counterfactual hypothesis that all EU countries will meet their headline EU 2020 employment targets. The results highlight that meeting the respective EU2020 employment targets is dependent on considerable activation efforts by several EU member states, which will have to outweigh existing policies. To meet employment targets with shrinking populations at natural rates of unemployment, European policy makers will have to rely on a menu of policy choices to increase activity rates by about 4.3 percentage points on average in the EU economy. This may entail the activation of a significant share of the currently inactive EU population, or a reliance on migration and other socio-demographic policies to ensure that the future supply of labour will be sufficient to meet skill needs.

    • Occupational labour shortages

      There are many factors that can be taken into account in migration policy, such as family reunification, increasing the nation’s stock of human capital, increasing gross domestic product, and alleviating occupational labour shortages. This chapter examines the concept of occupational labour shortages and describes how occupation-based immigration policy in the United States currently is structured and proposals that have been considered to improve how occupational labour shortages are measured and used in immigration policy. The chapter first explains the economic concept of occupational labour shortages and describes the reasons why shortages might arise. Next, the chapter discusses how occupational labour shortages can be recognised. This is followed by a summary of findings from an analysis of whether there are shortages for four occupations in the United States, and the conclusions from the study. The second part of the chapter deals with occupation-based immigration in the United States. The current US system for permanent and temporary labor is described, and current and past proposals for improving the system are discussed.

    • Migration in Europe

      According to a new recent data source, it would appear that only a fraction of labour migrants in EU countries are actually recruited as labour migrants from abroad and that more high-skilled jobs are filled by migrants recruited in the country than those recruited from abroad. This same source suggests that retention rates for immigrants having the most favourable labour market outcomes tend to be lower and that half of highly skilled labour migrants are no longer in the same jobs for which they were initially recruited after five years.

      These results suggest that shortage lists and labour market tests may not always be as relevant as generally considered as tools for regulating labour flows according to needs. Protection of domestic workers may best be ensured by seeing to it that wages and working conditions of first immigrant jobs are according to domestic standards.

      In addition, ensuring greater retention, encouraging migrants to come with their families and inducing potential candidates to learn national languages will require more significant incentives than are currently offered. For this the right of permanent residence upon entry seems a likely candidate. Generally, the ability to obtain good employment and to demonstrate language proficiency needs to be rewarded far more than is currently the case in most countries.

      It seems likely that the low levels of highly skilled labour migration in many European countries have less to do with low attractiveness than with the fact that employers are not recruiting significantly from abroad.

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