DELSA/ELSA/WD/SEM(2007)5 The Labour Market Integration of Immigrants in Denmark Thomas Liebig 50 OECD SOCIAL, EMPLOYMENT AND MIGRATION WORKING PAPERS Unclassified DELSA/ELSA/WD/SEM(2007)5 Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 05-Mar-2007 ___________________________________________________________________________________________ English - Or. English DIRECTORATE FOR EMPLOYMENT, LABOUR AND SOCIAL AFFAIRS EMPLOYMENT, LABOUR AND SOCIAL AFFAIRS COMMITTEE Unclassified DELSA/ELSA/WD/SEM(2007)5 OECD SOCIAL, EMPLOYMENT AND MIGRATION WORKING PAPERS No.50 THE LABOUR MARKET INTEGRATION OF IMMIGRANTS IN DENMARK Thomas Liebig J15, J21, J61, J62, J68, J7, J8 English - Or. English JT03222979 Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format DELSA/ELSA/WD/SEM(2007)5 DIRECTORATE FOR EMPLOYMENT, LABOUR AND SOCIAL AFFAIRS http://www.oecd.org/els OECD SOCIAL, EMPLOYMENT AND MIGRATION WORKING PAPERS http://www.oecd.org/els/workingpapers This series is designed to make available to a wider readership selected labour market, social policy and migration studies prepared for use within the OECD. Authorship is usually collective, but principal writers are named. The papers are generally available only in their original language – English or French – with a summary in the other. Comment on the series is welcome, and should be sent to the Directorate for Employment, Labour and Social Affairs, 2, rue André-Pascal, 75775 PARIS CEDEX 16, France. The opinions expressed and arguments employed here are the responsibility of the author(s) and do not necessarily reflect those of the OECD Applications for permission to reproduce or translate all or part of this material should be made to: Head of Publications Service OECD 2, rue André-Pascal 75775 Paris, CEDEX 16 France Copyright OECD 2007 2 DELSA/ELSA/WD/SEM(2007)5 ACKNOWLEDGEMENTS Thomas Liebig is economist in the Non-Member Economies and International Migration Division at the OECD Directorate for Employment, Labour and Social Affairs. This study benefited from various contributions of Emilio Hellmers (Danish Ministry of Refugee, Immigration and Integration Affairs) who was on secondment at the OECD for the preparation of the review. An earlier draft was discussed in the OECD’s Employment, Labour and Social Affairs Committee (ELSAC) on 21 November 2006. A revised version was presented and discussed at a joint meeting of the Danish and German Ministers of Employment on 8 December 2006 in Berlin. The author wishes to thank all interlocutors during the 2006 missions to Denmark, as well as the ELSAC Committee and the seminar participants, for their valuable information and fruitful discussions. 3 DELSA/ELSA/WD/SEM(2007)5 SUMMARY 1. The labour market integration of immigrants has been a key issue both in the public debate and on the government agenda in Denmark, triggered by unfavourable employment outcomes of immigrants – the gaps in employment rates of immigrants compared to the native-born are among the highest in the OECD – and a rapid rise of the immigrant population during the past twenty years. Prior to the 1980s, immigration to Denmark was a very marginal phenomenon. Despite the rapid growth since then, with less than 7% immigrants in the population, Denmark still has one of the smallest immigrant populations in Western Europe. 2. Labour market outcomes for immigrants have been significantly below those of the native-born for more than two decades. This is partly attributable to the fact that immigration to Denmark has been strongly dominated by refugees and family reunification – groups whose labour market outcomes tend to be not as good as the native-born or economic migrants in all countries, particularly in the early years of settlement. Since 2001, lower social assistance has been introduced for all persons who have been in Denmark for less than seven out of the past eight years because of concerns about the impact of Denmark’s relatively high social benefits on work incentives. In addition, participation in integration measures has been made obligatory. Finally, for more than a decade, there have been efforts to improve the labour market integration of immigrants, and these efforts have been enhanced recently. 3. However, the observed unfavourable labour market outcomes are not confined to non-OECD immigrants. Employment rates of immigrants from OECD countries are low in international comparison as well. In addition, a substantial part of the immigrant population in Denmark has tertiary educational attainment, yet this characteristic does not yield as large an impact on employment probabilities as one would expect, even if the qualification is obtained in Denmark. 4. The second generation is now gradually entering the labour market in larger numbers, and this group is of particular policy concern. Their educational attainment is well below that of comparable Danes without a migration background. This is mainly due to the fact that the dropout rates from vocational training for the second generation are more than twice as high as among persons of Danish origin. This, in turn, is at least in part attributable to the fact that persons with a migration background have more difficulties getting apprenticeship contracts with companies than comparable persons of Danish origin. There have been a series of recent measures to address this issue. However, even for those with upper secondary or tertiary education, employment rates of the second generation are significantly lower than for the native-born. This also holds for the offspring of immigrants from the OECD. 5. About one third of total Danish employment is in the public sector, where immigrants are underrepresented, although the degree of underrepresentation seems to be lower than in other OECD countries. Indeed, a variety of measures have been taken to increase immigrants’ employment in this sector, because of its size and importance in the Danish context. The public sector is also viewed as having a role-model function. Private employment is largely dominated by small- and medium-sized enterprises, but immigrants do not seem to be less present there than in large companies – in contrast to other OECD countries. 6. Considering the recent nature of most immigration, and the relatively small size of the immigrant population, the overall framework for integration in Denmark is highly developed and a significant amount 4 DELSA/ELSA/WD/SEM(2007)5 is invested in integration efforts. This is mirrored by the fact that Denmark is among the few OECD countries which has a separate Ministry for Refugee, Immigration and Integration Affairs, in which immigration and integration policies are considered together. Under this framework, municipalities have to offer a three-year introduction programme to immigrants from outside the European Economic Area, which consists of language courses and a range of labour market integration measures. Indeed, the strong emphasis on labour market integration in the introduction programme is particularly noteworthy. There are strong financial incentives for municipalities to achieve rapid labour market integration of recent arrivals, and an elaborate benchmarking system is in place to monitor municipalities’ integration performance and facilitate the mainstreaming of effective policies. 7. There is some indication that current policies are having the desired effect, as labour market participation and employment of recent arrivals have increased. However, the unemployment rate for this group has also increased and it is getting lower social assistance. One way to escape from the resulting marginalisation is via self-employment, but few immigrants seem to succeed in pursuing this route. This may be linked with the fact that immigrants generally do not have access to loans before they acquire permanent residence, and requirements for permanent residence have been tightened. There is thus a case for better loan access for this group. 8. What is especially striking in the Danish context is the fact that employment gaps relative to the native-born are across-the-board – they are longstanding and they are found for both OECD and non- OECD immigrants and even for offspring of immigrants from both OECD and non-OECD countries, at all attainment levels. Even returns to Danish education are lower for children of immigrants than for children of non-immigrants. Outcomes seem to be improving recently, but the general backdrop remains. Some of this may be attributable to the fact that foreign qualifications and experience may not be recognised by employers in Denmark, as is generally the case elsewhere as well. But this should not be the case for offspring of immigrants born and educated in Denmark, who show poor performance relative to children of non-immigrants at all attainment levels. 9. In any event, the inadequate results for the second generation, whatever the geographic origin or qualifications of persons in this group, suggests that the benefit disincentive explanation often advanced for low immigrant employment rates is not an entirely satisfactory one. A mix of less developed personal networks, information asymmetries and discrimination seems to be part of the answer. These are generally difficult to disentangle as the former in practice have the effect of excluding equally skilled immigrants from certain jobs even where there is no ostensible discrimination. Nevertheless, testing results