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Intergenerational transmissions of labour market position among immigrants

Jan Ekberg and Mats Hammarstedt

Jan Ekberg is professor in economics and Mats Hammarstedt is associate professor in Economics at the Centre of Labour Market Policy Research (CAFO) at Växjö university. Their research area is immigrants on the labour market e-mail [email protected] [email protected]

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Abstract There is a voluminous literature analyzing the economic status and labour market performance for foreign born individuals that is first generation immigrants. In contrast the corresponding literature about the second generation immigrants is rather few. Second generation immigrants are individuals born in the immigrant country with at least one parent born in the immigrant country. A very important issue for the future is to what extent labour market position for the first generation immigrants is transferred to second generation immigrants. To what extent do the differentials in labour market status between natives and immigrants in the first generation transfer to the second generation? Will there be a convergence tendency in earnings or employment towards the native mean in the second generation? The first empirical studies were conducted in USA. On the basis of USA data Borjas (1993) found support for the convergence theory. Chiswick (1977) found divergence in some immigrant groups. Chiswick´s explanation is that if a first-generation immigrant group posseses a positive selection of qualities are inherited by their children and these children, furthermore, may take part of the immigrant country´s educational system their differences from the second generation native born are reinforced. The first study in Sweden relating to this matter was Ekberg (1997). This study shows that second generation immigrants born before 1970 have about the same employment rate and about the same work income as native of the same age and with both parents born in Sweden. These second generation immigrants are children of those who immigrated in the 1950s and the 1960s. Immigrants who arrived in this period were well integrated in the labour market. So this is also the case for their children. The result is supported by Österberg (2000). However, the situation is probably more pessimistic for children to later arrived immigrants. We know that many of these immigrants have hade difficulties to enter the labour market in Sweden. This is especially the case for immigrants from outside Europe. So, we can expect bad labour market outcome for second generation immigrants with non European background. This was supported in studies by Rooth and Ekberg (2003) and Behrenz, Hammarstedt and Månsson (2006). However, these studies also found a good labour market position for some other groups of second generation immigrants (for instance background Western Europe). In these groups the parents (the first generation) have a good position on the labour market. Also Hammarstedt and Palme (2004, 2006) found large differences in labour market integration between different groups of second generation immigrants. They found support for the convergence theory on the average for all the foreign born and their Swedish-born children. However, for some groups there were evidence of divergence. The purpose of this paper is to present and compare the results from different countries concerning intergenerational studies of labour market position between the first and the second generation immigrants compared to natives. Nowadays there have been conducted studies in for instance USA, Denmark, Germany, Netherlands and Sweden.

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1. Introduction During the postwar period the number of immigrants in Sweden has increased rapidly. In 1940 the proportion of foreign born people among the total population of the country amounted to only 1 percent. The proportion had increased to about 4 percent in 1960, to about 7 percent in 1970 and to about 12 percent in 2005. In addition there is a growing group of so called second generation immigrants; that is children born in Sweden with at least one parent born abroad. This group is nowadays more than 800 000 individuals or about 9 percent of the total population. For more than 50 percent one parent was born in Sweden. One important reason for the high proportion with one parent born in Sweden is that many immigrants in the 50s and the 60s were single when they arrived. Thus the total number of first and second generation immigrants in Sweden comprises about 20 percent of the total population. Until the mid 70s immigration to Sweden was primarily labour force immigration mainly from Europe. A relative large number of these immigrants went to the manufacturing sector as blue-collar workers. This immigration varied with the labour market situation in Sweden: it increased with greater demands for labour in the Swedish economy and diminished when the demand decreased. According to the 1970 census about 60% of foreign born persons living in Sweden were born in the other Nordic countries and more than 90% were born in Europe. After mid 1970s the immigration pattern has changed.. The proportion of refugees and relatives to already admitted immigrants has increased. Many of the new immigrants were born outside Europe. At the same time a great many of the former labour force immigrants have returned home. Therefore the composition of the immigrant population living in Sweden has changed. At the beginning of the twenty-first century, the proportions of foreign born people in the population are almost 30% born in the other Nordic countries, about 35% in the rest of Europe and almost 40% born outside Europe. A great many studies have been conducted in Sweden about labour market outcomes for the first generation immigrants, see for example Wadensjö (1973), Ohlsson (1975), Ekberg (1983), Scott, (1999), Bevelander (2000) and Hammarstedt (2001), The conclusion from these investigations is that the employment situation for immigrants in Sweden was good up to the mid-1970s but has since then deteriorated. During the last decade the unemployment rate has been especially high for immigrants born outside Europe. It is to be noted that the tendency over time has been the same in many other immigrant countries. However, there are large differences between countries concerning the immigrant labour market. Investigations for the OECD countries show that Netherlands, Sweden and Denmark nowadays have particularly very high unemployment rates among immigrants, see (OECD, 1999 and 2001). In countries like United States, Australia and Canada the unemployment rate among immigrants is about the same as for natives. The literature on the labour market outcomes for the first generation immgrants is voluminous. In contrast the corresponding literature about the second generation immigrants is rather scarce. The subject of this paper is to sum up the literature about the labour market performance for the second generation immigrants. The paper proceeds in the following way. In the next section presents some hyphotheses about second generation immigrants on the labour market. Section 3 gives an overview of the results from empirical research. Section 4 describes a project over three. Section 5 summarises the results.

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2. Some hypotheses Much of this literature has focused on intergenerational mobility of labour market status. To what extent do the differentials in labour market status between natives and immigrants in the first (parent) generation transfer to the second generation? Will there be a convergence tendency in earnings (or unemployment towards the native mean in the second generation?). Convergence means that if the first generation immigrants have higher/lower wages than natives the wage gap will be smaller in the second generation. One theoretical reason for convergence is that individuals in the second generation have passed the school system in the immigrant country and probably also in other respects have acquired more human capital which is specific for the immigrant country. In Becker & Tomes (1986) model for intergenerational transmission of human capital divergence is also a possibility that is the wage gap will be reinforced in the second generation. If there is heterogeneity between different immigrant groups in the preference for invest in their childrens education the outcome for the second generation will differ between different ethnic groups. Success in the labour market is largely determined by the individual`s human capital, access to networks that are relevant to the success and the existence of discrimination. The parents as role models may also be of importance. Being a part of a network could reduce the search costs and increase the probability of finding a job and finding a job with a higher wage. Since the creation of networks is expected mainly to be made within the labour market, immigrant groups with a poor attachment to the labour market are expected to have a smaller network. Moreover, poor labour market integration of the parent generation could be negative for the second generation because of a lack of positive role models. Further, the transfer of human capital to children is achieved mainly through the education system and through the family. The parental human capital is usually the main determinant for a child´s educational attainment. However, in Sweden the authorities have since many years pursued a policy of equal opportunity by striving to provide free education of equal quality in public schools, which probably weakens the parental link.

3. Results from empirical studies In the last decades there has been an increasing interest for research about the second generation immigrants (children to immigrants who are born in the immigrant country) performance on the labour market and the transmissions of labour market positions between generations among immigrants. The research has been conducted with the help of register mass data and with modern advanced econometric methods. However, up to now the number of empirical studies are rather few. The first study was Chiswick (1977) and Carliner (1980). With the help of data from 1970 USA census they found that the relative wages for both first and second generation male immigrants were higher than for natives in USA. Moreover, they found no convergence toward the native mean wage in the second generation. The conclusion was that high work capacity among the first generation immigrants was inherited by their descendents. These results were questioned by Borjas (1993) since they were based on cross-sectional data at one point of time. Many of the first generation immigrants in 1970 USA census were not parents to the second generation immigrants in the same census. Instead, Borjas compared the wage level for second generation male immigrants in the 1970 census with the wage level for

5 first generation male immigrants in the 1940 census. He assumed that there in average is about 30 years between two generations and therefore these two groups had a children-parent relation to each other. Immigrants with background from 32 countries was studied. Borjas found support for convergence toward the native mean wage in the second generation. The difference in earnings between different groups of immigrants was smaller in the second generation than in the first generation. However, also in Borjas´ study we do not know to what extent first generation immigrants living in USA in 1940 are parents to second generation immigrants living in USA in 1970. There are no individual links between the first generation and the second generation. Register data in USA and in many other countries do not allow individual links between the parents and there children and therefore we are not sure that everyone in the first generation is parent to the children in the second generation. In Borjas´ investigation the first generation is a so called “synthetic” parent cohort. For Australia, Chiswick and Miller (1985) reported that sons of immigrants earned four percent more than native Australiens of the same age. However, Maani (1994) presented a darker picture. Both the number of employment spells and their duration exceeded those of native Australiens. In Europe there has been increasing interest in recent years in the labour market performance of second generation immigrants. One example is Van Ours & Veenman (2004) Netherlands. They investigated early labour market experiences for different ethnic groups of second generation immigrants. Especially second generation immigrants from Turkey and Marocco had lower probability to be employed compared to native youngsters even if controlling for backgrounds variables such as education and neighborhood-effect. For females the reason is probably voluntary withdrawals from the labour market. For men the explanation may be discrimination. There was also a significant relation between the educational level for the father in the first generation and the second generation. A low educated father increased the probability that individuals in the second generation leave school at low ages. Another example is Nielsen, Rosholm, Smith and Husted for Denmark. They investigated the transition from school to work. Their results show that the transitional is less successful than for young ethnic Danes. For the second generation immigrants the waiting time for the first job is longer, the first employment spell is shorter and their wages in the first employment is lower. They also found that unfavourable parental capital (short employment experience in the Danish labour market) is very important factor to explain the less successful labour market success for the second generation immigrants. In Sweden some studies have been conducted. The first was made by Ekberg (1997). He found that the unemployment rate for second generation immigrants born in Sweden before 1970 was nearly the same as among native Swedes of the same age. These second generation immigrants were children to immigrants who arrived in the 1950s and the 1960s and were well integrated on the Swedish labour market. The second investigation was conducted by Schröder and Vilhemsson (1998) and Vilhelmsson (2000). According to this study second generation immigrants born after 1970 run a higher risk of being unemployed than natives Swedes of the same age, with the same educational level, the same family background and the same region of residence. However, in these studies there are no intergenerational perspective about how labour market positions are transmitted over generations. Österberg (2000) analysed intergenerational earnings mobility between first and second generation immigrants and found that the mobility was almost the same as among natives (in the study 98% of the second generation immigrants had a European background). Rooth and Ekberg (2003) studied intergenerational mobility in earnings an unemployment. They adopted the approach by Borjas with a “synthetic” parent cohort. The second generation

6 immigrants in this study are 25 to 40 years old in 1998. The youngest one is the born in 2003 which means that the parents must have immigrated to Sweden prior to, or in 1973. Rooth and Ekberg made the assumption that the parents were 25 to 44 years old in 1975 and 35 to 54 years old in 1985. There are data about from censuses 1975 and 1985 about the employment situation for the first generation that is the “synthetic” parent cohort. In these years, the employment rate was lower for the first generation from Southern Europe and from NonEuropean countries than for natives and for other immigrant groups. In this sense the employment situation was worse for these two immigrant groups than for immigrants from the Nordic countries, from Western Europe and from Eastern Europe. In the dataset there are 145 891 second generation immigrants of which more than half of them have one parent born in Sweden. They are divided in the following groups: Both parents born in Finland, in other Nordic countries, in Western Europe, in Eastern Europe, in Southern Europe, in NonEuropean countries and one parent born in Finland, in other Nordic countries, in Western Europe, in Eastern Europe, in Southern Europe, in Non-European countries. The outcome fore these groups is compared with native Swedes with both parents born in Sweden. The last group comprises 33 816 individuals. The advantage with this study is that it is able to identify second generation immigrants with different ethnic backgrounds and also identify the parent composition. The result is that the labour market outcome for the second generation mirror the labour market outcome for the first (parent) generation. Second generation immigrants with a Nordic, Western or Eastern European background have labour market positions that are similar to native Swedes with both parents born in Sweden. However, individuals with both parents born in Southern Europe and in Non- European have a much worse situation compared both to natives with both parents born in Sweden and to the other groups of second generation immigrations. This is the case even if we control for differences in age distribution educational level, marital status, local unemployment rate on municipality level and region of residence. However, the outcome is more favourable if one parent is born in Sweden and especially if the mother is born in Sweden. The last observation indicate that it is the mother in the family who is most important when human capital (Sweden-specific human capital) is transferred from parents to children. The method with “synthetic” parent cohort has often been used. However, this method is inferior to the method with individual links between parents and children. Register data in USA and in many other countries do not allow individual links between the parents and their children. With the help of a special database which has been build up at The Center of Labour Market Policy Research (CAFO) at Växjö university it is now possible to make individuals links between parents and their descendents for both immigrants and natives. The database comprises individuals born abroad who immigrated into Sweden up to 1970 and their children and grandchildren born in Sweden. Furthermore, the register includes a control group of native born (so-called Swedish twins) with their children and grandchildren. ( A description of the register can be found in Ekberg (1994). In total, the register contains about 900,000 individuals. For the individuals in the register a very great amount of information has already been entered as regards occupation, work incomes, other incomes, education, residence, cross marriages (i.e. a marriage between an immigrant and a native born) etc. from the 1970, 1975, 1980, 1985 and 1990 censuses and, in addition, information referring to the 1990s and the 2000s from the occupational, income, educational, pension and family registers. Such information is also included in the 1960 census, which can be subsequently entered for each individual. Thus we would obtain series of observations from 1960 to 2005. With the help of the mentioned CAFO-database Behrenz, Hammarstedt and Månsson (2006) investigated the labour market position for several groups of second generation immigrants.

7 (In the study there are no links between generations of immigrants). They found the same pattern as Rooth and Ekberg that is to say second generation immigrants with background Southern Europe and Non-European countries are at a significant disadvantage and second generation immigrants with background Western Europe have a good labour market situation. The differences in labour market situation also explain the group-differences in the use of social assistance, see Hammarstedt and Ekberg (2004). With individual links between two generations an investigation of intergenerational income mobility among immigrants compared to natives has recently been done by Hammarstedt and Palme (2006). The parents’ incomes were observed for 1975 and 1980. The incomes for second generation immigrants and the children of natives were observed in 1997, 1998 and 1999. Because of the large size of the dataset the transmission can be studied for several subgroups of immigrants. They found an overall convergence between natives and immigrants over generations. However this result hides a divergence between different immigrant groups. The last result is different from the above mentioned result by Borjas. In Hammarstedt and Palme there are also estimations of intergenerational earnings mobility within different immigrant groups. They found that this mobility was lower for most immigrant groups than for the respectively comparable native group. However there are differences in within mobility between different immigrant groups. The highest degree of intergenerational earnings mobility was found for those groups with the lowest level of earnings in the first generation (groups originating Africa, middle East and Southern Europe). Low intergenerational mobility was found for immigrants from Western Europe. This is a group with the highest earnings in the first generation. So, in the second generation this immigrant group improve its position even further.

4. Over three generations Up to now there are no international published studies over three generations and with individual links between individuals in the different generations. This is the case both in Sweden and internationally. It may be mentioned that the Journal of Population Economics recently had a thematic issue (no 4, 2003) dealing with inter-generation processes as regards education and position on the labour market among immigrants in different countries. All the articles referred to second-generation immigrants and intergenerational mobility between the first and second generation of immigrants, i.e. only between two generations. However there are possibilities for Sweden. In the past years Statistics Sweden (SCB) has carried out a development work which now makes it possible to identify refugees who arrived to Sweden at the end of the second world war (during 1943-45). Thereby we can also identify these individuals and their children and grandchildren born in Sweden in the CAFO-database. These individuals can be followed over time beginning from the 1960 census up to now. For those who died or emigrated between 1944/45 and 1960 we cannot obtain any information. The reason is, according to SCB, that no computerized data have been saved prior to 1960. Of those who stayed in Sweden the majority was still alive in 1960. The age composition of those who arrived was such that the number who had deceased between 1944/45 and 1960 is supposedly low (with the exception of a group old people included in the group from Poland). The first children who were born in Sweden are now between 55 and 60 years of age and should have attained gainful employment age in the early or mid 1960s. The first grandchildren born in Sweden should now be above 30 years old and have reached gainful employment age in the mid 1980s. So, we can follow as regards occupational and income career both the first and the second generation over a large part of the life course and the third

8 generation for a part of the life-course. Besides, we can investigate the transmission over generations. Comparisons will be made with native Swedes over three generations. The economists at Växjö University have recently received financial grants from the Bank of Sweden Tercentenary Foundation (Riksbankens Jubileumsfond) to conduct such a study.

5. Conclusions Studies for USA show a rather light picture for second generation immigrants on the labour market. This is also the case for second generation immigrants in Sweden born before 1970. Their parents arrived to Sweden in the 1950s and the 1960s and were well integrated on the Swedish labour market. The labour market situation for the second generation mirror to a large extent the labour market for their parents. However the situation seems to be worse in many European countries for second generation immigrants whose parents have arrived later. This is especially the case for second generation immigrants with a non-European background. We know that many of their parents had difficulties to enter the labour market. Second-generation immigrants of working age with a non-European background are at present a relatively small group in most European countries. This is due to later start for immigration from this countries. There are large numbers of second generation immigrants with a nonEuropean background who still are at school or pre-school age. Over the next 10-15 years a large number of second generation immigrants with a non-European background will therefore try to enter the labour market in Sweden and in many other European countries. The chances for success for this group will, to a large extent depend on how well their parents are integrated into the labour market, and whether they themselves succeed in the school system. So, a good integration on the labour market for the first generation immigrants is of greatest importance for the second generation. There is a formidable challenge facing integration policy and the school system in many European countries.

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