European Outlook 2: Destination Europe, Immigration and Integration in the European Union

Summary of the key findings of the second European Outlook: Destination Europe. Immigration and Integration in the European Union:

• Immigration and integration policy should remain the responsibility of individual member states; the advantages of a common European approach are limited. A common approach is, however, appropriate for asylum policy in order to prevent member states from shifting the costs of receiving asylum-seekers onto each other.
• Labour market participation rates are lower and unemployment rates higher among immigrants than in the native population. Selection of high-potential migrants combined with active labour market policies could help reduce these differences.
• Immigrants make a positive contribution to public finances in countries where their labour market participation rate is high.
• A majority of EU citizens are anxious that immigrants may take away their jobs, threaten their economy or affect their culture. This anxiety is relatively marked among low-skilled workers and in countries with a low GDP and/or a high proportion of immigrants.

Public opinion on the European Union and migration
Support for the European Union is diminishing in many member states. Only a minority of the population in the accession countries, with the exception of Latvia and Malta, support their country's EU membership.
A majority in favour of a common European immigration policy is found in 16 member states. The differences are large, however: 73% of Italians support a community approach but only 16% of the Finnish population, for example.
There is wide variation among member states in the degree to which the native population are afraid that immigrants will take their jobs, are bad for the economy or affect their culture. This 'perceived ethnic threat' is high in Greece, but fairly low in the Scandinavian countries. Empirical analysis reveals that the perceived threat is high in countries with a high proportion of immigrants and a low GDP. The fears of job losses are most pronounced among indigenous workers with weak labour market prospects, such as low-skilled workers. One striking finding is that the perceived ethnic threat is higher in the countryside than in towns and cities.

Do immigrants replace natives?
Many native workers are afraid of immigrants taking their jobs, possibly driving them into unemployment or reducing their wages. The empirical evidence for this is weak, however: most studies fail to find a significant correlation. One weakness of most of these studies is, however, that they are not able to take into account the possibility that immigrants choose a destination country with high wages or low unemployment rates. The small number of studies that do correct for this selection effect observe a substantial influence of immigrants on the labour market position of native workers. The risk of job loss or wage reduction can therefore not be dismissed, especially if the wage costs of immigrants are relatively low. The latter holds inter aliafor temporary migrants with reduced access to social security provisions.

Migrants' contribution to public finances
Migrants contribute to public finances in countries where their participation rate is high. However, immigrants participate on the labour market less than the native population on average (60% versus 66%) and are more frequently unemployed (7% versus 5% of the working-age population). There are, however, wide differences between individual countries. The participation rate of immigrants in Belgium, the Netherlands and the Scandinavian member states is more than 10 percentage points lower and their unemployment rates are two to three times higher than among the indigenous population. The differences between immigrants and natives are much smaller in the Southern European countries. These different labour market performances explain why, for example, Spanish immigrants are net contributors to the government budget while immigrants in the Netherlands are not.
How can we explain the different labour market performance of immigrants? Differences in the population profile of source countries do not offer a significant explanation. The same holds for the economic characteristics of immigrants: while their education level and command of the host language are relatively poor, on average they tend to be young.
Education and labour market prospects are important, and could be used as a means of influencing future migration flows. One method of selection would be to accept only immigrants with guaranteed jobs. Alternatively, governments could award points according to age and education and accept only labour migrants with a certain number of points. However, the available evidence does not allow for an unambiguous choice between these two alternatives.

Migration and social security
Generous social security benefits in the destination country provide a significant explanation for the poor labour market performance of immigrants: their unemployment rate is relatively high in countries with generous social provision. One possible explanation, namely that a generous welfare system attracts workers with weak labour market prospects, has little empirical support. An alternative explanation is that a generous social security system reduces the incentive for unemployed immigrants to look for work. Empirical evidence suggests that an active labour market policy is especially helpful in improving the labour market performance of immigrants.

Community or national policy?
Should immigration and integration policy be coordinated at European level? According to the subsidiarity principle the European Union should intervene only if the benefits of coordination outweigh the loss of national policy sovereignty. A country-specific approach is desirable for immigration and integration policy because the differences (in preferences) between member states are large and the mutual spill-over effects of these policies weak.
The argument in favour of a common asylum policy is stronger: coordination may prevent member states from shifting the costs of receiving asylum-seekers onto other member states by restricting their own admission criteria.