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A new study shows that immigration reshapes local labor markets, but direct job losses for but direct job losses for most natives are minimal. How does immigration affect native workers’ jobs and wages? Public debate often confuses what happens to regions with what happens to individuals. The study finds that immigration reduces job opportunities for natives in areas with high inflows, but for most people already employed, the risk of losing their job is very low. Average wages in these regions stay about the same, although workers who keep their jobs experience modest wage declines.
The groups most at risk are older workers and those who are unemployed when immigration occurs.
Key Findings
• Regional vs worker-level effects differ. Immigration reduces job opportunities for natives in affected areas, but most people already in work face little risk of losing their jobs.
• Minimal displacement. A 1-percentage-point increase in immigrant employment reduces native jobs in a region by 0.87% over three years. For workers already employed, the risk of losing their job rises by only 0.14% and disappears after five years.
• Regional wages remain stable due to changing workforce composition. The wages of employed natives decline by about 0.19% for every 1-percentage-point increase in immigrant employment. However, this is offset by improvements in the average skill level of native workers, leaving regional average wages unchanged.
• Older and jobless workers are most vulnerable. They face higher risks of job loss and wage declines than younger workers and those already employed.
• Young workers invest in education. Some school leavers choose apprenticeships rather than low-skilled jobs, suggesting that immigration encourages more training.
Background
The study takes advantage of a unique policy experiment after the fall of the Berlin Wall. Czech workers were allowed to commute to German border districts for work, but not to live there. This created a pure increase in labor supply, as commuters earned wages in Germany but mostly consumed at home—creating a rare opportunity to measure immigration’s impact clearly. Using German social security records that track individuals over time, the authors were able to distinguish between effects on “places” (regional economies) and on “people” (individual workers). This approach highlights why previous research, relying only on regional comparisons, often produced contradictory results.
“Our results suggest that immigration has only a small impact on workers who already have jobs,” says Professor Dustmann. “The real story is how it changes who enters the labor market and how different groups of workers—especially older workers and job seekers—are affected.”
Prof. Christian Dustmann, 0044 78 18 04 83 80; cd@rfberlin.com; Sebastian Otten (University of Duisburg-Essen, Department of Economics and CReAM); Uta Schönberg; u.schoenberg@ucl.ac.uk; (University of Hong Kong, University College London, Department of Economics, Institute for Employment Research Nuremberg (IAB), and CReAM) • Jan Stuhler (Universidad Carlos III de Madrid, Department of Economics and CReAM)
“The Effects of Immigration on Places and People – Identification and Interpretation”, by Christian Dustmann, Sebastian Otten, Uta Schönberg and Jan Stuhler; RFBerlin Discussion Paper 86 (2025); forthcoming Journal of Labor Economics; doi/10.1086/739196
https://www.rfberlin.com/network-paper/the-effects-of-immigration-on-places-and-...
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