Does immigration hurt low income workers? Immigration and real wage income below the 50th percentile, Sweden 1993-2003

Martin H. Korpi, Uppsala University
Ayse Abbasoglu Ozgoren, Hacettepe University

This paper addresses questions of potential effects of immigration on wage income of predominantly low income Swedish born workers. Using full population panel data for two time-periods, 1993-1999 and 1997-2003, we estimate two fixed effect models controlling for both individual and local labor market characteristics, as well as individual and regional fixed effects. Most of the research on the impact of immigration on wage growth and job opportunities of native born workers, can be divided into two broad types, those using a factor analysis approach and those employing an “area approach”. Studies of the last type, using regionally aggregated data, suffer from lack of information on individual level factors affecting labour market outcomes of the native born. The paper at hand combines local labour market characteristics with individual full population panel data on native-born workers for Sweden. The models are tested for a range of population sub-groups, the compulsory and upper secondary educated and workers within certain shares of the local income distribution (using different below median percentile levels as population cut off points). We also ask whether ii) these effects are dependent on origin of the immigrants, defined as immigrants from OECD and non-OECD countries, and iii) whether the effects are limited to just economic growth regions or if found patterns are more of a general feature. The estimates show mainly a positive relationship between increasing shares of foreign born and wage income of Swedish born workers. It should be kept in mind that the contribution of the share of immigrants as explaining changes in income for the native born – whether positive or negative – seems to be very modest.