Foreign Workers and the Wage Distribution: Where Do They Fit in?

Luxembourg Institute of Socio-Economic Research (LISER) Working Paper Series 2014-02

32 Pages Posted: 9 Jun 2015

See all articles by Chung Choe

Chung Choe

Hanyang University

Philippe Van Kerm

Luxembourg Institute of Socio-Economic Research (LISER)

Date Written: May 14, 2014

Abstract

The presence of foreign workers is commonly deemed as driving wage inequality upwards. By 2006, seven in ten private sector workers in Luxembourg were foreign. This note builds on recentered influence function regression methods to identify where these foreign workers stand in the distribution of private sector wages, and assess whether and how much their wages contribute to overall wage inequality. Our analysis of the 2006 Structure of Earnings Survey reveals that foreign workers have generally lower wages than natives and therefore tend to haul the overall wage distribution downwards. Yet, surprizingly, their influence on wage inequality reveals small and negative. All impacts are further muted when accounting for human capital and, especially, job characteristics. Not observing any large positive inequality contribution on the Luxembourg labour market is a striking result given the sheer size of the foreign workforce and its polarization at both ends of the skill distribution.

Keywords: immigrant wages, wage inequality, cross-border workers, influence function, RIF regression, Luxembourg

JEL Classification: J15, J31, J61

Suggested Citation

Choe, Chung and Van Kerm, Philippe, Foreign Workers and the Wage Distribution: Where Do They Fit in? (May 14, 2014). Luxembourg Institute of Socio-Economic Research (LISER) Working Paper Series 2014-02, Available at SSRN: https://ssrn.com/abstract=2615880 or http://dx.doi.org/10.2139/ssrn.2615880

Chung Choe (Contact Author)

Hanyang University ( email )

Ansan
Korea, Republic of (South Korea)

HOME PAGE: http://https://sites.google.com/site/choechung/home

Philippe Van Kerm

Luxembourg Institute of Socio-Economic Research (LISER) ( email )

11, Porte des Sciences
Esch-sur-Alzette, L-4366
Luxembourg

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