The heterogeneous employment outcomes of first- and second-generation immigrants in Belgium. Working Paper Research January 2020 N°381

This paper provides a comprehensive quantitative assessment of the relationship between people’s migration background and their likelihood of being employed in Belgium. Using detailed quarterly data for the period 2008-2014, we find not only that first-generation immigrants face a substantial employment penalty (up to -36% points) vis-à-vis their native counterparts, but also that their descendants continue to face serious difficulties in accessing the labour market. The employment gap is, ceteris paribus, more pronounced for the first than for the second generation. Yet, intergenerational mobility patterns are found to be quite heterogeneous: although the children of immigrants from the European Union (EU) fare much better than their parents, the improvement is much more limited for those from EU candidate countries, and almost null for the second generation from the Maghreb. The situation of second-generation immigrants with only one foreign-born parent seems to be fairly good. In contrast, it appears that the social elevator is broken for descendants of two non-EU-born immigrants. Immigrant women are also found to be particularly affected, especially those originating from outside the EU. As regards education, it appears to be an important tool for fostering the labour market integration of descendants of non-EU-born immigrants. For firstgeneration immigrants, though, it proves to be much less effective overall. Focusing on the first generation, we find that: i) access to jobs increases with the duration of residence, though fairly slowly on average; ii) citizenship acquisition is associated with significantly better employment outcomes, for both EU and non-EU-born immigrants; iii) proficiency in the host country language is a key driver of access to employment, especially for non-EU-born immigrants; and iv) around a decade is needed for the employment gap between refugees and other foreign-born workers to be (largely) suppressed

Rent-sharing under different bargaining regimes : Evidence from linked employer-employee data

In many European countries, the majority of workers have their wage rates determined directly by industry-level agreements. For some workers, industry agreements are supplemented by firm-specific agreements. Yet, the relative importance of individual company and industry agreements (in other words, the degree of centralisation) differs drastically across industries. The authors of this paper use unique linked employer-employee data from a 2003 survey in Belgium to examine how these bargaining features affect the extent of rent-sharing. Their results show that there is substantially more rent-sharing in decentralised than in centralised industries, even when controlling for the endogeneity of profits, for heterogeneity among workers and firms and for differences in characteristics between bargaining regimes. Moreover, in centralised industries, rent-sharing is found only for workers that are covered by a company agreement. The findings of this paper finally suggest that, within decentralised industries, both firm-specific and industry-wide bargaining generate rent-sharing to the same extent.Rent-sharing, collective bargaining, propensity score matching.

Industry wage differentials, unobserved ability, and rent-sharing : Evidence from matched worker-firm data, 1995-2002

This paper investigates inter-industry wage differentials in Belgium, taking advantage of access to a unique matched employer-employee data set covering the period 1995-2002. Findings show the existence of large and persistent wage differentials among workers with the same observed characteristics and working conditions, employed in different sectors. The hypothesis that workers with better unmeasured abilities are over-represented in high-wage sectors may not be rejected on the basis of Martins’ (2004) methodology. However, the contribution of this explanation to the observed industry wage differentials appears to be limited. Further results show that ceteris paribus, workers earn significantly higher wages when employed in more profitable firms. Our instrumented wage-profit elasticity stands at 0.063 and Lester’s range of pay is about 41 per cent of the mean wage. This rent-sharing phenomenon accounts for a large fraction of the industry wage differentials. We find indeed that the magnitude, dispersion and significance of industry wage differentials decreases sharply when controlling for profits.Industry wage differentials; Unobserved heterogeneity; Rent-sharing; Matched employer-employee data; Quantile regressions

Wage structure effects of international trade: Evidence from a small open economy

In the last few decades, international trade has expanded not only between industrialised countries, but also between high- and low-wage countries. This important change has raised questions on how international trade affects the labour market. In this spirit, this paper aims to investigate the impact of international trade on wage dispersion in a small open economy. It is one of the few to: i) use detailed matched employer-employee data to compute industry wage premia and disaggregated industry level panel data to examine the impact of changes in exports and imports on changes in wage differentials, ii) analyse the impact of imports according to the country of origin. Looking at the export side, we find a positive effect of exports on the industry wage premium. The findings also show that import penetration from low-income countries has a significant and negative impact on inter-industry wage differentials, while imports from high-income countries seem to have a more ambiguous impact on the wage structure. The results suggest that trade with low-income and high-income countries has different effects on inter-industry wage differentials.wage structure, inter-industry wage differentials, international trade, matched employer-employee data

Wage structure effects of international trade: evidence from a small open economy

In the last decades, international trade has increased between industrialised countries and between high- and low-wage countries. This important change has raised questions on how international trade affects the labour market. In this spirit, this paper aims to investigate the impact of international trade on wage dispersion in a small open economy. It is one of the few to: i) use detailed matched employer-employee data to compute industry wage premia and disaggregated industry level panel data to examine the impact of changes in exports and imports on changes in wage differentials, ii) examine the impact of imports according to the country of origin. Looking at the export side, we find a positive effect of exports on the industry wage premium. The results also show that import penetration from low–income countries has a significant and negative impact on the inter-industry wage differentials, while imports from high-income countries seem to have a more ambiguous impact on the wage structure. The results suggest that trade with low-income and high-income countries has different effects on the inter-industry wage differentials. JEL Classification: F16, J31inter-industry wage differentials, international trade, matched employer-employee data, Wage Structure

Does education raise productivity and wages equally ? The moderating roles of age, gender and industry. National Bank of Belgium Working Paper No. 281

The labour market situation of low-educated people is particularly critical in most advanced economies, especially among youngsters and women. Policies aiming to increase their employability either try to foster their productivity and/or to decrease their wage cost. Yet, the evidence on the misalignment between education-induced productivity gains and corresponding wage cost differentials is surprisingly thin, inconclusive and subject to various econometric biases. We investigate this issue using rich Belgian linked employer-employee panel data for the period 1999-2010. Moreover, we provide first evidence on the moderating roles of age, gender and industry in the relationship between education, productivity and wage costs. Controlling for simultaneity issues, time-invariant workplace characteristics and dynamics in the adjustment process of dependent variables, findings support the existence of a ‘wage-compression effect’, i.e. a situation in which the distribution of wage costs is more compressed than the education-productivity profile. This effect, robust across industries, is found to disappear among older cohorts of workers and to be more pronounced among women than men. Overall, findings suggest that particular attention should be devoted to the productivity to wage cost ratio of low-educated workers, especially when they are young and female, but also to policies favouring gender equality in terms of remuneration and career advancement

Upstreamness, social upgrading and gender: Equal benefits for all? National Bank of Belgium, Working Paper No. 359

This paper examines social upgrading related to firms’ participation in Global Value Chains (GVCs) from a developed countries’ perspective. Merging detailed matched employer-employee data relative to the Belgian manufacturing industry with unique information on firm-level upstreamness, we investigate whether workers on the upstream stage of GVCs benefit from higher wages. We also enrich our analysis with a gender dimension. Unconditional quantile regressions and decomposition methods reveal that firms’ upstreamness fosters workers’ social upgrading. Nevertheless, gains are found to be unequally shared among workers. Male top-earners are the main beneficiaries; whereas women, irrespective of their earnings, appear to be unfairly rewarded

Wages and the Bargaining Regime under Multi-level Bargaining: Belgium, Denmark and Spain

We use a harmonized matched employer—employee dataset to study the impact of the collective bargaining regime on wages in the manufacturing sector in three countries with a multi-level system of bargaining: Belgium, Denmark and Spain. Single-employer bargaining has a positive effect both on wage levels and on wage dispersion in Belgium and in Denmark. In Spain, it also increases wage levels but reduces wage dispersion. Our interpretation is that in Belgium and Denmark, single-employer bargaining is used to adapt pay to the specific needs of the firm while, in Spain it is mainly used by trade unions in order to compress the wage distribution

Industry wage differentials, unobserved ability, and rent-sharing: evidence from matched worker-firm data, 1995 - 2002

This paper investigates inter-industry wage differentials in Belgium, taking advantage of access to a unique matched employer-employee data set covering the period 1995-2002. Findings show the existence of large and persistent wage differentials among workers with the same observed characteristics and working conditions, employed in different sectors. The hypothesis that workers with better unmeasured abilities are over-represented in high-wage sectors may not be rejected on the basis of Martins' (2004) methodology. However, the contribution of this explanation to the observed industry wage differentials appears to be limited. Further results show that ceteris paribus, workers earn significantly higher wages when employed in more profitable firms. Our instrumented wage-profit elasticity stands at 0.063 and Lester's range of pay is about 41 per cent of the mean wage. This rent-sharing phenomenon accounts for a large fraction of the industry wage differentials. We find indeed that the magnitude, dispersion and significance of industry wage differentials decreases sharply when controlling for profits

Unemployment risk and over-indebtedness

We study how unemployment affects the over-indebtedness of households using the new European Household Finance and Consumption Survey (HFCS). First, we assess the role of different labor market statuses (i.e. employed, unemployed, disabled, retired, etc.) and other household characteristics (i.e. demographics, housing status, household wealth and income, etc.) to determine the likelihood of over-indebtedness. We explore these relationships both at the Euro area level and through country-specific regressions. This approach captures country-specific institutional effects concerning all the different factors which can explain household indebtedness in its most severe form. We also examine the role that each country’s legal and economic institutions play in explaining these differences. The results of the regressions across all countries show that the odds of being over-indebted are much higher in households where the reference person is unemployed. These odds ratios remain fairly stable across different over-indebtedness indicators and specifications. Interestingly, we find similar results for secured debt only. Turning to country specific results, the role of unemployment varies widely across countries. In Spain, France or Portugal, for example, the odds ratio for the unemployed group is just below 2, whereas in Austria, Belgium, or Italy the odds ratio is higher than 4. Secondly, we situate the analysis in a macro-micro frame to identify households and countries that are especially vulnerable to adverse macroeconomic shocks in the labor market. For the Euro area, we find that the percentage of households plagued by over-indebtedness increased by more than 10%, suggesting that another unemployment shock could have a major impact on the financial solvency of Euro area households. Finally, the impact of this shock on single-headed households is much higher than on couple-headed ones