Skill Downgrading Among Refugees and Economic Immigrants in Germany

TL;DR

This paper investigates skill downgrading among refugees and economic immigrants in Germany, highlighting that refugees experience more downgrading, and emphasizes the importance of language skills in improving labor market outcomes.

Contribution

It provides a comparative analysis of skill downgrading between refugees and economic immigrants in Germany over several decades, revealing persistent disparities and the impact of language skills.

Findings

Refugees downgrade more than economic immigrants.

Language skill improvements significantly enhance labor market outcomes.

Disparity in downgrading persists over time.

Abstract

Upon arrival to a new country, many immigrants face job downgrading, a phenomenon describing workers being in jobs below the ones they have based on the skills they possess. Moreover, in the presence of downgrading immigrants receiving lower wage returns to the same skills compared to natives. The level of downgrading could depend on the immigrant type and numerous other factors. This study examines the determinants of skill downgrading among two types of immigrants - refugees and economic immigrants - in the German labor markets between 1984 and 2018. We find that refugees downgrade more than economic immigrants, and this discrepancy between the two groups persists over time. We show that language skill improvements exert a strong influence on subsequent labor market outcomes of both groups.