The Effects of Initial Low-barrier Employment Availability on Refugee Labor Market Integration

TL;DR

This study investigates how early access to low-barrier hospitality jobs influences refugee labor market integration in Austria, finding initial employment boosts but does not improve long-term job quality or wages, while increasing segregation.

Contribution

It provides empirical evidence on the short-term benefits and long-term limitations of early low-barrier employment for refugees using a natural experiment in Austria.

Findings

Early employment increases initial employment probability by up to 3 percentage points.

The employment advantage diminishes after the first year, with no medium-term wage differences.

Early employment increases labor market segregation among refugees.

Abstract

I examine whether the early but temporary availability of low-barrier employment opportunities in the hospitality sector affects the labor market integration of refugees. My identification strategy combines the quasi-exogenous allocation of refugees to Austrian regions with high seasonality in Austria's hospitality sector, where 25% of refugees find initial employment. Exploiting within region, within year variation, I find that receiving labor market access during high seasonal demand increases employment probability initially, with significant employment effects of up to 3 percentage points, or 9% of the mean, in the first months. Employment advantages diminish after the first year, indicating that such early employment opportunities do not serve as a stepping stone. Still, treated refugees have in total earned more in the first three years, with no significant differences in medium-term wages and job quality. One disadvantage of early employment in hospitality is the increased labor market segregation, as treated refugees are more likely to work in industries more typical for refugees and in firms with higher non-Austrian coworker shares.