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Does Migration Improve Family Income? -- William A.V. Clark and Jamie Goodwin-White

DOES MIGRATION IMPROVE FAMILY INCOME? : CONSTRASTS BETWEEN NATIVE BORN AND FOREIGN BORN HOUSEHOLDS IN GERMANY

William A.V. Clark and Jamie Goodwin-White

University of California, Los Angeles

ABSTRACT


There is a substantial research literature which examines the effects of migration on labor force participation and earnings. Much of the literature focuses on the effects on women of being a "tied mover" or a "tied stayer". A broader question, which is the focus of this research paper, is how migration improves family income as a whole and the contrasts between migration effects for native-born and foreign-born households. Our findings replicate the established finding that foreign born households on average have lower incomes than German born households but that in general households have significant income gains from migration. Seen as an investment in human capital migration is important for all households. At a second level, we show the relationship of gains in household income in movers versus stayers as well as foreign born versus native born households.

Introduction

Germany has undergone a major demographic transformation in the past three decades, a transformation that has brought about the beginnings of a multi-cultural society. The foreign born non-German population is now about 10 percent of the German population. The demographic transformation has been so great that the political structure has been forced to change in a way once unimaginable. Now, foreign-born immigrants have at least some of the same political rights as native-born Germans. This transformation is a recognition of the power and impact of immigration on German society.[1]

The immigrant population in Germany arrived in several waves, somewhat similar to the waves of foreign-born immigrants into the United States. The initial waves were those of the guest workers who arrived from Italy in the 1950s and 1960s followed in the 1970s and 1980s by immigrants from Greece, Yugoslavia and Turkey. Now immigrants from Turkey are the largest single group and continue to supply immigrants through family reunification and network linkages. International migration to Germany was driven by the same processes that have fueled migration flows to all developed industrial countries. While the first waves were primarily men who took up low skilled jobs which were left by German native born workers as they moved up the occupation ladder. When the economic downturn occurred in the early 1970s many of these workers decided to stay rather than risk leaving and being unable to return. They formed the core of the foreign born which we will analyze in this paper.

Political changes with the fall of "the wall" in 1989 and the unification of Germany created another wave of immigrants from the former Soviet Union and the former Yugoslavia. The flows during the 1990s were large, about three and half million ethnic Germans and other asylum seekers (Munz and Ulrich, 1998). Now the foreign born population is about 7.5 million, and about 10 percent of the total German population.

Conceptualization

Almost all of Europe is now concerned with the progress of immigrants in their new societies. A substantial body of literature has documented the disadvantaged position that most immigrants find themselves in after arrival in Europe and the difficulty in moving into mainstream occupations and integrated housing settings (Munz and Ulrich, 1997; Glebe and O'Loughlin 1987).

Even though it is fairly clear that the foreign born have lower incomes and are likely to live in the less desirable sections of the housing market there is evidence that they are able to make gains in the labor and housing markets though migration. That is the basic human capital model (Becker, 1964) which has been the mainstay of labor migration theory for the past four decades is also applicable in the new immigrant situation in European cities.

In this model, migration is an investment decision that increases an individual's productivity. Individuals, and families in the extended version of the model, move to places where their lifetime benefits will be maximized. The migration decision is a continuous evaluation of the trade-off between staying at the current residence and the utility of moving to a new location. The model evaluates the benefits of moving over a life course and examines gains in the context of changes in the household location.

In this work we use the notions of the affects of mobility over the life course to examine comparative outcomes for the native born and immigrants in Germany in the period 1984-1997, a period of significant changes in the German Republic. We hypothesize that movements on both native-born and foreign-born households lead to increased in income and greater labor force participation.

Data and Variables

Research on temporal impacts requires panel data and the German Socio-Economic Panel (GSOEP) is a longitudinal sample of about 6000 households. It is a data set modeled on the Panel Study of Income Dynamics (PSID). The panel is a representative sample of the West German population when it was set up and an East German sample has been added to the data set. Within the GSOEP there is a foreign born sub-sample of approximately 1400 households. In 1984 this foreign born sample included subsets of Italian, Greek, Spanish, Yugoslav and Turkish immigrants though for our present study we cannot divide the immigrants by origin.

The data we use in this analysis is the household data for all households, native and foreign born. We examine mean and median household income, and fulltime participation in the workforce for all households who moved between 1984 and 1985, and compare those households with households who did not move between 1984 and 1985. The income data is adjusted to 1990 values. Because we restrict the data to households with two workers the sample is limited and there are some analyses which we cannot undertake therefore.

Results and Interpretation

The analysis in this preliminary form is organized around a number of graphical interpretations of the changing impacts of mobility. The diagrams are organized in pairs of change over time, in each case foreign born and native born are presented on each graph. There are four basis sets of comparisons:

a. changes in mean and median income for native born and foreign born movers

b. changes in median and mean income for native born and foreign born stayers

c. changes in levels of employment for native born and foreign born movers.

d. evaluating the results in the context of all movers

In addition to the main issues of migration, income gains and employment changes, we examine the sample structure and the impacts of including all movers rather than only movers for whom we have data at all sample points.

The impact of moving.

The impact of making a move is clear. Both native-born and foreign-born households make immediate gains from moving. Native-born households start from a higher base and make slightly greater gains, but the foreign born close the gap by six to seven years later. That gap widens in the following years (Figure 1). Even so, by 1997 the foreign born have moved to incomes which are significantly greater than their initial incomes and are about 500 marks less than the native born. The median incomes (Figure 2) in fact show greater and more sustained gains on the part of the foreign born, though there is a "fall-off" in the last year. The overall trajectory is much steeper for the foreign born in the first few years, but there is a clear plateau in the later years.

The question of whether the initial move is critical in the initial creation of a higher income trajectory is answered by examining the percent change in adjusted income for movers. (Figures 3 and 4). For the foreign born there is a remarkable increase in mean and median incomes consequent on a move. Foreign born incomes increase nearly 35 percent with the 1984-85 move. The gain for the native born is a much more modest 12 percent. The gains are maintained for a number of years after the move, although the grains are decreased in towards the end of the decade after the move. The median gains are not quite as large, but are greater than at later points in the life course. There is also greater variability in the results from the medians. As in the case of the means, the percent change in the medians do fall below zero towards the end of the cycle. Perhaps most strikingly, the patterns for the foreign born and the native born and more similar than dissimilar. This suggests perhaps that larger economic forces are affecting native born and immigrant alike and that it is difficult for either group to escape the powerful pull of wider economic effects. At the same time, while the mean incomes are somewhat coincident, the patterns for the medians are much less synchronous. The foreign born have greater percent gains in the early years, and smaller gains, even losses in the latter years.

There is a distinct contrast with the plots of households who have not moved in the same period (Figures 5 and 6). While the movers shifted in income from the range of 2500-3000 marks, to 4000-4500 marks a month , the non-movers had much less change and achieved income levels which were significantly less than those for movers. The graphs show the slight gains in the first interval of the period we are examining, from 1984 to 1990 and then an almost flat trajectory until 1997. Although the means are greater than the medians the differences are not very large, less than 500 marks per month. At a superficial level there is support for the argument that moving to increase human capital and opportunities does pay off in returns to income (compare Figures 1 and 5). The difference in the gains from mobility is even greater when incomes are measured by median incomes (Figures 2 and 6).

Implications for employment
One of the striking findings from the study is the difference in levels of participation for native born and foreign born and the changes in the differences over time (Figure 7). For the first ten years the foreign born have full time employment rates which are 15 to 18 percent greater than those for the native born. For the last four years of the interval they are near parity. Focusing on the early years raises questions about the greater rates of participation and the lower average incomes. Returns to participation are much less for the foreign born which is consistent with lower levels of human capital.

Findings from all movers
Although the GSOEP is a detailed panel study, there are missing values on household income for some cases in some years. The overall results do not change when we examine all movers (Figures 8 and 9). However, when we include households for which we do not always have income data, that is income data is missing in some years, there are two important findings. First, the foreign born households do not reach parity with the German native born population. Second, the gains for the native born population are slightly greater when all cases are included. Obviously some of the missing values are high income households. Even, so these are minor differences and do not change the overall findings of gains from migration.

Observations and summary
This preliminary paper adds significantly to the wider literature on the impact of migration on earnings and labor force participation. Overall, movers make greater gains than non-movers and "catch-up" to non-movers after about five years. They then go on to surpass the incomes of non movers. Clearly, migration whether short distance or long distance is related to gains in income and labor force participation. Further analysis examines the composition of movers and non-movers and the differences in human capital between the foreign born and native born.

Figure 1


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Figure 5


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Figure 7


Figure 8


Figure 9


References

Clark, W.A.V. and Anita Drever 2000. Residential mobility in a constrained housing market: implications for ethnic populations in Germany. Environment and Planning A 32: 833-846

Glebe, G and J. O'Loughlin 1987. Foreign minorities in Continental European cities, Wiesbaden, Steiner.

Munz R. Siefert, W. and Ulrich, R. 1997. Immigration to Germany , structures, effecst and perspectives. Frankfurt, Campus.

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[1] Until the vote of the German parliament in which created some rights for the foreign born population, at least those born in Germany, all immigrants by law were foreign, even if born in Germany.