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Published On: Wed, Jul 1st, 2015

Somaliland:How do African immigrants affect European labor markets?

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By Muhumed Mohamed Muhumed (Khadar)

Africans have been migrating to Europe for decades. However the number skyrocketed in the last few years. In 2015 the number of immigrants reaching Europe by boat more than doubled compared to 2014. Between January and May in 2014, 49,500 immigrants entered Europe, while 105,000 reached the same period in 2015 (BBC, 2015). More than 600,000 immigrants applied asylum across Europe in 2014. Most of them entered Europe through Italy, Greece, Spain and Malta. Apart from Syrians majority of these immigrants came from Africa mainly Eritrea, Somalia, Nigeria, Niger and Ethiopia.

According to international economics, large inflow of immigrants increases labor supply which in turn lowers wages. This law holds in the short-run when capital is fixed. Specific-Factors Model is used in a situation like this. This model allows labor to be mobile and move between industries but keeps capital and land specific to each industry.

However if immigrants are low-skilled workers, they do not affect the wage of the local people. A good example is immigrants from Cuba to Miami, USA in 1980. Those immigrants increased the total population as well as the labor force of this specific state but did not influence the wage of both local low-skilled and high-skilled workers (Feenstra, Taylor 2012).

Apparently, an overwhelming number of African immigrants are illiterate, poorly educated or unskilled. As table 1 shows, according to the literacy rate of their home countries, a large number of these immigrants are illiterate or unskilled. Presumably they have no impact on wages of European labor markets. This is a special case like the one in Miami we have stated above.

Table 1: literacy rate of immigrants’ home countries, 2015

Eritrea Ethiopia Somalia* Nigeria Niger
73.8% 49.1% 24% 59.6% 19.1%

In table 2, Organization of Economic Cooperation and Development illustrates that wages of these selected countries were stable between 2010 and 2013. We have selected these countries as they host the largest number of immigrants from Africa. A notable issue is that instead of falling, countries like Germany and Sweden had slightly increasing wages.

Table 2: Average annual wages of selected European countries in 2013 (US Dollars)

Countries 2010 2011 2012 2013
Germany 42.184 42.859 43.361 43.682
Sweden 39.115 39.634 40.352 40.818
Italy 35.620 35.035 34.397 34.561
Austria 45.839 45.219 45.164 45.199

Because European countries have more workers but fixed amounts of capital and labor, wages should have declined due to diminishing marginal product of labor. However we have seen that this assumption does not hold due to the immigrants’ levels of skills. In summary as the majority of African immigrants are low-skilled workers, they have no significant effects on wages in European labor markets.

Muhumed Mohamed Muhumed (Khadar)

MS in economics candidate

Dhaka, Bangladesh

baadilmm@gmail.com

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