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Unclassified ECO/WKP(215)13 Organisation de Coopération et de Développement Économiques Organisation for Economic Co-operation and Development 25-Mar-215 English - Or. English ECONOMICS DEPARTMENT ECO/WKP(215)13

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Unclassified ECO/WKP(215)13 Organisation de Coopération et de Développement Économiques Organisation for Economic Co-operation and Development 25-Mar-215 English - Or. English ECONOMICS DEPARTMENT ECO/WKP(215)13 Unclassified IMPROVING THE LABOUR MARKET INTEGRATION OF IMMIGRANTS IN BELGIUM ECONOMICS DEPARTMENT WORKING PAPERS No By Álvaro Pina, Vincent Corluy and Gerlinde Verbist OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s). Authorised for publication by Alvaro Pereira, Director, Country Studies Branch, Economics Department. All Economics Department Working Papers are available at English - Or. English JT Complete document available on OLIS in its original format This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s). Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works. Comments on Working Papers are welcomed, and may be sent to the Economics Department, OECD, 2 rue André-Pascal, Paris Cedex 16, France, or by to This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. OECD (215) You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for commercial use and translation rights should be submitted to 2 ABSTRACT/RÉSUMÉ Improving the Labour Market Integration of Immigrants in Belgium Immigrants make up one fifth of the Belgian working age population, but their labour market integration is poor. Employment rates of non-eu immigrants, in particular, are very low, and the problem extends to their native-born offspring. Further, with more precarious jobs and lower wages, immigrants are heavily exposed to poverty. This is explained by low educational attainment and correspondingly high vulnerability to disincentives to work and relatively high minimum wages, but also by more diffuse handicaps, like discrimination and imperfect knowledge of the languages of Belgium. Improving the labour market performance of immigrants requires a two-fold strategy. First, policies specific to migrants need to be enhanced. To improve job matching, immigrants need more support to develop and validate their human capital, and employers, both public and private, need stronger incentives to hire a more diverse workforce. Second, general reforms to improve the functioning of the economy, desirable in any case, could also have a significant positive impact on immigrants. There is vast scope to reduce labour costs and increase work incentives for low-skilled workers. Also, the education system needs to become more equitable and responsive to the needs of the children of immigrants. This Working Paper relates to the 215 OECD Economic Survey of Belgium (www.oecd.org/eco/surveys/economic-survey-belgium.htm) JEL classification: I24, J15, J31, J32, J45, J61 Keywords: Belgium, immigrants, integration policies, minimum wage, labour tax wedge, equity in education, school choice, early tracking, vocational education ************** Améliorer l insertion des immigrés sur le marché du travail en Belgique Si les personnes immigrées représentent un cinquième de la population en âge de travailler de la Belgique, leur intégration au marché du travail reste faible. En particulier, le taux d emploi des ressortissants de pays extérieurs à l UE est très bas, de même que celui de leurs enfants nés en Belgique. Par ailleurs, les immigrés sont très exposés au risque de pauvreté dans la mesure où les emplois qu ils occupent sont plus précaires et moins bien rémunérés. Ce phénomène s explique par leur faible niveau de scolarité, et en conséquence une forte sensibilité aux facteurs dissuasifs pour le travail et à des salaires minimums relativement élevés, mais aussi par des handicaps répandus et ancrés tel que la discrimination et la maîtrise insuffisante des langues nationales de la Belgique. Une stratégie en deux volets est indispensable pour améliorer la situation des immigrés sur le marché du travail. D une part, il convient d optimiser les mesures ciblées sur les immigrés. Pour améliorer l appariement de l offre et de la demande d emplois, les immigrés doivent être mieux accompagnés pour développer et faire valider leur capital humain, tandis que les employeurs, dans le secteur public comme dans le secteur privé, doivent être davantage incités à diversifier leurs effectifs. D autre part, des réformes générales visant à améliorer le fonctionnement de l économie, au demeurant bienvenues en tant que telles, pourraient aussi avoir des retombées positives significatives sur les immigrés. Des marges importantes existent pour réduire les coûts de main-d œuvre et accroître les incitations au travail pour les travailleurs peu qualifiés. Il faut aussi renforcer l équité dans le système éducatif, qui doit mieux répondre aux besoins des enfants d immigrés. Ce Document de travail se rapporte à l Étude économique de l OCDE de la Belgique, 215 (www.oecd.org/fr/eco/etudes/etude-economique-belgique.htm) Classification JEL : I24, J15, J31, J32, J45, J61 Mots clefs : Belgique, immigrés, politiques d intégration, salaire minimum, coin fiscal sur le travail, équité dans l éducation, choix des établissements scolaires, orientation précoce, enseignement professionnel 3 TABLE OF CONTENTS IMPROVING THE LABOUR MARKET INTEGRATION OF IMMIGRANTS IN BELGIUM... 5 Immigration has reached record highs, but integration remains challenging... 5 The labour market integration of immigrants remains weak... 7 Both immigrant-specific and general policies need reform... 9 Integration and migration policies for better skills and job matching Reinforcing human capital Fostering diversity in the private sector Overcoming under-representation in public employment Migration policies for better matching with labour market needs General labour market settings often reduce the employment prospects of immigrants Reducing costs and taxes to stimulate labour demand and supply Avoiding relegating immigrants to precarious contracts The educational outcomes of the children of immigrants need improvement Promoting social diversity in schools... 2 Improving the performance of disadvantaged students and schools Tackling early tracking and grade repetition Upgrading vocational studies Addressing the educational needs of the children of immigrants BIBLIOGRAPHY Figures 1. Immigration has increased and become more diverse Immigrants are an essential mainstay of the Belgian labour force The employment rate of immigrants is low Non-EU immigrants have poorer labour market performance Immigrants have poorer job characteristics Many immigrants face poverty and social exclusion The share of low-educated immigrants is high Immigrants are highly concentrated in Brussels Immigration for non-labour motives is large Minimum wages are fairly high Unemployment and inactivity traps reduce work incentives Children of immigrants underperform by a wide margin Performance differences between schools are large Children of immigrants are over-represented in disadvantaged schools and lower education tracks 21 Boxes Box 1. The distribution of competences for integration and migration policies Recommendations to improve the labour market integration of immigrants IMPROVING THE LABOUR MARKET INTEGRATION OF IMMIGRANTS IN BELGIUM By Álvaro Pina, Vincent Corluy and Gerlinde Verbist 1 Immigration has reached record highs, but integration remains challenging Immigrants, henceforth defined as those born abroad whatever their nationality, account for a high and rising share of the Belgian population (16% in 213). Long substantial, immigration has risen to unprecedented levels since the turn of the century (Figure 1). Inflows have also become more diverse, with a decline in the relative importance of neighbouring countries and Italy, and surging arrivals from the new EU member states, Morocco and the rest of the world. Indeed, immigration has accounted for the bulk of population growth in Belgium since the 199s and can play an important role in counterbalancing the negative effects of ageing on the labour force, if immigrants can be socially and economically integrated (OECD/European Union, 214). As their age structure differs from natives, with relatively more people aged 2 to 55, immigrants already account for almost one fifth of the working age population (Figure 2). Successful integration of immigrants may also bring benefits in other areas, such as sizeable fiscal gains from higher employment (OECD, 213a) and new export opportunities for Belgian firms through networking and better knowledge of the tastes and needs of foreign consumers. 1. This paper originally appeared as chapter 1 in the OECD Economic Survey of Belgium 215, published in February 215 under the authority of the Economic and Development Review Committee. Álvaro Pina is a senior economist in the OECD Economics Department. He is also affiliated with ISEG (Lisbon School of Economics and Management, Universidade de Lisboa) and UECE (Research Unit on Complexity and Economics, Lisboa). Vincent Corluy is at the Centre for Social Policy, University of Antwerp, and the Centre for Economic Studies, KU Leuven. Gerlinde Verbist is at the Centre for Social Policy, University of Antwerp. The authors are grateful to Pierre Beynet, Robert Ford, Thomas Liebig, Álvaro Pereira and Sanne Zwart for valuable comments and suggestions on earlier drafts, as well as for discussions with Belgian government officials and independent experts. Special thanks go to Desney Erb for statistical assistance, to Joost Haemels for support in the collection of data and policy information, to Francesco Avvisati, Gábor Fulop and Pablo Zoido for computations with PISA microdata, and to Sylvie Ricordeau and Krystel Rakotoarisoa for editorial assistance. 5 POL MEX TUR JPN CHL SVK HUN CZE FIN PRT DNK ITA SVN EST FRA ISL GRC NLD GBR DEU NOR ESP USA SWE BEL AUT IRL CAN ISR AUS CHE NZL LUX ECO/WKP(215)13 Figure 1. Immigration has increased and become more diverse Total Other EU A. Flows Thousand persons, by origin 1 8 EU15 Rest of world B. Stocks Rest of the world Congo 2 Turkey Morocco Other EU countries Other EU15 countries Neighbouring countries and Italy¹ France, Germany, Netherlands and Luxembourg. 2. Democratic Republic of the Congo Source: Federal Planning Bureau and Eurostat (214), Population by citizenship and country of birth, Eurostat Database, November. Figure 2. Immigrants are an essential mainstay of the Belgian labour force Foreign-born population as a percentage of total population, age 15-64, for European Union member countries, Iceland, Norway and Switzerland; for other countries. Source: Eurostat (214), Population by citizenship and country of birth, Eurostat Database, November and OECD International Migration Statistics (database). 6 NLD SWE DNK BEL FRA AUT DEU NOR FIN ESP AUS GBR EU27 SVN CAN TUR NZL GRC ISL POL EST IRL USA CZE PRT ITA SVK HUN LUX TUR GRC ESP BEL FRA ITA POL IRL SVN EU27 NLD PRT SWE DNK FIN AUT SVK USA DEU GBR HUN EST CZE AUS CAN NOR NZL LUX ISL ECO/WKP(215)13 The labour market integration of immigrants remains weak However, the labour market integration of immigrants is poor. In international comparison, the employment rate of immigrants in Belgium is among the lowest, lagging the native-born by one of the widest gaps (Figure 3). Among immigrants, important heterogeneity exists. The employment status of immigrants from EU origin is broadly comparable with that of natives, with men more exposed to unemployment but less to inactivity (Figure 4). In contrast, the labour market performance of non-eu immigrants is much worse, with high unemployment and, among women, large inactivity as well. In , the employment rate gap to natives of EU-born immigrants fell markedly, while that of non- EU immigrants essentially stagnated (Corluy and Verbist, 214). Since 28, non-eu immigrants have been hit hardest by the crisis, with a further worsening of their employment rate gap, making integration problems even more pressing. Figure 3. The employment rate of immigrants is low Age 15-64, A. Employment rate Per cent of population 15 B. Gap relative to native born Percentage points for Australia, Canada, New Zealand, Turkey and United States. Source: European countries: Employment and unemployment - Labour Force Survey, Eurostat Database, November; United States: Current Population Surveys; Australia, Canada, New Zealand and Turkey: Labour Force Survey. Weak labour market integration extends to the native-born children of immigrants. Not immigrants themselves, they might be expected to reap the benefits of greater familiarity with Belgian culture and institutions. However, like their parents, they have a low employment rate (OECD, 212a). Labour market disadvantage is greatest when both parents (rather than only one) were born abroad (De Keyser et al., 212) and for the children of non-eu immigrants. Despite some progress in 28-12, outcomes for the native-born offspring of immigrants stress the persistent nature of integration problems. 7 Figure 4. Non-EU immigrants have poorer labour market performance Employment status by country of origin and gender, age 15-64, per cent, Employed Unemployed Inactive A. Total B. Men C. Women Belgium Other EU Non-EU Total Numbers may not add up to 1 due to rounding. Source: Eurostat (214), Employment and Unemployment (Labour Force Survey), Eurostat Database, November. Besides lower employment rates, immigrants also tend to face less favourable job characteristics. Compared to natives, immigrants are under-represented in public sector and white-collar private sector jobs, and over-represented in the less well-paid blue-collar and temporary employment (Figure 5). Again, disadvantage is largest for non-eu immigrants, but there are also important gaps in average job characteristics between EU immigrants and natives. Figure 5. Immigrants have poorer job characteristics Population aged by country of origin, per cent, 212 A. Type of employment 1 Temporary employment White-collar worker B. Gross daily wages 15 EUR 12 15 EUR Blue-collar worker 9 12 EUR EUR 1 Belgium Other EU Non-EU Public sector 1. Blue and white-collar categories refer to employees working under a regular blue or white-collar contract of indefinite or limited duration. Temporary work covers interim employment. Self-employment is excluded as are European Union officials. Source: CBSS (214), Datawarehouse marché du travail et protection sociale (Labour market and social protection database), Crossroads Bank of Social Security. 1 Belgium Other EU Non-EU 8 HUN POL SVK IRL DEU EST PRT ISL GBR CHE LUX DNK CZE EU28 NOR FIN ITA NLD SWE SVN AUT FRA ESP BEL GRC SVK ISL CHE POL LUX DEU NOR CZE HUN EST SWE GBR FIN NLD IRL AUT DNK PRT SVN FRA EU28 ITA BEL ESP GRC ECO/WKP(215)13 Lower employment and lower wages fuel poverty and social exclusion, where Belgium displays, together with Greece, the largest gap in the EU between immigrants and natives (Figure 6). While among natives couples are three times less likely than singles to live in a poor household, they are as or more likely among non-eu immigrants. This results from lower wages, higher unemployment and a different household composition, with widespread female inactivity and more children. Figure 6. Many immigrants face poverty and social exclusion 7 Risk of poverty or social exclusion by country of birth, age 18-64, A. Immigrants at risk Per cent of population B. Gap relative to native born Percentage points for Ireland and Switzerland. People at risk of poverty or social exclusion corresponds to the sum of persons who are: at risk of poverty, severely materially deprived or living in households with very low work intensity. At risk-of-poverty are persons with an equivalised disposable income below 6% of the national median (after social transfers). Severely materially deprived persons are constrained by a lack of resources experiencing at least 4 out of 9 deprivation items such as being unable to pay rent or utility bills, buy a telephone or a washing machine. People living in households with very low work intensity are those living in households where the adults worked less than 2% of their total work potential during the past year. Source: Eurostat (214), Living conditions and welfare: People at risk of poverty or social exclusion (Europe 22 strategy), Eurostat Database, November. Both immigrant-specific and general policies need reform Poorer educational attainment goes some way to explain the weak labour market integration of immigrants. Belgium has an internationally high share of low-educated non-eu immigrants (Figure 7). Unlike their EU-born peers, immigrants born outside the EU have not accompanied the general upward trend in education levels in Belgium over the past two decades, and their comparative disadvantage has therefore increased (Corluy and Verbist, 214). Taking adult skill proficiency instead of educational 9 qualifications yields a similar picture, with an internationally low performance of immigrants to Flanders in literacy and problem-solving skills (OECD, 213b). Nonetheless, education accounts for only a limited part (less than 2%) of the large employment rate differences between natives and non-eu immigrants, and even controlling for other socio-demographic factors (such as Region of residence, discussed below) a large unexplained gap remains often called the ethnic gap or penalty (Corluy and Verbist, 214). Figure 7. The share of low-educated immigrants is high Per cent of population aged with lower secondary education or less as highest level of education, Non-European Union country of origin Gap relative to total population -2 PRT IRL EST LUX HUN ESP NLD CZE ITA DNK EU28 FIN GRC SVN FRA SWE BEL AUT Source: Eurostat (214), Education and Training: Distribution of the population by educational attainment level, Eurostat Database, November. Patterns of regional settlement and some general labour market settings also help explain lower employment rates among immigrants. The foreign-born, and especially newcomers among them, are highly concentrated in Brussels, where unemployment is highest, and relatively less numerous in Flanders, where unemployment is lowest (Figure 8). Each Region broadly displays the same gaps in employment status between immigrants and natives observed for Belgium as a whole, with non-eu immigrants, and especially women among them, lagging behind. Brussels is the starkest example of a more general pattern of strong concentration of immigrants in the largest cities, which gives rise to problems of residential and school segregation. Network effects from settled communities help explain that pattern, further r
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