Immigrants’ changing position in Germany’s labor market institutions

As Germany works to get its refugee population into employment, immigrant labor market assimilation has become a major policy concern. The German economy has undergone significant structural changes since the first cohort of guest workers arrived over a half century ago, with the corporatist features that defined the German model now much weaker. This report examines how this shift towards greater liberalization has affected immigrants in the German labor force relative to natives. Using data from the German Socio-Economic Panel, I find that immigrants’ position in Germany’s labor market institutions changed considerably in the period from 1984 to 2016. Working immigrants were originally more likely to hold permanent contracts, have works council representation, and belong to trade unions than native Germans, but the relationship has reversed in all three cases. During this period, immigrants were 50% more likely to exit union membership than natives after controlling for demographics, labor market events, and industry and occupation. Immigrant-native income and wage gaps have widened, although structural features of the German labor market likely mitigate intergroup inequality. I conclude by discussing refugees’ limited prospects of entering the primary labor market and what policymakers can do to improve them.