EU Enlargement and Ireland's Labour Market

This paper considers several issues related to EU enlargement, migration and Ireland's Labour Market. Given Ireland's economic boom and subsequent economic crisis, it is necessary to discuss the Irish experience since 2004 in two very distinct phases. For the four years after 2004, net migration was strong but from 2009, net migration has turned negative due to Ireland's deep recession. Given these two phases, it is necessary to examine the labour market dimensions from different perspectives. For the earlier phase, the literature examined the following issues: what were the characteristics of the immigrants (mostly from the EU's accession states) who arrived in Ireland during this period; how did they fare in the labour market; what were there impacts on economic variables such as GDP and wages. For the latter phase, the question arose of whether the recession had impacted more strongly on the labour market outcomes of migrants relative to natives. Ireland's immigrants, in general, are relatively highly educated. About 30% of the Irish labour force have third level qualifications. The proportion of immigrants with third level qualifications, at over 40%, points to a high-skilled inflow. As regards immigrants from the EU10, although they have the lowest proportion of highly educated across the immigrants groups, they still compare favourably with the Irish labour force. Analysis of earnings data from 2004 suggested that immigrants, on average, earned 18% less than natives, controlling for characteristics such as gender, experience and education. However, this aggregate figure hid large differences across immigrant groups. When broken down by immigrants from English-speaking and non-English-speaking countries, the wage gap was essentially zero for the former group and 31% for the latter group. A wage gap of 45% was found for EU10 immigrants relative to natives. This was the largest disadvantage across the different national groups. Analyses of earnings using more recent data (from 2006) continued to show larger wage gaps for EU10 immigrants. The more recent data has also revealed that the earnings disadvantage is not uniform across the earnings distribution. Instead, the wage gap is essentially non-existent at lower earnings and rises as earnings rise. This suggests that the wage gap suffered by EU10 immigrants in Ireland is related to a failure to capture a full return on human capital as opposed to discrimination against lower skilled, and possibly more vulnerable, workers. Research on the economic impacts of immigration in Ireland during the boom generally showed positive impacts on GDP. This result emerged from models where immigration was seen to increase labour supply and to dampen wage pressures. However, research which attempted to verify this wage-dampening effects yielded contradictory results. Since the economic downturn of 2008/9, attention has shifted to how the recession has impacted on immigrants relative to natives. Much greater rates of job loss have been experienced by immigrants and net population outflows have re-emerged. The labour mobility which arose from EU enlargement has been beneficial for Ireland in both the boom and the recession. However, the benefits to the immigrants themselves are less clear-cut.