In the middle of the nineties, the brutal wars in what had been known for decades as Yugoslavia produced hundreds of thousands of refugees—and triggered a natural economic experiment in Denmark.
A decade earlier, Denmark had put in place laws that created a generous refugee program. But until the outbreak of the Yugoslav wars, Denmark remained almost exclusively the land of Danes. The foreign-born population was miniscule—somewhere around one or two percent of the population.
That started to change in 1995, when a large number of refugees from the Yugoslav wars entered the country. They were followed by Somali refugees. Then, after 9/11, by refugees from Afghanistan and Iraq. Even after the initial waves of refugees were settled, immigration from those countries was maintained at high levels because of family reunification policies.
A simple supply-and-demand model would suggest that an influx of low-skilled labor would depress the wages of natives, particularly those in low-skilled occupations. The beneficiaries of higher immigration, it's often argued, are elites who benefit from a larger, cheaper labor pool. Curiously, that doesn't seem to be what happened in Denmark.
A new working paper studying the effect of this wave of immigration finds that the newcomers did not depress native wages. In fact, the influx did not increase unemployment and led to higher wages among the less-educated natives. Higher-educated natives also saw an increase in wages but that effect was only temporary. Only low-skilled workers in the public sector suffered a fall in wages due to immigration.
So what happened to the law and supply and demand? The authors of the study, Mette Foged of the University of Copenhagen and Giovanni Peri of U.C. Davis, write that native workers were pushed into more complex—and higher paying—occupations by the competition from the new immigrants.
"Hourly wages of less educated natives were on average positively affected by immigration, the effect increases as the low skilled gradually move towards more complex occupations and a fraction receive formal training to increase their complementarity with the manual jobs performed by non-EU immigrants," Foged and Peri write.
Naturally, this is being greeted as great news by supporters of more open immigration in the United States. If immigration improves the lot of native workers—especially low skilled natives—it would seem to be a win-win scenario.