Immigration, Unemployment and Domestic Welfare

Alexander Kemnitz provides a unified framework for the analysis of the effects of immigration on wages, employment and welfare of the population of the target country in the presence of unemployment. Taking into account important features of European labor markets, he shows that unemployment results from the interplay of trade union wage setting and welfare state provisions. The author identifies technological and political conditions, in particular with respect to the wage setting process and the adjustment of welfare state provisions, which can make low skilled immigration beneficial for the host. Building on these insights, he scrutinizes the popular argument that immigration can serve to alleviate the demographic burden imposed by public pensions. It is shown that population aging can not serve as an argument for immigration when unemployment exists. Moreover, the author elaborates on the political viability of immigration policies and the challenges education policy faces, emphasizing the importance of educational participation of the native population and the integration of second generation immigrants.