NCPA - National Center for Policy Analysis


September 15, 2006

When it comes to unemployment, immigrants do better in the United States than in most other countries, where the foreign-born typically have jobless rates twice as high as native-born workers, say Pia M. Orrentius and Genevieve R. Soloman in the Federal Reserve Bank of Dallas' Economic Letter. 

To compare foreign and native-born unemployment rates, the International Institute for Management Development (IMD) compares market regulations in different countries, and produces a score for each, ranging from zero for countries with the most regulations to 10 for nations with policies that cause the least.  The results show:

  • The United States is among the least regulated, with an IMD score of 6.6, a male foreign-born unemployment rate of 7.2 percent, and a male native-born unemployment rate of 7 percent.
  • Germany has an IMD score of only 2.4, and has a 16.9 percent male foreign-born unemployment rate along with a 9.3 native-born unemployment rate.
  • France has the lowest IMD score at 2.3, a male foreign-born unemployment rate of 15.4 percent and a native-born unemployment at 7.3 percent.

The authors also say that more restrictive labor markets disproportionately hurt the youth:

  • The United States has a youth national unemployment rate of 12.5 percent, compared to a foreign unemployment rate of 10.7 percent.
  • Germany's youth unemployment rate is 10.0 percent for nationals, and 16.3 percent for foreigners
  • France has the greatest margin, with a national unemployment rate of 17.8 percent and a foreigner unemployment rate of 34.2 percent. 

Overall, higher IMD scores -- indicating freer markets -- lead to relatively small differences in unemployment between immigrants and natives, say the authors.  This correlation is indicative of employers having greater freedom in hiring and firing, and working in an environment where supply and demand largely determines the terms of employment. 

Source: Pia M. Orrenius and Genevieve R. Solomon, "How Labor Market Policies Shape Immigrants' Opportunities," Federal Reserve Bank of Dallas, July 2006.

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