Expert Commentary

Social networks and the dynamics of labour market outcomes: Evidence from refugees

2012 paper from Northwestern University in the Review of Economic Studies on the value of social networks for refugee job seekers in the United States.

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Research on recent immigrants’ social networks and their hunt for work has produced mixed findings. Such networks have been shown to provide job opportunities and raise wages, but they can also aggravate cultural tensions and trigger competition for jobs. A 2012 study from Northwestern University, published in the Review of Economic Studies, suggests that it’s the composition of an immigrant’s social network that determines its impact on his or her employment prospects.

The study, “Social Networks and the Dynamics of Labour Market Outcomes: Evidence from Refugees Resettled in the U.S.,” examines how social networks affect employment for newly arrived workers. The researcher used data on approximately 1,700 male refugees between 2001 and 2005 from the International Rescue Committee, the Census Bureau and the Department for Health and Human Services. Refugee populations were studied because individuals typically settle in locations with existing social networks.

Key study findings include:

  • The arrival in current and prior years of a larger-than-average number of network members decreases the probability of employment for a new entrant by at least 4.8 percentage points. However, if the refugee social network is more than two years old, the probability that a new refugee will find employment increases by 4.6 percentage points.
  • Because of competition for jobs from new refugees, the employment rate for established refugees increases only 3.4% for each additional year of residency. “The negative competition effect from [an] increase in the number of network members arriving a year prior more than offsets the positive effects of an additional year of residence.”
  • If there are many new refugees in a city, they compete against each other for work and drive down hourly wage rates. But a new refugee in a city with fewer newcomers and an established network faces less competition for work, pushing up hourly wages.

The researcher suggests that “a given network size may prove beneficial in some settings, while negative in others. Therefore, while the fact that refugee social networks provide labour market information to its members suggests a potential drawback to immigrant dispersal policies, dynamics are important to consider.”

Tags: employment, municipal

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