Blue Collar Labor Vulnerability

Native blue collar wokers often fear the competition of foreigners, as they may induce declining wages and rising unemployment. This has to be expected if natives and immigrants were substitutes. Substitutability might even be greater between foreign labor already in Germany and those newly arriving. This paper outlines the issue in a framework with two types of labor, native blue collar and foreign blue collar. Examining the wage functions of blue collar natives and foreigners in a random effects panel model using a vast sample of micro data, we actually find that foreigners negatively affect the wages of Germans and themselves on the whole. Negative effects are experienced by blue collar employees with less than 20 years experience, but these are outweighed by the much larger negative effects experienced by blue collar foreigners with more than 20 years experience.Earnings Function, Immigration, and Random Effects Panel Models