The impact of the introduction programme on the labour-market integration

by Jens Clausen, Hans Hummelgaard, Leif Husted, Kræn Blume Jensen and Michael Rosholm, January 2006

Report available in Danish

Summary

One of the objectives of the Danish Integration Act is that newly arrived foreigners should enter permanent employment and self-sufficiency more quickly. The means for this is a three-year introductory programme consisting of both Danish language education and a number of labour-market oriented measures. An assessment is now being made of the impact of the introductory programme up to 2003.

Are some labour-market measures more effective than others?

As a whole, the different labour-market oriented measures do not significantly impact foreigners’ chances of becoming self-sufficient. There are, however, considerable differences between the impact of the different types of measures: some further the transition to self-sufficiency while others delay it.

Job training in private enterprises is without doubt the most effective measure for removing foreigners from public support. Normally the chances of becoming self-sufficient are reduced while the individual is taking part in a workfare programme (locking-in effect). The reasons generally given for this are that there is less time for job-seeking during a workfare programme and that the individual has an interest in completing in particular the workfare measures that upgrade his or her qualifications in one way or another. No locking-in effect can be shown for private job training, which may be because private job training is highly vocationally oriented in its aim (if a job opportunity arises, it must be grasped immediately because this is the whole purpose of this activation). By means of participation in private job training, foreigners’ chances of becoming self-sufficient are increased relatively much after the completion of the programme (programme effect).

On the other hand, the overall results show that education, specially activating programmes and other workfare, prolong the waiting time to self-sufficiency, although not significantly for workfare programmes. This is due to very strong locking-in effects during workfare and weak programme effects, of which, however, only the programme effect of specially activating programmes is significantly positive. These are rather short programmes that do not have the same directly vocational aim as private job training. Furthermore, counselling and upgrading, for example, could very well have a long-term effect as the foreigner builds up the necessary qualifications.

The impact of public job training lies somewhere in the middle, as this form of activation results in a small shortening of waiting time until self-sufficiency is achieved, although the effect is not significant.

When foreigners become self-sufficient, only in half the cases this is because the person in question obtains employment. Many go over to being supported by their spouses. In spite of this, there is no great difference in the impact of the activation effort in relation to employment relative to the impact in relation to self-sufficiency.

To the best of our knowledge, no comparable studies have been conducted in Denmark or abroad with which the present results can be compared. The results that exist for the effect of employment efforts in relation to everybody on the labour market (and not only to foreigners who are covered by the introduction programme) show mostly positive, but small effects of the efforts. Studies from Sweden, which is very similar to Denmark, show insignificant or negative employment effects of the labour-market oriented effort.

This together with the fact that our analyses of, in particular, the impact of the various activation measures on the chance of obtaining employment at a early point in time after the Integration Act came into force mean that it is probably not so surprising that no certain effects of the activation efforts can be shown at present.

Does Danish language education help?

Danish teaching has a broader aim than contributing to the foreigner getting a job. Keeping this reservation in mind, as in the case of workfare, an argument can be made for Danish language education having both a locking-in and a programme effect. Calculations show that the chances of becoming self-sufficient are greatly reduced while the foreigner attends Danish courses, which may be due to a locking-in effect, i.e. that the individual foreigner has less time to look for a job and he/she must be presumed to be interested in completing the course. But in relation to Danish language education in particular, it is important to note that many foreigners do not have adequate language skills for managing a job at the time they attend the course.

On the other hand, the calculations also show that the improvement of Danish language skills that results from the teaching increases the chances of becoming self-sufficient (programme effect). But this effect is not strong enough to outweigh the above-mentioned negative locking-in effect of participating in Danish language education. The figures behind the calculations show that Danish language education reduces the chances of becoming self-sufficient for the part of self-sufficiency linked to being supported by a spouse. In other words, to a high degree Danish language education prevents the foreigner from staying at home and being supported by a spouse.

If, on the other hand, the part of self-sufficiency that is due to transition to employment is examined, a somewhat different picture emerges. It is true that the calculations seem to show that Danish language education does not improve the chances of getting a job (but neither are they worsened). However, the result is highly dependent on the relatively short period (four years) on which the calculations are based combined with the fact that an introductory period lasts for three years. If the period of calculation is extended to ten years, as expected Danish language education has a great, positive effect on the chances of employment. The relevance of this result presupposes, however, that the estimated favourable effect of Danish language education is lengthy. On the one hand, this would seem to be a reasonable assumption, as better Danish skills cannot be expected to be lost over time when one lives in Denmark and needs Danish in one’s everyday life. On the other hand, it can, however, also be assumed that language skills are lost over time if they are not used. There would seem to be foreigners who speak very little Danish in their everyday lives – especially those who are outside of the labour market.

Is it effective to combine the use of Danish language education and workfare?

The study cannot in general demonstrate that a combination of Danish language education and vocationally-oriented programmes has a particularly positive effect on the chance of becoming self-sufficient or gaining employment.

In the case of public job training and special workfare programmes, the locking-in effect is strengthened in relation to self-sufficiency when it is combined with Danish language education (the combination effect is insignificant for the other types of workfare). When the workfare programmes are completed, it cannot be convincingly shown that persons with good Danish skills benefit more from workfare than others.

Has the Integration Act worked?

The impact analysis was conducted relatively soon after the Act came into force. Thus, up to now we have primarily seen the full locking-in effects of the more comprehensive workfare and Danish language education while the programme effects have only had a short period in which to act.
The implementation of the Act (workfare in particular) started up slowly and the workfare frequency is still low in some municipalities. This enhances the problem mentioned under the point above.
The lack of data has meant that there are matters that could not be included in the analyses, first and foremost the education and vocational experience the foreigners had on arrival. If newly-arrived foreigners are less well-educated after the Integration Act came into force than before, for example, this could point to underestimating the effect of the Act. Although the statistical analyses make allowances for matters for which there is no information, it is not to be expected that the total significance of the omitted variables has been captured.
A distribution policy was implemented simultaneously with the intensification of Danish language education and the labour-market oriented effort. This policy means that relatively more foreigners have been placed in municipalities with relatively little experience in the work of integration.

The detailed calculations show that the Integration Act has been of positive significance for some groups of immigrants and of negative significance for others. In the case of men, for example, foreigners from Iraq find employment more quickly than before the Act came into force, while the opposite is true for male foreigners from Turkey, Iran and the rest of Asia.

Who finds it easiest?

The foreigners who generally find employment most quickly have the following characteristics:

Men without children
Young
Married to a Dane
Come from e.g. ex-Yugoslavia or Turkey
Family reunification with a non-refugee
Residence in a municipality with many foreigners and low unemployment
Living outside of a ghetto
Good health

In contrast a sick, female quota refugee with many small children, married to another refugee and residing in a municipality with few foreigners and high unemployment, finds it difficult.

Recommendations of the report

Not surprisingly, the directly vocationally-oriented efforts such as private (and partly, public) job training have the greatest impact with respect to lifting foreigners out of public support. In relation to this, the fact that relatively few foreigners enter public job training and even fewer private job training is a great problem. There is a need for measures that are significantly more effective than up to now in securing more places.

The grounds for this are, firstly, that from the point of view of society it is extremely important for many more foreigners to enter employment, among other things because there will be considerably fewer persons of working age in the coming years. Secondly, the benefit to society of foreigners being upgraded and in ordinary employment is greater than the benefit that the individual enterprise on average can anticipate by upgrading foreigners (positive externality). This means that the individual enterprise has no incentive to meet the total costs involved in integrating a foreigner on the labour market. There is a risk of the well-integrated foreigner being offered another job, and therefore while the enterprise’s investment may benefit society as a whole, it will not fully benefit the investing enterprise. On this basis it would not be optimal for the enterprise to undertake the full upgrading of foreign labour and regulation would be justified.

At present, this is allowed for by it being possible to offer traineeships and jobs with wage subsidies, and from 2003 the Integration Act opens the possibility of paying for upgrading at a workplace, mentors etc. The relatively few jobs with wage subsidy that exist for foreigners in enterprises seem to indicate, however, that the subsidies are not high enough or that other measures are called for.

Raising the wage subsidies could perhaps be financed by the enterprises collectively and thus in practice by the enterprises that do not offer trainee jobs. The problem here, however, is that in principle the present subsidies are adjusted to the fact that persons in job training may not distort competition relative to those already employed and thus push these people into unemployment. But with the relatively few job training places on offer today, this seems far from being the situation. There would seem to be grounds for studies of how and by how much the wage subsidy can be increased with a view to obtaining more job training places without this leading to unemployment for those who are already employed.

Another supplementary option is to introduce quotas so that it is guaranteed by law that all enterprises take on their part of the task of offering jobs with wage subsidy. The problem with quotas is, however, that this is not an optimal form of regulation. There is no guarantee that training will be concentrated in the enterprises where it is best and least expensive. To avoid this, the quotas could perhaps be made transferable, i.e. that it should be possible for the enterprises to trade quotas with each other, thus giving rise to a market price of quotas.

Not all foreigners have the right qualifications for entering job training from the start. Before job training it could be relevant/ necessary to offer other measures such as brief counselling and clarification programmes, upgrading, work experience etc. This would be a gradual upgrading for the labour market, which is a general objective. However, on the basis of the statistics it is striking that counselling and introductory programmes as well as special workfare programmes are relatively seldom followed up by private job training. A more detailed study is recommended of whether the idea of gradual upgrading is being implemented to a sufficient extent in practice and of what could be done to improve the situation.

Danish language education should be so organised as to make it possible to follow just over 1 year’s (1.2 years) full-time teaching over a period of three years. This would make it possible to combine the teaching with the foreigner’s job or workfare offer. Considering the fact that relatively few foreigners obtain employment while participating in Danish language education, the question is if this is the best way of organising the teaching. Analyses indicate that it might be preferable to conduct Danish language education quickly as full-time teaching. This would make it possible to significantly limit the locking in effect of the teaching, and the foreigner would be more quickly able to reap the benefits of better Danish skills in the form of employment or good benefit from e.g. job training. There is thus nothing to indicate that the simultaneous implementation of Danish language education and workfare produces any particularly good effect – the opposite is rather the case.

Finally, there are good grounds for considering whether the municipalities should not be obliged to make the same offer to people who have been reunited with their families as to refugees, as it is important for the economy that everyone has the best opportunities for entering the labour market.

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