EU Labor Immigration and the Organization of Work (IMMORG)

The EU enlargement to Eastern European countries in 2004 was the start of a large growth in labor immigration into Norway and a sharp increase in the availability of low wage workers and cheap subcontractors. Labor immigration has contributed to high activity and production in important sectors like the oil sector, manufacturing and building and construction. For Eastern European firms, the internal market has provided new business opportunities. For workers from Eastern Europe, accession to the EU has fostered better job opportunities and wages. The EU-enlargement has also led to worry of increased wage inequality in the Norwegian labor market, problems with social dumping of immigrant workers and problems related to recruitment of native youth into occupations directly affected by labor immigration. Parallel to these developments, there is a major reorganization of work in all OECD countries, with increased fragmentation of work through increasing use of domestic outsourcing and alternative work arrangements (OECD Employment Outlook 2021) and increasing between-firm wage inequality.

In this project, we connect these major trends in the labor market and investigate the impact of low-wage labor immigration on firms’ use of domestic outsourcing and alternative work arrangements. Because the legal framework that concerns equal pay and equal work conditions applies to different work-arrangements like direct hirings, subcontracting, temporary agency work etc., there are large economic incentives for firms to use the employment form that allows them to reduce costs and pay the lowest wages. The sorting of high and low wage workers into different employment forms may strengthen and deepen labor market inequalities and may have long term effects on the skill composition in the economy, especially if native workers and youth shy away from certain occupations and educations that are strongly affected by EU immigration.
Key questions in the project are: How much does the supply of labor from low-wage EU countries affect domestic work-organization? How important is the growth in alternative work arrangements for the growing between-firm wage inequality and the growing inequality between different groups of workers? Does the supply of low-wage workers also affect our long-term skill-composition? Have we made ourselves dependent on labor market immigration to fill important jobs in the future? What are the possibilities to regulate labor markets to protect immigrants and native workers from some of the negative side effects of EU integration within EU- and EEA-law? How efficient is current policy in reducing the incentives for domestic outsourcing and promoting the skilling of workers?