Abstract

Germany will suffer a sharp workforce decline resulting from demographic change in the near future. To avoid negative consequences related to this decline, an annual influx of 400,000 migrants is required. Yet, it is not clear how an adverse economic shock would differentially affect labour-market conditions for natives and these new migrants. This paper analyses how migrant and native wages respond to changes in occupational unemployment rates by developing an augmented occupational wage curve. We use an extensive dataset covering 10 percent of all German employees, which we expand with administrative firm data and regional characteristics, providing the most comprehensive examination of regional wage curves that we are aware of. Our results indicate that changes in a region’s unemployed/employed ratio within an occupation produces similar wage responses for native Germans and new immigrants. However, the composition of the unemployed differs across the two groups in terms of long-term unemployment and educational attainment.