Labour Market Experience of Male Immigrants and Ethnic Minorities in the UK

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1 IVERSITY OF OTTIGHA Dscusson apers n Economcs Dscusson aper o. 09/08 Labour arket Experence of ale Immgrants and Ethnc nortes n the K By Sayema H. Bdsha Department of Economcs nversty of Dhaka Bangladesh September D 09/08

2 Labour arket Experence of ale Immgrants and Ethnc nortes n the K Sayema H. Bdsha Department of Economcs nversty of Dhaka Bangladesh September 2009 JEL Classfcaton: J61 J71 J24 J15 Key Words: Immgrant Ethncty nemployment Occupatonal Attanment Decomposton Analyss Correspondence to: Sayema H. Bdsha Department of Economcs nversty of Dhaka Dhaka 1000 Bangladesh. E-mal: bdsha_duecon@yahoo.com. I acknowledge helpful comments from my hd supervsors Dr. Smon Appleton and Dr. eter Wrght. I also thank rofessor Davd Blackaby and Dr. Sarah Brdges for ther suggestons. Comments of the partcpants at the 42 nd Annual Conference of Canadan Economc Assocaton 2008 Annual Conference of Scottsh Economc Socety 2008 and 7 th Annual ost Graduate Conference of GE 2008 are also apprecated. 1

3 Labour arket Experence of ale Immgrants and Ethnc nortes n the K Abstract Ths paper examnes the changes n the labour market experence of dfferent mmgrant and ethnc mnorty groups n the K over tme. The analyss suggests that n early 90s although there was no clear cut evdence of segregaton n terms of employablty certan groups of mnorty natves were found to be less represented n hgh-sklled professonal occupatons whereas some of the mmgrants were n greater proporton n such obs. Over tme unemployment nequalty has become sgnfcant among mnorty natves whereas the poston of mmgrants n terms of employment status appeared to have mproved. In recent years mnorty mmgrants representaton n superor occupatons has reduced sgnfcantly whch s n contrast to the mprovement of ob market status of ther natve counterparts. Decomposton analyss of the results ndcate the mportance of both explaned as well as unexplaned factors behnd such performance. For certan groups of ethnc mnortes and mmgrants observed attrbutes cannot explan ther less favourable labour market outcomes and the analyss ndcates the possblty of labour market dscrmnaton aganst them. 2

4 1. Introducton It s often argued that n comparson to the ndgenous populaton of a country the mmgrant and the mnorty communty suffers greater level of unemployment and s thought to be under represented n hgh-sklled better pad obs. Gven the fact that people of dfferent orgn or of dfferent ethnctes may have dfferent attrbutes preferences or abltes ther performance n the labour market could certanly be dfferent from natves. However n addton to such dfferences there could be certan unexplaned factors relatng solely to ther natonalty or ethncty that have mportant mpacts on ther employablty or occupatonal attanment. In the labour lterature t s often argued that people of a mnorty communty receve unequal treatment n comparson to the maorty group and that ths could constran the earnngs potental and labour market performance to a certan extent. In the context of the K t s a well accepted fact that n comparson to whte natves ethnc mnorty natves as well as mmgrants suffer hgher level of unemployment Blackaby et al ; rce 2001 receve lower wages Bell 1999 and are under-represented n the hgher stage of occupatonal ladder Borooah 2001; Carmchael and Wood Anecdotal evdence also suggests wde dversty n labour market experences on the bass of ethncty and country of orgn. However t s not very clear why some of the groups among the mnortes/mmgrants under perform than others. In addton n the backdrop of changed mmgraton polces and skll mx n the last decade t s plausble that over tme there have been mportant changes n the labour market performance of dfferent groups. Gven the exstng debates on the mpact of the recent waves of mmgrants n the Brtsh economy t s an nterestng polcy ssue to examne the changes f any of the performance of mmgrants and ethnc mnortes 2 nd or hgher generaton mmgrants themselves. Exstng lterature on the labour market experence of the mmgrants or ethnc mnortes of the K are prmarly concentrated on explanng the unemployment problem of mnorty communtes. In ths context rce 2001 used labour force survey LFS data to analyze unemployment among the whte as well as the non-whte males born both n the K and abroad and found hgh unemployment among the prme-aged male mmgrants wth wde varatons dependng on country of brth. Blackaby et al found that the ethnc mnortes have a 11% lower employment probablty than whtes wth blacks appearng to be the worst sufferers followed by akstans. Labour market performance however 3

5 nvolves not only employablty but also the type of occupaton n whch an ndvdual ends up. In ths context research n the K s qute lmted and to our knowledge the work of Borooah 2001 and Carmchael & Wood 2000 are the only exceptons. The latter used the 1994 LFS data of the K to analyze the occupatonal status of both males and females of dfferent ethnc groups and found that mnortes end up at lower stages of the occupatonal ladder wth black men and Indan women n the worst poston. Ther result s n lne wth that of Borooah 2001 who whle usng census data found blacks to be dsadvantaged both n terms of wages as well as occupatonal attanment. Hs decomposton analyss suggested the mportance of both attrbutes as well as ethnc background whereas for Indans superor attrbutes compensate for much of the so called ethnc penalty. Ths paper n addton to nvestgatng the ssue of unemployment also nvestgates the type of obs that people of dfferent ethnc/mmgrant background performs. In partcular whle comparng the predcted probabltes of employment status and occupatonal attanment generated through multnomal logt estmaton t analyzes the labour market performance of prme aged males of dfferent mmgrant and ethnc groups. In ths context t also nvestgates the reasonng behnd the lack of occupatonal success of dfferent groups. Ths queston has been addressed whle applyng a decomposton analyss whch dstngushes the contrbuton of attrbutes possessed by the ndvdual from the unexplaned part where the latter part s popularly known as dscrmnaton effect. It s worth mentonng that the exstng lterature of unemployment Blackaby et al and rce 2001 and occupatonal choces Borooah 2001 and Carmchael and Wood 2000 has not examned the mpact of the change n mmgraton polces and skll mx over tme but focused prmarly on the experences of mnortes durng the decade of 1990s. Ths paper attempts to examne the changes n the labour market experence of dfferent groups over tme whle utlzng the data of the Labour Force Survey of the K for summer 1992 and summer The analyss suggests that n early 90s although there was no clear cut evdence of segregaton n terms of employablty certan groups of mnorty natves were found to be less represented n hgh-sklled professonal occupatons whereas some of the mmgrants were n greater proporton n such obs. Over tme unemployment nequalty has become sgnfcant among mnorty natves whereas the poston of mmgrants n terms of employment status appeared to have mproved. In recent years mnorty mmgrants representaton n superor occupatons has reduced 4

6 sgnfcantly whch s n contrast to the mprovement of ob market status of ther natve counterparts. The paper s organzed as follows: the next secton dscusses the data and key methodologcal ssues secton 3 descrbes the estmaton results and decomposton analyss of employment status. In secton 4 emprcal analyss of occupatonal choces s presented and fnally secton 5 concludes. 2. Data & ethodology Ths analyss uses the summer quarter of the Quarterly Labour Force Survey QLFS for 1992 and 2006 and consders males wthn the age band of 25 to 65. For the employment analyss household compostonal varables demographc varables regonal dummes qualfcaton dummes health status age age squared and martal status are used as controls. For household composton the number of dependent chldren below 19 years n the household s consdered as the relevant varable and four dummy varables for havng no chldren one chldren two chldren and more chldren are ncluded. All of the regons are classfed nto three broad groups: north south and London and sx dummes for academc qualfcatons are used: degree level educaton below degree educaton A level O level below O level educaton other qualfcaton and no formal qualfcaton. An addtonal dummy varable s used to capture the status of health of the respondent. In order to nvestgate the effect of ethncty and mmgraton status 14 dummes for the natves and foregn borns of whte black Indan akstan and Bangladesh mxed ethncty Chnese and other ethnc groups have been used. In order to capture assmlaton effect of the mmgrants years spent n the K and ts square are used as addtonal controls. For the dependent varable the sample has been classfed nto four groups: wage employed self employed non employed ncludes student government employee tranee and nactve and unemployed. The analyss of occupatonal choces deals only wth the wage employed and they are categorzed nto three classes: professonal 1 sklled 2 and unsklled 3 1 rofessonals nclude a managers and senor offcals and b professonal occupatons. 2 Sklled ncorporate a assocate professonal and techncal b admnstratve and secretaral c sklled trades occupatons d personal servce occupatons and e sales and customer servce occupatons. 5

7 occupatons. Gven the fact that the number of chldren along wth the health status of an ndvdual s not expected to nfluence occupatonal choces of an ndvdual the dummes for chldren and health status are excluded from the occupatonal attanment model. In ths analyss the choce of employment status can be consdered as an optmzaton decson of a utlty maxmzng ndvdual. In ths framework the probablty of choosng outcome s of ndvdual can be descrbed as: prob chooses s = exp s / exp t t where t ranges over all choces n the set. The followng logstc specfcaton llustrates the probablty of choosng a partcular alternatve: J = exp x / exp x = 1 Here s an unknown K*1 vector of parameters correspondng to the K*1 vector x whch s a vector of varables determnng the choce set of the ndvdual. In ths setup the problem of optmal employment status can be resolved wth multnomal logt L formulaton whle consderng four employment status outcomes: wage employed self employed non employed and unemployed. The analyss then proceeds wth only the sample of wage employed people and ther occupatonal choce s modeled wth L methodology as well consderng three categores of occupatons namely professonal sklled and unsklled. After addressng the queston of whether there s any dfference n the labour market attanment among dfferent ethnc/mmgrant groups the next queston s why such dfference f any mght emerge especally between whte natves and other mnorty groups. In partcular t s mportant to examne whether the dfference n employment status and occupatonal attanment s generated prmarly from the dfferences n ther attrbutes or the mnortes and mmgrants face dsadvantage and are dscrmnated n the labour market. In addton among the mnortes/mmgrants f certan groups perform better than the others than t would also be nterestng to examne the factors behnd ther relatve success. In order to address these questons a decomposton technque a la Borooah 2005 has been 3 nsklled nclude a process plant and machne operatves and b elementary occupatons. 6

8 appled where the dfferences n the outcomes are decomposed whle separatng the contrbuton of attrbutes from that of unexplaned part where the latter s often consdered as an approxmaton of any labour market dscrmnaton. Followng the methodology appled by Borooah 2005 f t s assumed that there are ndvduals =1.. n the sample then each of them can be consdered as orgnatng from any of the 14 mmgrant/ethnc communtes denoted by g g= For the decomposton of employment status each ndvdual could agan fall nto any of the four categores =1 4 and the lkelhood of an ndvdual from communty g beng n employment group can be represented n the followng manner: r Y g g = = F Here g = g k k=1..k s the vector of observatons of ndvdual of communty g on K covarates where such varables determnes the lkelhood of choosng a partcular employment status. The vector of correspondng coeffcent estmates are denoted by vector g. Whle controllng for ther characterstcs f the mnorty and maorty would have been treated equally then the observed or raw dfferental n the probabltes of beng n a specfc employment group would be attrbuted entrely due to the dfferences n endowments. However n the presence of dscrmnaton n the labour market the beta vectors are expected to dffer between two groups and n ths context Borooah 2005 shows that the employment probabltes between two groups can be decomposed n the followng manner: Ether = [ ] + [ ] a Or = [ ] + [ ] b In equaton a dfferences n outcome between group and are decomposed whle consderng the maorty group as the base and askng what would have been the average probablty of a mnorty ndvdual to be n group f he would be treated as a member of 7

9 the maorty communty. In equaton b the mnorty group s consdered as the base. Therefore the second part of the rght sde of the equatons captures the contrbuton of endowments whle generatng correspondng probabltes whereas the frst part s the dscrmnaton effect f any where the probabltes are generated solely by the dfferences n beta vectors. 3. Emprcal Analyss of Employment Status 3.1 Descrptve Statstcs of Employment Status As reflected n Table 1 the most strkng feature of the employment structure n the survey years s the fall n unemployment rate from 8.5% to 3.2% reflectng the general upturn n the economy. A pont of nterest s that n comparson to natves mmgrants appear to suffer more n the recesson of early 90s wth a 12% unemployment rate n 1992 and ths holds true for almost all categores of mmgrants Table 2. The rate of unemployment was hgh for all of the groups n 1992 but t was remarkably hgh for black and mxed natves along wth the mmgrants of black South Asan and other ethnc communtes. It s however nterestng that although n 1992 there exst wde dvergences between mmgrants and natves n 2006 the former seem to have smlar employment pattern to the latter and such a convergence s also prevalent n Table 2 where except for akstans and Bangladeshs all other maor groups are observed to have 65%-70% representaton n wage employment. Table 1: Employment rofle of atves & Immgrants 1 % Summer 1992 Summer 2006 Total atve Immgrant Total atve Immgrant Wage Employed Self Employed nemployed on employed student+tranee+nactve The percentages correspondng to each column refers to percentages of the correspondng group. Table 2 : Employment rofle of Dfferent Ethnc & Immgrant 2 % Wage Employed Self Employed n Employed Whte atve Whte Immgrant Black atve

10 Black Immgrant Indan atve Indan Immgrant akstan+bangladesh atve akstan+bangladesh Immgrant xed atve xed Immgrant Chnese Immgrant Other atve Other Immgrant The percentages correspondng to each row refers to percentages of the correspondng group. 3.2 redcted robabltes of Employment Status As dscussed before n order to model employment status a multnomal logt framework has been used and four categores are consdered n ths regard: wage employed self employed unemployed and non-employed tranee+student+nactve where wage employed are regarded as the base category. Table 3 presents the predcted probabltes of occupatonal status for dfferent ethnc and mmgrants groups where such probabltes are calculated whle holdng the controls at the mean of the sample. Therefore t predcts the employment status for dfferent mmgrant/ethnc groups when they have the same characterstcs and dffer only n terms of ther ethncty or mmgraton status. The hgh rate of unemployment of black natves as suggested by the descrptve s also observed n predcted probabltes: n 1992 a black natve endowed wth the same characterstcs as other groups have as hgh as 22% probablty of unemployment whch although reduced to 6% n 2006 s hgher than most of the groups. The relatve unemployment experence of South Asan natves n 2006 can be characterzed by hgh unemployment along wth moderate partcpaton n wage employment. Over tme the relatve employment probablty of mmgrants appears to have mproved. As for whte mmgrants there has been a sgnfcant reducton of unemployment probablty over tme and a 74% probablty of wage employment n year The most mpressve change s for black mmgrants whose partcpaton n wage employment has ncreased to as hgh as 69% n 2006 wth ther unemployment probablty declnng to 8% from 15%. The predcted partcpaton of Indan mmgrants n wage employment has also ncreased over tme. The poston of akstan and Bangladesh mmgrants although has mproved they stll have one of the lowest rates of wage employment and hghest probablty of unemployment n both of the survey years. 9

11 Table 3: redcted robablty of Employment Status for Dfferent Wage employed Wage employed Self employed Self employed n employed n Employed Whte atves Whte Immgrant Black atve Black Immgrant Indan atve Indan Immgrant akstan+bangladesh atve akan+bangladesh Immgrant xed atve xed Immgrant Chnese atve Chnese Immgrant Other atve Other Immgrant Standard Errors are n parentheses. 6 robabltes of non employment although used n calculaton are not shown n the table. 3.3 Decomposton Analyss of Employment Status From the predcted probabltes t appears that country of brth as well as ethnc background has an mportant mpact on the labour market experence of an ndvdual. However t should be kept n mnd that people of dfferent ethnctes or of countres of orgn may have dfferences n household compostons demographc profles educatonal and occupatonal achevements and areas of resdence. Therefore t s mportant to examne whether the dfferences n employment outcomes for dfferent groups are the result of dfferent attrbutes or are due to unexplaned features related to ther ethncty/mmgraton status. In order to dsentangle such ssue a decomposton analyss of the unemployment probablty between whte natves wth other ethnc and mmgrant groups has been carred out. Table 4 depcts the results of decomposton analyss where panel a presents the result on the bass of equaton a and panel b presents the result for equaton b. 10

12 anel a of Table 4 suggests that n 1992 unexplaned factors are the maor determnants of unemployment for whte mmgrants whereas panel b shows that attrbutes have mportant contrbuton as well. In addton t s surprsng to observe that havng coeffcents of mmgrants would actually mprove the poston of natves snce ther unemployment probablty would have reduced from 8.2% to 6.4%. Such a contradctory result ndcates the mportance of unexplaned factors e.g. ablty experence etc. whch have not been ncluded n the model that could have postve nfluence on the employment outcome of whte mmgrants. For black natves decomposton analyss suggests that the maor porton of the dfference n unemployment probablty s generated not from the nferor endowments but out of the coeffcents and therefore the possblty of labour market dscrmnaton aganst them cannot be ruled out. However n comparson to the maorty group the mnorty communty also possesses nferor endowments. The decomposton analyss of black mmgrants on the other hand does not ndcate any defnte result n terms of the relatve mportance of endowments or coeffcents and both factors appear to affect ther unemployment probablty. For Indan mmgrants accordng to 1992 estmates when the mnortes are treated as maortes endowments vrtually play no role n explanng unemployment dfferental whch s also reflected n panel b. In addton n terms of endowments 1992 analyss shows that Indan mmgrants possess ether better or smlar endowments to whte ndgenous people. Therefore the decomposton analyss suggests that f the mnorty would be treated lke the maorty group t s hghly lkely that they would even have lower unemployment than the latter. In the case of akstan and Bangladesh mmgrants the estmates of panel b of 1992 clearly reflect nferor endowments of akstan and Bangladesh mmgrants. Whereas for 2006 as suggested n panel a havng coeffcents of whte natves would have halved the unemployment probablty of akstan and Bangladesh mmgrants. Summng up the results t s both coeffcents as well as endowments whch contrbute to the hgh rate of unemployment of akstan and Bangladesh mmgrants. 11

13 Table 4: Decomposton Results of Employment Status dfference n the probablty of unemployment anel a anel b anel a anel b Whte atve W vs. Whte Immgrant W Ws are treated as Ws Ws are treated as Ws Ws are treated as Ws Ws are treated as Ws Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low = Coeffcent Effect = = Coeffcent Effect = =.0184 Coeffcent Effect = = Coeffcent Effect = = Attrbutes Effect = =0 Attrbutes Effect = =-.032 Attrbutes Effect = = Attrbutes Effect = =.0108 Whte atve W vs. Black atve B Bs are treated as Ws Ws are treated as Bs Bs are treated as Ws Ws are treated as Bs Sample Average between Hgh and Low =-.223 Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low = Coeffcent Effect = = Coeffcent Effect = = Coeffcent Effect = =-.049 Coeffcent Effect = = Attrbutes Effect = = Attrbutes Effect = = Attrbutes Effect = = Attrbutes Effect = =-.018 Whte atve W vs. Black Immgrant B Bs are treated as Ws Ws are treated as Bs Bs are treated as Ws Ws are treated as Bs Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low =

14 Coeffcent Effect = = Coeffcent Effect = = Coeffcent Effect = =-.078 Coeffcent Effect = = Attrbutes Effect = = Attrbutes Effect = = Attrbutes Effect = = Attrbutes Effect = = Whte atve W vs Indan Immgrant I Is are treated as Ws Ws are treated as Is Is are treated as Ws Ws are treated as Is Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low = Coeffcent Effect = = Coeffcent Effect = = Coeffcent Effect = = Coeffcent Effect = = Attrbutes Effect = = Attrbutes Effect = =.0814 Attrbutes Effect = =.0057 Attrbutes Effect = = Whte atve W vs akstan atve s are treated as Ws s are treated as Bs Sample Average between Hgh and Low = Sample Average between Hgh and Low = Coeffcent Effect = = Coeffcent Effect = =.0071 Attrbutes Effect = = Attrbutes Effect = = Whte atve W vs akstan Immgrant Bs are treated as Ws Ws are treated as Bs s are treated as Ws Ws are treated as s 13

15 Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low = Coeffcent Effect = = Coeffcent Effect = = Coeffcent Effect = = Coeffcent Effect = =-.065 Attrbutes Effect = =-.052 Attrbutes Effect = = Attrbutes Effect = = Attrbutes Effect = =

16 4. Emprcal Analyss of Occupatonal Choce 4.1 Descrptve Statstcs of Occupatonal Choce In terms of occupatonal status over tme there s a greater partcpaton of respondents n professonal occupatons and at the same tme a notceable reducton n the partcpaton n sklled obs. It s nterestng to note that n both of our survey years n comparson to natves there s a greater proporton of mmgrants n professonal occupatons. However there s no notceable mprovement of occupatonal status for mmgrants whereas the presence of natves n professonal occupatons has ncreased from 33% to 37%. Table 5: Descrptve on Occupatonal Attanment 3 n % Summer 1992 Summer 2006 Total atve Immgrant Total atve Immgrant rofessonal Sklled nsklled The percentages correspondng to each column refers to percentages of the correspondng group. Table 6: Occupatonal Attanment of Dfferent Ethnc & Immgrant 4 n % rofessonal Sklled nsklled Whte atve Whte Immgrant Black atve Black Immgrant Indan atve Indan Immgrant akstan+bangladesh atve akstan+bangladesh Immgrant xed atve xed Immgrant Chnese Immgrant Other atve Other Immgrant The percentages correspondng to each column refers to percentages of the correspondng group. 4.2 redcted robabltes of Occupatonal Attanment In order to understand occupatonal choces of mmgrants and ethnc mnortes a multnomal logt model for the selected sample of wage employed has been performed. Table 7 compares occupatonal choces of dfferent groups of people based on ther ethncty and country of orgn holdng all other controls at the mean of the sample. It s 15

17 nterestng to observe that whte mmgrants have the hghest representaton n professonal occupaton and n 1992 more than half of ths group was engaged n such occupatons. However ther stuaton appears to have deterorated by 2006: representaton of whte mmgrants n professonal occupatons has dropped by 10-percentage ponts along wth an ncreased presence n unsklled occupatons. Accordng to the predcted probabltes over tme there s deteroraton n the occupatonal poston for all groups of mmgrants wth the steepest declne found among akstan and Bangladesh mmgrants mxed mmgrants and Chnese mmgrants. It s however black mmgrants who n both of the survey years are found to be n the worst poston n terms of occupatonal status. In contrast to mmgrants the poston of mnorty natves has generally mproved over tme. The estmates of 1992 show that black and South Asan natves had relatvely lower probablty to work n professonal obs. However over tme there has been a sgnfcant mprovement n ther occupatonal achevement wth more than 10-percentage pont ncrease n ther probablty of workng n professonal occupatons. Table 7: redcted robabltes of Occupatonal Choces for Dfferent 7 rofessonal Sklled nsklled Whte atves Whte Immgrant Black atve Black Immgrant Indan atve Indan Immgrant akstan+ Bangladesh atve akstan+bangladesh Immgrant xed atve xed Immgrant Chnese atve Chnese Immgrant Other atve Other mmgrant Standard Errors are n parentheses

18 4.3 Decomposton Analyss of Occupatonal Choce Table 8 presents a decomposton analyss of the probabltes of endng up to a professonal occupaton. For both of the years the analyss shows the relatve mportance of unexplaned factors for black natves as well as for black mmgrants. Therefore the poor performance of the black communty n terms of occupatonal attanment s partly due to the dscrmnatory atttude of the employers. In addton for black mmgrants n all of the panels endowments act n opposte drecton to coeffcents and they are found to have ether smlar or even better endowments than whte natves. Therefore f black mmgrants are treated as whte natves we would expect ther partcpaton n professonal occupaton to ncrease even more than the latter. As revealed by the L estmates for 1992 n comparson to a otherwse smlar whte natve whte mmgrants have greater probablty of workng n professonal occupatons. The estmates of 2006 shows contradctory pcture. Treatng the mmgrants as natves would have reduced the probablty of obtanng a professonal ob for the latter by 8-percentage ponts whereas panel b shows the mportance of better endowments of mmgrants. The bass of occupatonal success of whte mmgrants therefore s not qute straght forward. In ths context n addton to certan endowments the unexplaned part can be consdered as a reflecton of unobserved attrbutes skll-level or ablty that has not been captured by model covarates. Indan mmgrants are found to be endowed wth better attrbutes. At the same tme the result of 1992 shows that the coeffcents also act aganst them. Therefore t could be nferred that f treated equally to whte natves we would have observed much hgher presence of Indan mmgrants n superor obs. The case of akstan and Bangladesh mmgrants ndcates the opposte scenaro. Accordng to panel a of 1992 analyss 60% of the dfference n probabltes s generated by the nferor endowment where the correspondng fgure for 2006 s 64%. The analyss however ndcates mportant contrbuton of unexplaned factors as well. As a whole although the results are mxed we could thnk about a strong correlaton of ther nferor attrbutes to ther poor performance. Whle summarzng both sets of decomposton analyss 4 possble scenaros can be consdered: a the mportance of coeffcents wth nferor attrbutes of the mnorty group: case of black natves and black mmgrants b mportance of coeffcents wth superor endowment of mnortes: case of Indan mmgrants c nferor endowments accentuatng the negatve effect of the coeffcents: case of akstan mmgrants d postve effect of coeffcents on occupatonal attanment: case of whte mmgrants. 17

19 Table 8: Decomposton Results of Occupatonal Choces dfference n the probablty of beng n professonal occupaton anel a anel b anel a anel b Whte atve W vs. Whte Immgrant W Ws are treated as Ws Ws are treated as Ws Ws are treated as Ws Ws are treated as Ws Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low = Coeffcent Effect = =-.067 Coeffcent Effect = = Coeffcent Effect = = Coeffcent Effect = =.023 Attrbutes Effect = = Attrbutes Effect = =.0476 Attrbutes Effect = =.0103 Attrbutes Effect = = Whte atve W vs. Black atve B Bs are treated as Ws Ws are treated as Bs Bs are treated as Ws Ws are treated as Bs Sample Average between Hgh and Low =.1588 Sample Average between Hgh and Low =.1588 Sample Average between Hgh and Low =.0398 Sample Average between Hgh and Low =.0398 Coeffcent Effect = =.0916 Coeffcent Effect = =.2258 Coeffcent Effect = =.0671 Coeffcent Effect = =.0594 Attrbutes Effect = =.0672 Attrbutes Effect = =-.067 Attrbutes Effect = = Attrbutes Effect = = Whte atve W vs. Black Immgrant B Bs are treated as Ws Ws are treated as Bs Bs are treated as Ws Ws are treated as Bs 18

20 Sample Average between Hgh and Low =.119 Sample Average between Hgh and Low =.119 Sample Average between Hgh and Low =.14 Sample Average between Hgh and Low =.14 Coeffcent Effect = =.1696 Coeffcent Effect = =.1219 Coeffcent Effect = =.1572 Coeffcent Effect = =.2305 Attrbutes Effect = = Attrbutes Effect = = Attrbutes Effect = = Attrbutes Effect = = Whte atve W vs Indan Immgrant I Is are treated as Ws Ws are treated as Is Is are treated as Ws Ws are treated as Is Sample Average between Hgh and Low = Sample Average between Hgh and Low = Sample Average between Hgh and Low =-.064 Sample Average between Hgh and Low =-.064 Coeffcent Effect = =.0426 Coeffcent Effect = =.0375 Coeffcent Effect = = Coeffcent Effect = =.0118 Attrbutes Effect = = Attrbutes Effect = = Attrbutes Effect = = Attrbutes Effect = = Whte atve W vs akstan atve s are treated as Ws Ws are treated as s Sample Average between Hgh and Low = Sample Average between Hgh and Low = Coeffcent Effect = =.0141 Coeffcent Effect = =.114 Attrbutes Effect = = Attrbutes Effect = =

21 Whte atve W vs akstan Immgrant s are treated as Ws Ws are treated as s s are treated as Ws Ws are treated as s Sample Average between Hgh and Low =.1175 Sample Average between Hgh and Low =.1175 Sample Average between Hgh and Low =.1707 Sample Average between Hgh and Low =.1707 Coeffcent Effect = =.0442 Coeffcent Effect = =.0869 Coeffcent Effect = =.0606 Coeffcent Effect = =.1941 Attrbutes Effect = =.0733 Attrbutes Effect = =.0306 Attrbutes Effect = =.1101 Attrbutes Effect = =

22 4.4 ested Logt odel of Occupatonal Choce One mportant consderaton whle analyzng occupatonal choce s that there could be a selecton process nfluencng an ndvdual s decson to take employment. Therefore f there exst unobserved features that affect an ndvdual s decson of employment status and f these features are not captured n the model of occupatonal choce then that could lead to sample-selecton bas. In order to correct such plausble bas a nested logt model wth the decson of employment status as the 1 st stage and the choce of occupaton as the 2 nd stage s estmated. Gven the fact that ndvdual s 1 st stage decson s ncorporated drectly nto the model the plausble problem of sample selecton bas s not expected to affect the 2 nd stage of decson makng. It s worth mentonng that n the context of nested logt model the estmates are prmarly consdered for occupatonal choces rather than for employment status. However due to the complex structure of nested logts a smpler specfcaton than that of multnomal logt model s adopted. 4 In addton some of the categores of ethnc/mmgrant dummes are qute small and ths s especally crucal n the case of 1992 data set. In order to tackle such problem for 1992 data set a more aggregate categorzaton s used a summary of the result s shown n appendx. 5 Therefore ths analyss s prmarly carred out on the bass of 2006 results. Except Chnese natves and Chnese mmgrants the nested logt analyss of 2006 ncorporates all of the categores used n multnomal logt specfcaton. 6 In case of professonal occupatonal choces for ethnc/mmgraton dummes most of the coeffcents reflect smlar fndng to that of multnomal logt estmates. Accordng to both sets of results ethnc background has no sgnfcant effect on ndvdual s occupatonal choce. Whereas accordng to nested logt model n comparson to ther natve counterparts all groups of mmgrants except Indans are found to have a sgnfcantly lower probablty of workng n 4 In ths regard rather than usng dfferent covarates n dfferent stages same specfcaton and same set of varables are used n both stages of nested logt. 5 In the multnomal logt analyss we use whte black Indan akstan and Bangladesh Chnese mxed and other ethnctes and ther mmgrant counterparts whte beng the base category. In 1992 nested logt the categores are whte base category black Asan comprsng of Indan akstan Bangladesh and Chnese and remanng ethnc groups those of mxed ethncty and other remanng categores. 6 All of the varables used n the model are choce-nvarant and therefore these are nteracted wth the respectve constant terms. Here the estmaton result shows fve possble alternatves that can be chosen by an ndvdul the 6 th alternatve of beng wage employed and workng n unsklled occupatons s the base category of analyss. 21

23 professonal occupatons. Accordng to multnomal estmates n comparson to ther natve counterparts black mmgrants have lower presence n professonal occupatons. Smlar fndng s also revealed for akstan and Bangladesh mmgrants and accordng to the results of both nested logt and multnomal logt these groups of mmgrants have a lower probablty of workng n professonal occupatons than n unsklled obs. Although estmates of multnomal logt fal to show any sgnfcant dfference for whte mmgrants nested logt model reflects that n comparson of an otherwse smlar whte natve whte mmgrants have 42% lower probablty of workng n professonal occupatons than n unsklled obs. For sklled occupatons the coeffcents of most of the varables represent smlar fndng n both multnomal and nested logt estmates. For the ethnc/mmgrant dummes the nested logt model shows that n comparson to whte natves blacks and Indans have greater probablty of workng n sklled occupatons. The estmates of multnomal logt model however show no sgnfcant effect of ethnc dummes on the choce of sklled occupaton. In contrast to the negatve coeffcent estmates of the mmgrant dummes n multnomal logt model accordng to the nested logt estmates none of these dummes are sgnfcant. Table 9: Full Informaton axmum Lkelhood ested Logt odel year 2006* Varable Coeffcents and Standard Errors unsklled wage employed are the base category** *** rofessonal Sklled Self employed nemployed on-employed Constant Age Age square arred Stay Stay square Hgh degree Below degree A level O level Below O level Other qualfcaton South orth

24 Whte mmgrant Black mmgrant Indan mmgrant akstan+bangladesh mmgrant xed mmgrant Other ethnc mmgrant Black Indan akstan+bangladesh xed Other ethncty Inclusve Value arametres Wage Employed on Wage Employed o. of Observatons Log Lkelhood Functon cfadden seudo R Concluson The problem of unemployment and low occupatonal attanment amongst mmgrants and ethnc mnortes n the K has been a hotly debated ssue for decades. The research to date s however confned prmarly to examnng the unemployment problem of certan groups rather than analyzng the overall experence of dfferent communtes n the labour market. In ths paper the exstng emprcal analyss has been extended whle combnng both the ssues of employment and occupatonal attanment. The key research questons that ths paper nvestgates are: a whether the ethnc mnortes and mmgrants suffer hgher unemployment than whte ndgenous people b dependng on ethncty and/or country of brth what are the probabltes of dfferent groups to reach the hghest stage of occupatonal ladder c whether there has been any sgnfcant changes n the labour market experence of dfferent groups over tme and d what are the reasons behnd the dfferences n performance between the whte ndgenous people and the mnortes/mmgrants. Such ssues are explored whle estmatng multnomal logt model and adoptng decomposton analyss for 1992 and

25 The research confrms the problem of unemployment of ethnc mnortes n partcular. Accordng to the analyss black natves experence much hgher level of unemployment than ther whte counterparts and n recent years black and South Asan natves are found to have a sgnfcantly hgher unemployment probablty. The problem of unemployment among the mnortes however seems to be a relatvely recent phenomenon snce n early 90s South Asan natves were not n an nferor poston n comparson to ther whte peers. By contrast the relatve poston of mmgrants has mproved over tme wth a sgnfcant reducton n unemployment and an ncrease n wage employment for most of the groups. Regardng occupatonal attanment the pcture s however dfferent: there s a clear segregaton n terms of mmgraton status and n recent years mnorty mmgrants e.g. black South Asan and Chnese are less represented n professonal or sklled occupatons. Ths fndng s consstently reflected n both multnomal as well as nested logt estmates. On the other hand n early 90s certan categores of the mmgrants lke whtes and Indans had a greater probablty of workng as professonals whlst black and South Asan natves were predcted to work n relatvely greater proporton n nferor qualty obs. The relatve poston of certan categores of mnorty natves however has mproved over tme as reflected by the greater representaton of black South Asan Chnese and other natves n professonal occupatons. A decomposton analyss of the estmates ndcates the mportance of both explaned and unexplaned factors n analyzng the performance of dfferent groups. Ths s n contrast to that of Carmchael & Woods 2000 who emphaszes the dscrmnatory selecton process of employers n the Brtsh labour market. Accordng to the present analyss for black natves as well as for black mmgrants n most of the cases endowments cannot explan ther nferor performance and n certan contexts they even possess better or smlar endowments to whte natves. Therefore on the bass of our analyss we cannot rule out the possblty of dscrmnaton aganst blacks. For akstan and Bangladesh mmgrants n addton to the contrbuton of unexplaned features ther nferor attrbutes could also play mportant role for ther poor performance. The superor performance of Indan mmgrants s caused prmarly by ther superor attrbutes but had they been treated smlarly to whte natves they would be able to attan even better status n the ob market. As a whole both attrbutes as well as coeffcents are found to be mportant for the labour market performance of South Asans. For whte mmgrants the result s not straght forward and the analyss suggests plausble postve contrbuton of certan unobserved factors not captured n our model. 24

26 References Bell 1997 The erformance of Immgrants n the nted Kngdom: Evdence from the GHS The Economc Journal : Blackaby D. Drnkwater S. Lesle D. and urphy A cture of ale and Female nemployment Among Brtan s Ethnc nortes' Scottsh Journal of oltcal Economy 44 2: Blackaby D. Lesle D. urphy. and O Leary. C Whte/Ethnc norty Earnng and Employment Dfferentals n Brtan: Evdence from the LFS Oxford Economc aper 54: Blnder A. S Wage Dscrmnaton: Reduced Form and Structural Estmates Journal of Human Resources 8 4: Borooah V How do Employees of Ethnc Orgn Fare on the Occupatonal Ladder n Brtan Scottsh Journal of oltcal Economy 48 1: Borooah V Caste Inequalty and overty n Inda Revew of Development Economcs 9: Carmchael F. and Woods R Ethnc enaltes n nemployment and Occupatonal Attanment: Evdence for Brtan Internatonal Revew of Appled Economcs 14 1: Gabrel. Wllams D. and Schmtz S The Relatve Occupatonal Attanment of Young Blacks Whtes and Hspancs Southern Economc Journal 57 1: Oaxaca R. L. 1973: ale-female Wage Dfferentals n rban Labor arkets Internatonal Economc Revew rce S. W The nemployment Experence of ale Immgrants n England Appled Economcs 33:

27 Appendx: an Results of ested Logt odel year 1992 T he restrcted set of estmates of 1992 nested logt show that ceters parbus blacks have a lower probablty of workng n professonal occupatons and a hgher chance of workng n unsklled occupatons. The Asan dummy whch corresponds to the combned effect of Indan akstan and Bangladesh and Chnese ethnctes s nsgnfcant n the nested logt whch s consstent wth the nsgnfcant coeffcent estmate of Indan and Chnese dummes of the multnomal logt model. The dummy varable representng the remanng ethnc groups s found to be nsgnfcant n case of professonal occupaton whch s smlar to the result of multnomal logt model showng nsgnfcant estmates of mxed and other ethnc dummes. one of the ethnc dummes has come as sgnfcant for the choce of sklled occupaton whch s smlar to multnomal logt estmates. In the case of mmgrants both models however dffer sgnfcantly for both professonal and sklled occupatons and we can not come to any conclusve result whch s consstent across the models. However due to the restrctve nature of the 1992 nested logt estmates the results of multnomal logt model whch allows to analyze all of the ethnc/mmgrant groups separately should be gven prmarly mportance. 26