Does free movement of workers boost immigrant employment? New evidence from Germany

Abstract

Abstract Extending free movement of workers (FMW) to the new Member States from Central and Eastern Europe was one of the most controversial political decisions in the history of the European Union. In this article, we study how the introduction of FMW affected immigrants’ labor market integration in Germany. Using data from the IAB-SOEP Migration Sample,1 we show that the introduction of FMW was associated with a higher influx of skilled workers. Moreover, FMW has increased the probability of labor market entry within one year after arrival by 12 percentage points. Correspondingly, FMW improved welfare not only by increasing the scale of migration but also by raising immigrants’ skill level and reducing the time before entry into the labor market. Our findings thus yield new insights on the beneficial effects of FMW on labor market integration of immigrants in the Common Market.