The Labor Market Costs of Job Displacement by Migrant Status

Abstract

This paper examines the differential impact of job displacement on migrants and natives. Using administrative data for Germany from 1997–2016, we identify mass layoffs and estimate the trajectory of earnings and employment of observationally similar migrants and natives displaced from the same establishment. Despite similar pre-layoff careers, migrants’ earnings losses are about 23% larger in the first five years after displacement. This gap arises from both lower re-employment probabilities and post-layoff wages and is not driven by selective return migration. Key mechanisms include sorting into lower-quality firms and relying on lower-quality coworker networks during job search.