Summary2018_eng_fin (Иностранные работники на российском рынке труда выбор занятости и заработная плата)

Foreign Workers in the Russian Labour Market: Location Choice and EarningsEugenia CherninaThis research was conducted at the Federal State Autonomous Educational Institution of HigherEducation, the National Research University’s Higher School of EconomicsAcademic advisor:Olga Lazareva, PhDJEL codes: J61 J15 J31Research ProblemLabour supply is extremely heterogeneous: workers differ in their socio-demographiccharacteristics and skills, and thus in their position in the labour market.

One such special groupis foreign workers1. They stand out for several reasons. First, their productive characteristics – thelevel and quality of their education, language skills, culture and many other factors – may differsignificantly from the characteristics of a country’s native workers2. These differences affect boththe supply of and demand for foreign workers' labour.

Second, the behaviours and positions offoreign workers in the labour market are affected by a number of specific factors that are notrelevant to native workers: the presence of others from their ethnic group, length of stay in the hostcountry and age at entry. Third, most countries have special regulations that control the access ofsuch workers to their labour markets.Foreign workers attract a great deal of academic and public interest, which can be explained byinfluence these workers can have on a host country.

On one hand, the influx of labour from abroadmakes it possible to solve demographic problems associated with the decline and aging of a localpopulation and fill the professional niches that remain vacant due to the preferences of the localworkers. On the other hand, host countries’ citizens often blame migration for various economicand social problems, which makes the inflow of foreign workers a political issue. Among the mainconcerns related to migration are the adverse effect foreign workers may have on wages and theemployment of native workers, crime, adverse effects on the housing market and interculturalconflicts.This dissertation investigates several aspects of the position of foreign workers, namely, labourmigrants from Tajikistan, in the Russian labour market.

First, we address the determinants ofIn this study, the terms ‘foreign worker’, ‘migrant worker’ and ‘labour migrant’ are used as synonyms to mean a‘person who is to be engaged, is engaged or has been engaged in a remunerated activity in a State of which he or sheis not a national’ (UN Convention on the Rights of Migrants).2By ‘native workers’, I mean both employed and unemployed country nationals.11migrants’ choice of Russian regions. In particular, various characteristics of the regions and theworkers’ previous migration experiences are considered.

Second, we analyse differences in wagesbetween foreign and native workers, and their sources. Both of these aspects are important fordeveloping optimal migration policies.Understanding the size and sources of migrant–native wage differences is important for severalreasons. First, the impact of foreign workers on the labour market of the host country depends ontheir placement in the skills distribution and occupational structure of the labour force and, as aresult, on their place in the wage distribution.

This place depends on migrants’ stock of human andsocial capital and on the presence of various cultural and regulatory barriers for foreign workers.Second, differences in earnings can serve as an indicator of migrants’ adaptation to the labourmarket of the receiving country. Third, the presence of an unexplained wage gap may be anindicator of discrimination in the labour market.The effect of foreign workers on a host country also depends on their geographical concentration.Even with a low overall share of foreigners in a country’s labour force, their presence can besignificant in certain local markets.

Geographical concentration also has a significant impact onmigrants’ labour market outcomes, namely, their wages, employment and assimilation rate. It isin the interest of the host country for foreign workers to settle in regions with the greatest demandfor their labour. However, workers’ choices can be also determined by the presence of co-ethnicsand their own previous experiences in the host country. Thus, it is important to assess thecontributions to migrants’ location choice of factors such as regional economic situations and thepresence of co-ethnics and personal migration experiences.The issue of labour migration is extremely relevant for today’s Russian labour market.

Russiabecame attractive to foreign workers in the early 2000s, when its recovering economy began todemand additional labour3. Only officially registered part of largely undocumented foreign labourforce constituted approximately 3.1% of the total number of employed workers in Russia in 20092010, but the share was much higher in some industries; for example, construction, attracted almost40% of all foreign workers in 2009-2010, accounting for 16% of all those employed in the industry.This study focuses on workers from Tajikistan, who accounted for 16% of all registered foreignworkers in Russia (second among all sending countries after Uzbekistan) during the period of2007–2011.

Despite country-specific background, they can be viewed as quite typicalrepresentatives of mostly low-skilled migrants from the Commonwealth of Independent States3According to the Federal Migration Service of Russia, the number of registered labour migrants increased by 11times between 2003 and 2008, from 213,000 to 2.426,000.2(CIS) countries to Russia (for example, from the point of view of demographic characteristics oroccupational choice).Literature ReviewEconomic literature studies several aspects of migrants’ behaviours and outcomes in the labourmarkets of their host countries: choice of location, employment outcomes, job characteristics (e.g.,occupational choice), wages, and so on. Empirical literature typically compares foreign workersto local employees, or contrasts different groups of foreign workers.

This dissertation focuses onthe choice of the local labour markets by foreign workers and their wages.Many studies are devoted to migrants’ location choice in the host country [see Bartel, 1989; Kritz,Nogle, 1994; Zavodny, 1999; Gurak, Kritz, 2000; Jaeger, 2000; Jaeger, 2008; Kaushal,Kaestner, 2010]. These works highlight the presence of co-ethnics and labour marketopportunities as the main factors influencing migrants’ location decisions. However, other studieshave shown that the relative importance of these factors varies for different groups of migrants.For example, the conditions in the labour market are more important for more educated and legalforeign workers, while the presence of co-ethnics is more important for low-skilled and illegalones.The empirical literature to date has rarely considered the choice of location in cases of workers’short-term and repetitive trips, and the impact of such trips on workers’ subsequent locationchoices.

One noteworthy exception is the series of works by Bauer and colleagues [Bauer,Epstein, Gang, 2002, 2005, 2007], who studied cases of migration from Mexico to the UnitedStates. In the case of Russia, previous literature considered only the demand side of migrants’distribution between regions [Vakulenko, Leukhin, 2015].A partial list of works that have made significant contributions to the analyses of the migrants’earnings include [Chiswick, 1978; Borjas, 1985; Borjas, 1989; LaLonde, Topel, 1991; Butcher,DiNardo, 2002; Chiswick, Miller, 2002].

Usually, foreign workers’ wages are analysed incomparison with the wages of native workers, and in most cases, migrants lose out to nativeworkers in this regard. This result can be explained by differences in human and social capital, aswell as discrimination against foreign workers.While for many countries there exists an extensive body of literature documenting and explainingthe differences in earnings of various groups of foreign and native workers, for Russia, such studiesare rather limited. Some studies [Commander, Denisova, 2012; Vakulenko, Leukhin 2016] used3administrative data to analyse the differences in wages between foreign and native workers inRussia, while [Grigorieva, Mukomel, 2014] have addressed the relative wages of foreign workersin their analysis of a survey of migrant and native workers who contact at the workplace. Studies[Lazareva, 2015; Polyakova, Smirnykh, 2015] analysed the dynamics of workers’ relativeearnings with migration experiences using data from the Russia Longitudinal Monitoring Surveyof Higher School of Economics (RLMS-HSE).A number of researchers have studied the position of foreign workers in the Russian labour market,including: Andrienko, Chudinovskikh, Denisenko, Guriev, Iontsev, Ivakhnyuk, Mkrtchyan andRyazantsev.