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Today’s flourishing, worldwide anti-globalisation movements have led many countries to implement stricter immigration policies. The motivation has been to reduce immigration and/or improve the integration of immigrants, and one such policy is the shift from permanent to temporary residency permits for refugees.
A shift to temporary permits could have both positive and negative effects on immigrant integration and in the labour market. On the one hand, increased stress from a lower probability of being granted permanent residency, as well as firms being less willing to hire the immigrant due to higher risk of losing the worker, reduces employment chances for the worker as well as wages. On the other hand, actions that lead to labour-market attachment during the time with temporary residency are incentivised when they increase the probability for permanent residency. The latter effect could strengthen the incentives for labour-market investments in the host country and improve integration.
In a recent paper, my co-authors Elisabet Olme and Matilda Kiltröm of Stockholm University and I study the effects of a Danish refugee residency reform package, implemented in 2002. One aspect increased the time a refugee would need to be a legal resident (on a temporary residence permit) before being eligible to apply for permanent residency. During this temporary status, a residence permit could be withdrawn if the grounds for protection were no longer valid, and if the individual did not have the right to stay on other grounds.
The explicit aim of this reform package was to limit the number of asylum seekers in Denmark and speed up the integration process (The Danish Immigration Service, 2003).
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In addition to these changes in the residency requirements, the package also implied other changes. We are able to isolate the effect of changes to the eligibility for permanent residency from other parts of the reform package as this was the only component introduced retroactively, and it applied to all individuals who lodged their asylum application on or after 28 February 2002 (the date when the new bill was proposed). The other components of the reform package took effect after the bill was passed on 1 July 2002.
Another potentially important reform came in 2003, allowing immigrants that had lodged their applications on or after 28 February 2002 to apply for permanent residency after only five years (instead of the now seven years) if they were “well integrated” i.e. if they were actively seeking feasible work and had not relied on social welfare. Furthermore, in case of an exceptionally successful integration (for example, full employment throughout the period), it was possible to receive a permanent permit after only three years of legal residency. The law strengthened the integration motive.
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We compared the outcomes for refugees who came just before the reform to those who came after. Danish register data allowed us to track individuals granted asylum, and a large set of their outcomes, over time.
Our main outcomes were educational investments and status in the labour market. Job seeking can, in itself, be viewed as a measure of integration, whereas education can be considered as an investment in integration.
While the reform we study in this paper is in many ways ideal for analysing the effect of prolonged temporary status, the sample size is small, and we need to be careful when interpreting our results.
Our results suggest that lowering the ex-ante probability of receiving permanent residency increased enrolment in education. Enrolment is measured as the share that is ever enrolled in education, excluding Danish courses, during the first 12 years of residency in Denmark. We also show that enrolment rates are higher for the treatment group throughout the sample period.
Mainly women and low-skilled individuals increase their enrolment. Hence, the positive effect on enrolment in education is an increased investment in human capital and integration. In terms of labour-market outcomes, we focus on the share of individuals that are ever employed (or self-employed) during the first 12 years in Denmark, and on their earnings measured three and seven years after arrival. While there is no impact on the full sample, women and high-skilled workers tend to be negatively affected by the reform in terms of income.
"When taking a political decision, potential positive impacts on immigrants have to be weighed against increased uncertainty and potential reduction in immigrants’ wages and employment perspectives"
A final question is whether the law did limit immigration. The answer seems to be no. The reform did not necessarily change whether an individual got to stay in Denmark or not. In fact, we show that around 90% of the refugees who applied both before and after the reform are still in Denmark 12 years later.
In total, the stricter immigration policy improved integration in Denmark as although all immigrants were worse off, the conditions were relatively better for well-integrated immigrants and thereby the law raised incentives to integrate. However, it did come at a cost in terms of more uncertainty and lower wages for female and high-skilled immigrants. And if the main political agenda was to reduce immigration, this part of the law change did not have the intended impact.
What may other countries learn from the Danish experience of increasing the number of years before immigrants can apply for permanent residency? In case different rules apply for well-integrated workers compared to other workers, educational enrolment may increase. As such, a change in the law will improve integration. When taking a political decision, this potential positive impact on immigrants has to be weighed against increased uncertainty and potential reduction in immigrants’ wages and employment perspectives.
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