How immigration affects the Swiss labour market

Do foreign workers compete with domestic employees and put pressure on their wages? Or are companies dependent on immigrants to be able to grow? Researchers from KOF have examined these questions. Watch the video for the most important answers.

Since 2004, Swiss firms have been allowed to employ cross-border workers without any restrictions. The consequence of this liberalisation: Until 2010 the proportion of immigrants among employees in border regions increased by 10 percentage points more than in the rest of Switzerland. In the border regions, therefore, the pressure of immigration was significantly greater during this time period due to the opening of the laobur market.

The different developments in regions near and far from the border were a stroke of luck for the researchers because they created laboratory-like conditions. The economists were able to examine how wages and employment levels in border regions have changed over time – both before and after the labour market was opened up – compared with the rest of Switzerland.

They found little evidence of displacement effects. The wage and employment levels of Swiss nationals in border regions revealed the same trends as those in the rest of the country. The wages of highly qualified Swiss nationals near the border have actually risen more sharply than those further away. Although the possibility of modest displacement effects on the low-skilled cannot be completely ruled out, there is no robust evidence of this.

Why have wages not come under pressure even though competition in the labour market has increased? The researchers explain the results with the lack of skilled workers that many Swiss companies complained about in the late 1990s. The gradual introduction of the free movement of labour alleviated this shortage and enabled these firms to grow. The study shows that knowledge-intensive companies located near the border have stepped up their research and development activities and have tended to become more innovative. Moreover, more new businesses have been set up in the border region than in the rest of Switzerland. The local population has also benefited from this growth. We can see, for example, that it created opportunities for highly skilled locals to grow professionally.

According to the economists, the opening of the Swiss border illustrates a general phenomenon that economists have been drawing attention to for some time. The labour market is not a rigid structure containing a fixed number of jobs. When immigrants come to a country, it is not simply the case that the same number of jobs are shared among more people. Firms take advantage of the opportunities available by creating additional jobs.

Source: Swiss Federal Institute of Technology


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