The earnings gap between native and immigrant workers in Swedish metropolitan and non-metropolitan regions

Sammanfattning

Abstract This study examines the earnings gap between native and immigrant workers in Sweden. Focusing on how the structure of this gap differs across regions. Specifically, metropolitan compared to non-metropolitan regions over the period 2000-2020. Analysing microdata from Luxembourg Income Study (LIS), this analysis applies an Oaxaca-Blinder decomposition to separate the earnings gap into an explained and unexplained component, based on observable characteristics. The results show that immigrants earn less compared to native workers in both regions. However, the size of the wage gap differs substantially across metropolitan and non-metropolitan regions. In metropolitan labour markets natives earn approximately 30.9% more than immigrants. Part of this wage disparity can be explained by observable characteristics such as education, age and industry affiliation. Although it is found that much of the wage gap remains unexplained after controlling for differences in observable characteristics. In contrast, the wage gap in non-metropolitan regions is smaller in magnitude at approximately 11.1% and this wage gap is dominated by the unexplained component accounting for more than 100% of the wage gap, indicating that the wage gap is primarily driven by differences in returns to individual characteristics, rather than differences in characteristics in non-metropolitan labour markets. The analysis highlights substantial wage disadvantages for immigrants in Sweden across both regions. In metropolitan regions the wage gap is partly associated with differences in observable characteristics while, for non-metropolitan regions, is primarily driven by difference in returns to these characteristics. Suggesting labour market structure varies across regions. Overall, the results emphasize the importance of regional labour market conditions in shaping the wage differences between native and immigrant workers. These findings demonstrate that the mechanisms that contribute to wage gaps between native and immigrant workers are not uniform across regions and that policy approaches to labour market integration needs to account for regional variation and its effect on the labour market outcome.