Øyvind Wiborg,ISS/UIOTitle: Ethnicity, Education & the Labor MarketFebruary 2004
AbstractNonwestern minorities in Norway retrieve less economic rewards and have lower participation in the labor market than members of the western majority who have same education. In this Master Thesis I will attempt to give a plausible account as to why this pattern occurs in the setting of the Norwegian welfare state, which main purpose is to implement the ideals of universal and equal opportunities and fairness in several important social arenas. This study is a part of the project “Higher Education: Recruitment, Results and Financing” supervised by Arne Mastekaasa and Marianne N. Hansen.In the second half of the 20th century, the Scandinavian countries of Sweden, Denmark and Norway have been governed according to social democratic principles. The main concern of these nation states has been to create greater social justice. Social origin, gender or ethnicity should have no significant and systematic influence upon the kind of opportunities available for the individual when it comes to participation in the society. Norwegian education politicshave been deeply influenced by this line of thought. In fact, according to official statements,education is actively used to achieve the goal of equal opportunities. Primary education hasbeen standardized and higher education has been made equally economically accessible for every citizen. The implementation of these ideals becomes important when we look at thedifferences between the ethnic majority and ethnic minorities, since education is a crucial factor for determining success and participation in the labor market. For the labor force, peopleare protected against discrimination against sex, race and ethnicity by law and parliamentary actions plans.Whether education truly creates equal opportunities for participation and success in the labor market can be studied in two ways. On one hand, we can bring the attention to the education system itself by looking at recruitment processes, but on the other hand, we can lookthe result of education, with other words, at people’s level of integration in the labor market after their graduation. The scope of this thesis includes only the latter, but we will reflect on theformer to make appropriate conclusions to the subject in matter. If we look at approximately equally qualified graduates entering and participating in the labor market, whose only difference lies in their ethnic background, and if differences still occur along ethnic lines in the labor market, we suspect that the systematic differences can be attributed to the integration process itself. It is not unusual to see the integration process mainly as how the well the individual is doing in the labor market with respect to participation and how this participation is rewarded economically. It is fruitful to understand this integration process in terms of the relation between the employer, or a firm, and the employee in question where the insights rely on literature from econometrics and social science. Economic theory offers several important insights to wage bargaining and the hiring processes where the actors are assumed rational andinstrumental but also act under conditions of uncertain information. Social science provides insights central to these processes yet often not accounted for in economic literature. Socialnetworks and organizational structure are important determinants that are often are left out of econometric analyses but which are important to understand the labor market integration.My main argument, or claim, in the thesis is that employers make decisions that are crucial for employees’ success and participation in the labor market. The employers’ judgments are conditioned by their perception of reality. When information about future employees’performance is uncertain, employers are likely to attribute lower productivity to potential employees with nonwestern backgrounds than those with western background. An example could be cases where employers assume that a nonwestern worker would be less productive ina particular job position because of allegedly lesser communication skills than workers with western backgrounds. Some studies support this argument by showing that people with easilyidentifiable nonwestern background attributes such as names are often filtered out already in the application process. People who are members of majority ethnic groups are thus favored tominorities, even in cases where in cases where applicants have same and relevant job skills.The empirical analyses are divided in two parts to assess the question of ethnic division of the labor market. The first perspective looks at the impact of education levels in general forintegration into the labor market. The second perspective gives a more detailed account of the effect of Norwegian higher university education. First of all, the findings tell us that as peoples’education levels get higher, the differences in participation and economic rewards between people with nonwestern and western origin, increase. A cause could be that as the higher theeducation potential employees’ possess, the employers’ demands for job and communication skills increases. And as the demands raises, employers let their beliefs about lesser productivitybecome more prevalent in their judgments.Second, our findings suggest that the divergence in labor market participation and wages between nonwestern and western higher university graduates are greatest in the start ofthe labor market career. As people work in a company, the actual productivity becomes more visible and challenges the initial beliefs about lower productivity attributed to nonwesternemployees. This would explain the decreasing gap between people with western and nonwestern backgrounds.A third important finding that occurs in both of the data sets, shows us that immigrants’ length of residency has great significance upon the level of integration in the Norwegian labor market. The length of residency can be both seen as human and social capital,which may contribute to greater integration. On the one hand, with increasing length of residency for an immigrant, language skills and day-to-day cultural knowledge develop. On theother hand, social networks and good articulation skills can function as guaranties of the prospective employees’ actual productivity and then increase people with nonwesternbackgrounds opportunities in the labor market.If we consider the findings in a theoretical view, they suggest that although the Norwegian education system is heavily influenced by social democratic ideals, their implementations are not sufficient to create equal conditions for participation and economicrewards in the labor market for people with different ethnicity. The problem depends partly on skewed recruitment to higher education as others have pointed out, but cannot be attributed to this process alone, because it does not explain the difference in labor marketintegration between people who have same education and same academic achievements. The employer seem to play a central role in the systematic selection of western workers rather thannonwestern – not necessarily because he possesses a resentment toward ethnic deviance, but because he thinks a nonwestern worker is more likely to be less productive.