The impact of third country nationals immigrants on wages of the receiving country : a Maltese perspective

Abstract

This dissertation will take an econometric approach to better identify the labour effects caused by third country nationals (TCNs) on Maltese nationals’ wages. TCNs are individuals who are not citizens of the European Union (EU) and so do not enjoy the European’s right to free movement. The impact of immigration on the wages of individuals having a Maltese citizenship by TCNs is analysed utilizing a technique similar to that used by Borjas (2003). Under this method, the labour market is divided into specific cells, which will be defined by skill level, present economic activity together with the year analysed. In theory, one adverse effect of immigration on the labour market is the decline in nationals’ wages and as a result, receiving countries tend to apply stricter labour policies. Great importance will be given to the share of TCNs immigrants based on the mentioned specification and their effect on the nationals’ average wage, the reason is that increasing migration has provided to be an uphill battle for the EU member states. Malta has been one of the most affected as it has faced increased number of immigrants both from the EU and Third Nations. In this dissertation a priori, the expectation were that nationals’ wages will decrease as the immigrant concentration increases. The results are that in fact immigrant share does decrease nationals’ wages by a 0.05 percentage point to a unit increase in immigrant share which in turn increases significantly when we observe differential characteristics pertaining to immigrants. This outcome will provide policy makers with insight on policies to implement regarding TCNs who put downward pressure on nationals’ wages.