The Impact of Social Capital on Immigrants Labour Market Performance - Research Paper Example

The Impact of Social Capital on Immigrants’ Labour Market Performance Abstract The challenges faced by immigrants when it comes to entry into the labor-market are numerous, compared to the native-born citizens. This is especially because immigrants obtain their education from a totally different milieu to that of the host countries. Social capital has become an important factor influencing the entry of individuals into the labor-market. However, most studies have not ventured into the evaluation of the influence of social capital on the entry into the labor-market for immigrants. Thus, this article seeks to establish whether social capital plays a role in influencing the entry into the host countries’ labor-market for immigrants. Key words: Immigrants, Social Capital, Labor-Market Entry, Social Connections The impact of social capital on the labor market entry I. Statement of the Problem Immigrants normally access education and training in a totally different milieu to that of their host country. Thus, the context of their education acquisition may affect the transferability of their qualifications and skills, once they arrive in the host country (Piracha, Tani & Vaira-Lucero, 2013). There are different methods that are applied to access employment by individuals. An individual can either search though websites for job vacancies, apply for jobs through agencies or approach an employer directly. However, the most popular way of looking for jobs is through social networks and connections, where between 25% and 80% of the working population access employment using this method (Piracha, Tani & Vaira-Lucero, 2013). This indicates that social capital is a very important factor for job market entry. However, there is little evidence related to whether social capital also plays a role in influencing job market entry for immigrants in the host countries (Piracha, Tani & Vaira-Lucero, 2013). Thus, the focus of the study was to establish the impact that social capital has on the employment outcome of the immigrants within the host countries. The study also sought to establish the existing differences between the impact of social capital on the entry into white-collar and blue-collar job market, for the immigrants (Piracha, Tani & Vaira-Lucero, 2013). II. Background Literature Related to the Problem Trust is fundamental for building social connections, which in turn plays an important role in determining the entry of individuals into gainful labor market opportunities (Glaeser & Laibson, 1999). Trusting behavior increases as the social connection accessible to an individual also increase. Social capital, defined as the access of social networks and social connection support, has been termed as an important factor that helps individuals gain entry into the job market, and possibly get good wages (Piracha, Tani & Vaira-Lucero, 2013). Nevertheless, despite the indication that interpersonal interactions have increasingly played an important role in influencing job market entry outcomes over the last decades, there is limited analysis of this relationship by economists (Borghans, 2005). However, although the influence of social capital on the accessibility of jobs has become a subject of many empirical studies, it is not still clear whether the observed causal relationship between social capital and job market entry outcomes is affected by endogeneity (Chen, 2011). Endogeneity bias associated with social studies limitations such as self-selection bias, sample selection bias, simultaneity and omitted variable biases may influence the outcomes of the social studies, and thus give inaccurate causal-effect relationship (Chen, 2011). Nevertheless, systematic studies that have been undertaken quantitatively to overcome the endogeneity bias have also shown that social capital is not only important in influencing the labor-market outcomes, but also entry into different occupations, as well as the wage levels payable (Guiso, Sapienza & Zingales, 2000). III. Method The study applied data collected from the Household Income and Labour Dynamics in Australia (HILDA), which is a longitudinal data survey that has been collecting information related to over 7000 households since 2001, constituting a population of 13,000 people (Piracha, Tani & Vaira-Lucero, 2013). Purposive sampling was applied in selecting the sample recruited in the study, where only participants between the age of 25 and 59 years were selected, to eliminate either fulltime students below the age of 24 or those considering retirement at or above 60 years. The elimination criteria under the purposive sampling also entailed the removal of those who were self-employed and those who were unemployed, as well as those who refused to give information about their country of origin (Piracha, Tani & Vaira-Lucero, 2013). The study conducted a total of 10,196 observations on immigrant workers, and compared their results to 47,031 observations consisting of both immigrants and native-born Australians (Piracha, Tani & Vaira-Lucero, 2013). IV. Analysis and Results The “principal component analysis” (PCA) was applied as the method of building and analyzing labor indexes (Piracha, Tani & Vaira-Lucero, 2013). The results indicated that most of the female immigrants work in the white-collar services industry, at between 72-75% (Piracha, Tani & Vaira-Lucero, 2013). This was also found to be the same case with the native-born Australians, both male and female. Immigrant women were also found to be highly participating in social activities beyond their close social circles compared to men, with such immigrant women being highly involved in volunteer work and other community participation (Piracha, Tani & Vaira-Lucero, 2013). Social capital emerged as an important factor influencing the access to job opportunities for immigrants, where those who had a wider social circle and those who were widely interconnected socially, had employment accessibility increase of 32% (Piracha, Tani & Vaira-Lucero, 2013). Further, social capital and social connections increased employment chances in the white-collar sectors. The odds of increase in employment accessibility for the immigrants in the white-collar industries were 11.1%, while there were no odds for the blue-collar job industries (Piracha, Tani & Vaira-Lucero, 2013). V. Summary, Conclusions, and Recommendations Social capital is an important factor influencing job accessibility both for the natives and the immigrants in the host countries. The major influence is observable in the white-collar industries, where social capital increasingly plays an important role in determining who has a better chance of accessing job opportunities. Considering the fact that the transferability of qualifications and skills for the immigrants into the host country context is a big challenge, social capital acts as a fundamental resource aiding the entry of such immigrants into the host country’s labor market. Thus, it is recommended that other systems be established that can assist immigrants to access job opportunities in the host countries based on qualifications, skills and merit, as opposed to social capital and social connectedness. This is essential because the immigrants who do not have the advantage of social capital and social connectedness on their side are greatly disadvantaged, when it comes to accessing gainful employment. References Borghans, L., Weel, B. & Weinberg, B. A. (2005). People People: Social Capital and the Labor-Market Outcomes of Underrepresented Groups. IZA DP No. 1494, 1-62. Economists’ analysis of the effect of social capital on the labor-market outcomes is lacking. Interpersonal interactions have several impacts in relation to the labor-market outcomes. First, the interactions influence entry into the labor market. Secondly, interpersonal interactions influence not only the occupation which an individual is likely to join, but also the wage levels likely to be earned. Chen, Y. (2011). The Causal Effect of Social Capital in the Labor Market: Identification Challenges and Strategies. Chinese Sociological Review, 44(2), 76–100. There has been an overemphasis of the role of social capital in influencing entry into labor markets, yet there might be endogeneity weaknesses to the studies promoting this argument. Social sciences rarely apply quantitative methodology in studies. Therefore, the findings of social science studies might be prone to sampling biases, self-selection biases and omitted variable biases. This has resulted in the generalization of the influence of social capital on labor outcomes, which may be erratic, especially for the underrepresented groups. Glaeser, E. & Laibson, D. (1999). What is Social Capital? The Determinants of Trust and Trustworthiness. NBER Working Paper No. 7216, 1-62. Trusting behavior and trustworthiness increase as the social connectedness of individuals increase. Differences in shared traits such as nationality and race on the other hand reduce trust. Individuals with a high status attract more trustworthiness, such that high status then becomes associated with high social capital. Social capital does not only influence economic outcomes for individuals, but also their political and influential capacities. Guiso, L., Sapienza, P. & Zingales, L. (2000). The Role of Social Capital in Financial Development. NBER Working Paper No. 7563, 1-58. Trust and trustworthiness have a great impact on the development of social capital. On the other hand, social capital has a strong influence on the accessibility of economic opportunities. Thus, lack of social trust outside of the immediate family circles can lead to underdevelopment. Piracha, M., Tani, M. & Vaira-Lucero, M. (2013). Social Capital and Immigrants’ Labour Market Performance. IZA Discussion Paper No. 7274, 1-29. Social capital has become an increasingly strong influence on the accessibility and entry into job markets. Social capital does not play the role of influencing the accessibility of job opportunities for natives only, but also for immigrants in the host countries. Immigrants with access to high social capital and good social connectedness will easily gain access to job opportunities in the white-collar industries. Read More