Impact of migrant workers on Cypriot labour force

The Economic Research Centre of the University of Cyprus published a paper in December 2008 examining the impact of migration in the period 1999–2005 on the working age population. The findings show that the presence of migrant workers may affect different population groups in different ways, depending on factors such as people’s gender, age, level of education and sector of occupation.

In December 2008, the Economic Research Centre of the University of Cyprus published a paper entitled the ‘Effects of foreign workers on unemployment, part-time employment and labour force participation’. The research examined the impact of migration into Cyprus in the period 1999–2005 and was based on econometric analysis as well as statistical data from the Labour Force Surveys.

Recent labour market developments

Influx of workers from third countries

The influx of migrants from third countries has rapidly increased in recent years. Currently, some 80,000 legal migrants live in Cyprus, and it is estimated that another 20,000–30,000 migrants are illegally residing in the country. The need to attract workers from third countries has arisen from a lack of unskilled workers, since the majority of Cypriot school-leavers with a secondary education choose to continue their studies in third-level education. In parallel, improved living standards of citizens and their desire for more leisure time, along with increased employment among women, have led to a higher demand for domestic workers; as a result, in 2000 nearly 100% of domestic workers were migrants. Developments have also occurred in the hotels and restaurants sector as regards the employment of EU workers and third-country nationals. These developments are due to both an increased need to employ cheap labour and Cyprus’ accession to the EU in 2004. In general, the proportion of workers from third countries, in the period 1991–2006, showed an upward trend in all sectors of the economy, with the exception of the public administration sector, along with electricity and water supply.

Turkish Cypriot workers

With the elimination of restrictions on the labour market mobility of Greek Cypriots and Turkish Cypriots to and from the free areas of Cyprus in 2003, the participation of Turkish Cypriots in the Cyprus labour market has increased substantially. According to data from the Social Insurance Department of the Ministry of Labour and Social Insurance (Υπουργείου Εργασίας και Κοινωνικών Ασφαλίσεων, MLSI), before 2003, only 600 Turkish Cypriots were registered with the Social Insurance Fund and working in the free areas; in contrast, it is estimated that some 5,000 Turkish Cypriots work in the free areas today, including those who are not registered. Turkish Cypriot workers are mainly employed as unskilled labour in the construction and manufacturing sectors, reducing the need to bring in workers from the EU or third countries.

EU workers

Following the accession of Cyprus to the EU in 2004, the number of EU workers increased rapidly – more specifically, at a rate of 60% between 2005 and 2006, when their total share of the Cyprus labour force rose from 3.3% to 5.2%. EU workers are mainly employed in the country’s construction and tourism sectors, reportedly meeting the need for unskilled labour and taking the place of workers from third countries.

Impact of migrant workers on unemployment

The paper examines possible impacts of migrant workers coming to work in Cyprus – both those from the EU and from third countries – on unemployment in the domestic labour force, according to age and level of education. The econometric analysis carried out by the paper’s authors showed that the presence of migrant workers in Cyprus in the period 1999–2005 raised the likelihood of unemployment among people aged 20–29 years, at almost all levels of education, with the exception of persons with an upper secondary education.

More specifically, an increase in the proportion of migrants by one percentage point raises the likelihood of unemployment by an average of 0.28% among people aged 20–24 years and by 0.37% among those aged 25–29 years at all levels of education, apart from upper secondary level. People in other age groups are less affected by the presence of migrant workers, except for those in the 30–39 and 60–64 years age groups, where the increase in unemployment may be around 0.15% and 0.25%, respectively. People aged 25–29 years, who are mainly new labour market entrants, often choose to remain unemployed rather than take jobs that fail to meet their expectations; as a result, many of these jobs are filled by migrant workers. It is noteworthy that the authors expressed reservations with regard to this conclusion, since migrant workers supplement rather than replace the domestic workforce.

Effect of migrant workers on labour market participation

The authors of the paper also examined the impact of migrant employment on the likelihood of labour market participation, according to the age and level of education of people who are either members of the workforce or have stated that they are non-active. The authors estimate that an increase in the proportion of migrants by one percentage point increases the likelihood of non-participation in the labour force for people aged 20–39 years with a primary education – more specifically, by 0.58% among those aged 20–24 years, by 0.68% among persons in the 25–29 age group, and by 0.32% among those aged 30–39 years. However, the likelihood of labour force participation for people aged 60–64 years actually increases by 1.03% for those with a secondary education, by 1.51% for persons with an upper secondary education and by 1.48% for those with a third-level education. A percentage point increase in the proportion of migrants had no particular effect on the labour market participation of other categories of people. In view of the fact that migrants are mainly employed in sectors not requiring any special qualifications, it stands to reason that the increase in the proportion of migrants has a positive effect on young people with a college or university education and a negative one on young people with a primary school education.

Impact of migrants on part-time employment

Another issue that the paper examined was the likelihood of migration having an impact on the rate of part-time employment on the basis of age and education. The results of the econometric analysis show that the increase in the proportion of migrant workers causes a rise in part-time employment for all people up to 39 years of age, irrespective of their level of education. It also has a positive effect on people aged 40–49 years with a third-level education, as well as on those aged 60–64 years who have a secondary and third-level education. However, an increase in migration reduces the likelihood that people in the 60–64 years age group who have a primary education will be employed part time.

According to the findings, a possible rise of one percentage point in the proportion of migrant workers increases part-time employment by 0.84% among people aged 20–24 years with a third-level education and by 0.5% among those with a primary education. Similarly, in the 30–39 years age group, the level of part-time employment increases by 0.34% among persons with a primary education and by 0.46% among those with a third-level education. By contrast, for people aged 60–64 years, the impact of migrant employment varies widely depending on the level of education: within this age group, the rate of part-time employment among people with a third-level education increases by 0.67%, whereas it decreases by 0.23% among those with a primary education.

In general, it was found that, where there was a possible increase in the proportion of migrant workers, the rate of part-time employment was dependent on age. Younger people, in particular, are more likely to work part time in such circumstances.

Commentary

In general, migration into Cyprus is not a significant factor in increasing unemployment as a whole, since it supplements rather than replaces the local labour force. However, the presence of migrant workers raises the likelihood of unemployment among people aged under 29 years compared with their older counterparts. In addition, the possibility of unemployment is lower for people with a third-level education than it is for those with a secondary or upper secondary education. With regard to other characteristics, men – particularly married men – appear to be less likely to be unemployed than women. The economic sector in which a person works also plays a significant role. For instance, in construction, manufacturing and trade, there is a greater possibility of unemployment than in the financial services sector.

Overall, therefore, age, level of education and even occupational qualifications may affect the impact that the employment of migrant workers can haveon various population groups in Cyprus.

On the other hand, migrants may also have a positive impact on employment levels, making it easier for women in particular to participate in the labour market and find jobs. As reported above, the increase in the employment of domestic workers – the vast majority of whom are third-country nationals – has helped to substantially increase both full-time and part-time employment among women. It is noted, however, that the increase in part-time employment should not always be seen as positive, since it may result from workers shifting from full-time to part-time employment.

Polina Stavrou, Cyprus Labour Institute (INEK/PEO)