Employer sanctions: A policy with a pitfall?

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URI: http://hdl.handle.net/10900/116553
http://nbn-resolving.de/urn:nbn:de:bsz:21-dspace-1165536
http://dx.doi.org/10.15496/publikation-57928
Dokumentart: Aufsatz
Date: 2021-06-29
Source: University of Tübingen Working Papers in Business and Economics ; No. 149
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Economics
Other Keywords:
Employer sanctions
Illegal migrant laborers
Welfare of native laborers
License: Publishing license excluding print on demand
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Abstract:

This chapter investigates the impact of the imposition of sanctions for employing illegal migrants on the welfare of native laborers. In response to such sanctions, managers in a firm may be reassigned from the supervision of production to the verification of the legality of the firm’s labor force. The chapter analyzes three different conditions of the host country’s labor market: full employment, voluntary unemployment, and minimal wage in combination with involuntary unemployment. It is shown that when the sanctions are steep enough, a profit-maximizing firm will assign managers to verification, which impedes the firm’s productivity. The impact on the wages and / or employment of the native laborers depends on the efficiency of the verification technology, namely on the percentage of the “filtered out” illegal laborers in relation to the fraction of reassigned managers. If this efficiency is not high enough, the sanctions bring in their wake consequences that fly in the face of the very aim of their introduction: the welfare of the native laborers will take a beating.

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