Anastasios Karasavvoglou, Technological Educational Institution of Kavala/Greece
JEL classification : J3, J6
It is fact that during the last ten (l0) years Greece went from being a country that sent immigrants to countries in Central and Northern Europe to being a host country to immigrant labor force. The consequences of the presence and employment of foreign labor force, legal and or illegal, on both the Greek economy and society are strong and various. Particularly interesting are the effects that the employment of foreigners have on the labor market for reasons that have just as much to do with the size and extent of the black market as they do with the height and structural characteristics of unemployment. The present study investigates the effects of the employment of foreigners, mainly in the region of Kavala and secondly in rural eastern Macedonia and Thrace. At the empirical level of analysis the basic structural characteristics of the employment of foreigners in Kavala are registered and the effects on basic parameters such as the supply and demand of labor are determined. In particular, it is also examined whether the substitution of native labor force by foreigners is corroborated. Finally, efforts are made to determine the comparative advantage of the presence and employment of foreigners on the local economy in the region of Kavala, especially taking into account the changes that are taking place or are expected to be materialized in the near or remote future in the wider Balkan area and in Central and Eastern Europe. Since the beginning of the l990s Greece has been a host country to immigrants in contrast to the l950s and l960s, when a significant number of Greeks moved to Europe and America in search of a better life. Today there are 480,000 foreigners living in Greece, either legally or illegally. The main reasons for these mass population movements towards Greece was the socio-political changes that took places in the central and eastern european countries. Greece accepted strong currents of immigrants from neighboring countries, such as Bulgaria, Albania, Romania, Poland, but also from other democracies of the former Soviet Union. This article examines the effects of the massive entrance of immigrants on the economy, society and local labor and housing markets in the region of Kavala. Particular emphasis is given on the matter of the relation between native and foreign labor force (a complementarity or a substitution relation). The issue of the determining factors in immigration and its effects on the economy and society of the host countries began to systematically and strongly occupy scientists-researchers during the l980s and l990s. It concerns the time periods which coincide with the appearance and even more with the strengthening of crises conditions and the worsening of the problem of unemployment in the market economy. It is generally accepted that the larger part of the immigration movement is explained by the presence of different income levels between countries. The relative “immigration elasticity” index concerning the income of the host country is positive and is estimated to be bigger than unit l and smaller than 3 (Bhagwati l985). In addition, empirical research shows that a change in the number of labor force members in a country, as well as an increase in unemployment, are positively related to immigration (Blanchard and Katz l992, Stark and Taylor l99l ). Finally, the cost and potentiality of population movements, the political context as well as the availability of information about the host country (Siebert l993) to the potential immigrants all comprise additional factors that may affect the intensity and extent of immigration. It is a fact that the effects of immigration on the economy and the society of the host country are significant. The relevant bibliography examines this matter mainly in relation to productivity, wages and employment. The studies that examine the effects of immigration on the American economy show that there are more positive sides to immigration (Borjas 1990, Simon 1989), and this is evidenced by the quick adjustment of foreigners on both the economy and social life of the area (Chiswick 1978). At the wage level and the employment of the natives it is emphasized that generally there were never any substantial negative effects. (Lalonde and Topel l99l, Altonji and Card l99l, Winegarden and Khor l993, Friedberg and Hunt l995). This, however, does not exclude the existence of particular categories of native workers (concerning those who did not finish university) who showed that their wage level was negatively influenced by the entrance of immigrants into the United States (Borjas, Freeman and Katz l99l). With regard to the question concerning the relation between native and foreign labor force the actual research on the American economy supports the view of complementarity (Borjas 1986) as much as the view of substitution of natives by immigrants (Akbari and Devoretz l992, Matta and Popp l985, Defreitas and Marshall l983). Analogous research has been conducted in European economies and particularly in the case of Germany. The results show the positive aspects of the effects of immigration on the domestic production and employment (Straubhaar and Zimmerman l992, Barabas, Gieseck, Heilemann and Von Loeffelholz l992) but mainly the negative aspects (Wehrmann l989). Concerning the wage levels of natives and foreigners, the relevant studies support the view regarding long-term adjustment of foreigners’ income to the levels of natives’ income. In particular, research from Pischke (l992) and Schmidt (l992) lead to the realization that the wages of foreigners after the passing of seventeen years adapt to the equivalent levels of income of the natives. Finally, the question concerning the possibility of the substitution of natives by foreigners, or the existence of a complementarity relation between the two the prevailing view is that in the field of wage employment in the private sector foreigners replace domestic labor supply,whereas there is evidence that a complementarity relation exists between unskilled workers and foreigners (De New and Zimmermann l993). As far as the Greek bibliography is concerned, the relevant research concerning the subject is limited, given the fact that it is a relatively new phenomenon for Greece. Thus the available statistical elements are limited and concern only a small part of the total number of immigrants. In spite of this, efforts were made to evaluate the effects of the illegal immigrant labor force on the Greek economy, despite the reservations about the validity of the data and thus the validity of the results. In this context the issues that are examined are: first, if the employment of foreigners in Greece is complementary with regard to the native character or if the former replace the latter for the limited work places, leading to worse unemployment. Second, if the wages of foreigners push the wage level down, leading to a worsening of employment conditions and of the survival of wage earners in the country. With regard to the first issue recent empirical research conducted in the area of Northern Greece has shown that illegal immigrants replace native workers in unskilled labor, whereas in the field of agriculture they cover additional real needs (Lianos, Sarris Katseli l995, Chletsos and Karasavvoglou l997). Relevant research at the Institute of Labor (IN.L) led to the same conclusion. It emphasized, among other things, the fact that foreigners work in areas for which there in no analogous supply of labor on the part of native workers (Linardos-Rilmon l993, Katsoridas l994). It should be emphasized that the complementarity character of the employment of immigrants prevails in the first phase of their entrance into the country, whereas in the later phases foreigners replace equivalent skilled domestic workers (Kontis l996). The wage level of immigrants is lower than the corresponding level of Greek workers (Linardos-Rilmon l993). It is estimated that the average wages of immigrants are 45% lower than the average wages of Greek workers (Lianos-Sarris-Katseli l995). This finding together with the fact that employers do not make the mandatory insurance payments establish illegal foreign workers as a particularly cheap and thus attractive labor force. The incorporation of this labor force in the production process constitutes for many domestic businesses a condition of survival and continuity. Otherwise, they would be condemned to economic stagnation and eventually to a discontinuity of their activities (Chletsos and Karasavvoglou l997, Karasavvoglou and Katrakilidis 1997). The results of this empirical research show that foreigners in the area of Southern Kavala are mainly men, relatively young who came illegally in the country. They are employed in agriculture (37.0%), in livestock (30.3%), in construction industries (22.3%) and in the quarrying of marble (l0.4%). They offer services as unskilled workers. Their employment is of a seasonal temporary nature and their work program is particularly flexible. Their wages fluctuate at lower levels than those of their native colleagues. This is why 50% of the business persons prefer foreigners to Greek workers. Foreigners are also preferred because there are no Greek workers (30%) found for a particular type of employment and finally the behavior of foreigners is for the Greek business person a particularly attractive factor (20%). The local society is split concerning acceptance of foreigners, even though it is obvious that foreigners contribute to the discontinuity of the process of population exodus from the rural areas and to the revival of economic life of the area. In addition, the educational structure is not substantially worsened by the presence of foreign students in primary and secondary education. Finally, the housing market is positively influenced by the presence of immigrants. Regarding the question concerning the type of relation between native and foreign workers, research leads to the conclusion that the work profile of foreigners (employment sector, additional wages, conditions of employment) favor the acceptance of the complementarity view of employment of foreigners and natives, without this excluding the likelihood of the substitution of native workers by foreigners. It has been realized that agricultural cultivations in the area would have been quantitatively fewer without foreigners. In the area of quarrying foreigners cover rather additional needs of the businesses and in manufacturing they offer services that native workers do not want to provide, given the particular conditions.