Labour migration, divergent business strategies and change in national models

Department seminar with Jens Arnholtz, Associate Professor, FAOS.

What is the long-term impact of labour migration on receiving countries’ labour markets?

While much sociological research has studied the discrimination migrant workers and much economic research has investigated labour migrations immediate impact on wages of native workers, few studies have addressed the issue on the long-term transformation that labour migration causes in receiving labour markets. Yet the issue is increasingly important because labour migrants’ share of employment has expanded substantially, reaching beyond 25 percent in some European countries. However, predominant approaches to understanding transformation in labour markets have failed to deliver adequate answers because they typically assume that the use of migrant labour happens in ways that are compatible with the national model (Menz, 2008; Ivardi and Wanklin, 2025) and therefore has limited effect on those models. 

By contrast, this paper draws on economic sociology and comparative political economy to argue that firms pursuing divergent business strategies that are less compatible with the predominant model can use migrant labour to overcome institutional and policy obstacles, and that labour migration can therefore underpin incremental, but transformative changes in national models. This argument is developed into a model, which lends itself to different kinds of empirical research.

The paper presents part of that research by drawing on Danish register data to show that the increasing inflow of migrant labour has allowed low-wage firms to expand employment more than the medium wage firms that typically dominate the Danish economy. Rather than simply conforming to the national model, labour migration thus underpins changes in that model.