Measuring Impact of Increase in High-Skilled Workers on the Livelihoods of Medium- and Low-Skilled Workers

This paper assesses the impact of high-skilled labor on the unemployment and wages of low- and medium-skilled workers in the Netherlands. Using annual panel data from the Netherlands’ Centraal Bureau voor de Statistiek (National Bureau of Statistics, CBS), a statistically significant negative impact of an increase in high-skilled labor on the livelihoods of low- and medium-skilled workers can be shown. An increase in high-skilled labor is associated with a significant decrease in the income share of the bottom tenth percentile of the population as well as a decrease in jobs for the low- and medium-skilled workers. The data reveals a significant negative effect on the bottom 60 percent of earners and a disproportionate increase in the earnings share of the top 30 percent. This development can be explained by job market dynamics. Every high-skilled worker that enters the labor market displaces medium- and low-skilled workers into lower paid positions.