The effect of labour unions on immigrant unemployment

Abstract: One purpose of labour unions is to promote equal outcomes for workers. However, immigration causes the labour force to become more heterogeneous. As a result, the promotion of equal outcomes may have unintended effects. This paper develops a search and matching model to investigate the effect of labour unions on the labour market opportunities of immigrants. The model is calibrated and then tested by running simulations. It is found that labour unions cause the unemployment rate of immigrants to be higher than that of natives, both with and without discrimination. The difference in unemploymentrate is greater when the difference between immigrants and natives is greater. In most cases, discrimination only has a small effect. To see large effects of discrimination, we have to consider extreme situations, such as when the difference between immigrants and natives is large, and, at the same time, immigrants make up a large fraction of the labour force. The results suggest that integration of immigrants may be ineffective when there is a labour union controlling wages.