Swiss naturalisation boosts earnings, says research

Academics from ETH Zurich, London School of Economics and Stanford have produced research that suggests naturalisation boosts long term earnings.

At first glance this might appear to be an impossible task. Surely those who gain Swiss citizenship are likely to earn more because they possess a range income-boosting attributes that also help them gain citizenship. How could we ever disentangle the effects of these attributes from the effects of a new passport? Well, this group of researchers found a way.

They took data on naturalisations in Swiss communes where success is based on community voting. In some parts of Switzerland, local citizens vote on whether someone, who fulfils the formal requirements for citizenship, should be naturalised.

The researchers took data on these decisions and reduced their focus to applications that were accepted or rejected by a fine margin. They assumed that fine voting differences were random. Essentially, the individuals in this group had the same chance of gaining Swiss citizenship, however, by chance, some did and some didn’t.

In addition, no discernible income differences were found between those narrowly granted Swiss citizenship and those who were narrowly rejected in the 5 years leading up to the naturalisation votes. So their earnings were the same before applying to become Swiss.

However, they found that those lucky enough to “win” citizenship earned on average CHF 5,615 more a year over the 15 years following naturalisation than those who were rejected. This is equivalent to a 13.5% pay increase.

Low-paid immigrants benefited the most. Those with earnings at the 25th percentile received an average annual post-citizenship pay boost of CHF 3,234 over 15 years. Those at the 75th percentile only received an annual pay boost of CHF 733 over 15 years.

The study’s leading causal hypothesis for this naturalisation-linked pay boost is labour market discrimination. In Switzerland, employers and employment websites typically expect job applicants to report their citizenship, making citizenship status a visible criterion, which can be used to screen applications. Employers sometimes assume that non-naturalised immigrants are, in general, lower skilled and less likely to remain in Switzerland. In turn they are less likely to hire, promote, or invest in them. Acquiring citizenship sends employers a signal of successful integration and commitment to permanent settlement in Switzerland.

The study also points out that discrimination against immigrants may be driven by employers’ prejudice and animus against particular origin groups. Narrowly winning the citizenship vote gave typically marginalised immigrants from Turkey and former Yugoslavia a greater than average earnings boost than “winners” from other nations.

Overall, the findings support the argument that citizenship can alleviate some of the labour-market discrimination that impedes immigrant integration, according to the authors. However, the applicability of the results is limited because the data used doesn’t include irregular immigrants or immigrants who do not meet citizenship requirements.

More on this:
Research report (in English)

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