16 Chapter 2 tive study across 15 European countries from 1971-2007, Lipsmeyer and Zhu (2011) find that domestic political pressures, such as the strength of left parties and trade unions, can mediate the relationship between unemployment compensation and migration. Using changes in net migration and levels of unemployment replacement rates, they show that when labour unions are strong and left parties hold more parliamentary seats, then higher net migration rates are associated with higher levels of benefits. Finally, using data on levels of social expenditures and the foreign-born population for 25 OECD countries for the years 1980-2008, Gaston and Rajaguru (2013) find no negative relationship between migration and social spending in a sample. Instead, they determine that depending on the countries included in the sample, immigration can have a positive effect on social welfare spending. As evidenced by the mixed results and conclusions in the literature, the association between immigration and welfare state effort is complex and likely to be influenced and mediated by a number of factors. It is entirely possible that immigration creates opposing pressures on the welfare state and that one effect may simply dominate over another. As the analysis takes into account two dependent variables, which represent two different operationalisations of welfare state effort, then different effects may materialise. This could be a result of substantive reasons such as the inclusion of different programmes in each aggregate indictor. Nonetheless, it would be surprising to find completely opposing effects in the two indicators. 2.2.3 Hypotheses This analysis is based on a European sample, subsequently it is possible that a higher proportion of immigrants are low-skilled and work in lowerpaid jobs2 (UN-DESA & OECD, 2013), in which case the theoretical models would predict that increasing immigration leads to reductions in welfare state effort. The empirical work of Alesina et al. (2001); Alesina and Glaeser (2004); and Soroka et al. (2006; 2016) would generally support this. On the other hand, should those immigrants increase perceptions of economic risk for the native labour force through increasing the competitiveness of the labour market, then increasing immigration could alternatively lead to increases in welfare state effort. The recent empirical results from Gaston and Rajaguru (2013) and Lipsmeyer and Zhu (2011) lean towards this expectation. Considering the literature and the competing mechanisms, two hypotheses are proposed: H1: Retrenchment: increasing immigration is associated with reductions in welfare state effort – reflected in decreases in spending and/or generosity. 2 In 2015, 23.8% of working age (15-64) foreign-born labour in the EU was tertiary educated (Eurostat 2025) and immigrants earn on average about 30% lower wages than natives (Dossche et. al., 2022)
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