This article focuses on the situation of migrants and their descendants in European labour markets. This important socioeconomic dimension of the current crisis illuminates the role of pre-existing policies and institutions and points the way to political solutions. The article begins with a comparative puzzle: how can one account for cross-national, cross-local, and cross-sectoral variation in the labour market outcomes of migrant-origin minority groups and explain migrant-origin and gender differences. This is followed by a critical examination of debates on the ‘integration’ of migrants and the ‘second generation’ reflecting political diatribes on the across-the-board poor performance of minorities and the role of ethnic or religious factors. An alternative explanation underscores the importance of policy paradigms and institutional hurdles focusing on three aspects of European political economies: welfare state arrangements, education, and sub-national labour market policies. The arguments put forth rely on comparative aggregate data and surveys in countries representative of ideal types according to the original version of the varieties of capitalism, worlds of welfare, and integration models literature, in particular France, Germany, Sweden, and the Netherlands.