Recession and Migration

A couple of studies on recession and migration.

D’Amuri and Peri write that:

“In this paper we analyze the impact of immigrants on the type and quantity of native jobs. We use data on 15 Western European countries during the 1996–2010 period. We find that immigrants, by taking manual-routine type of occupations pushed natives towards more “complex” (abstract and communication) jobs. This job upgrade was associated to a 0.7% increase in native wages for a doubling of the immigrants’ share. These results are robust to the use of an IV strategy based on past settlement of immigrants across European countries. The job upgrade slowed but did not come to a halt during the Great Recession. We also document the labor market flows behind it: the complexity of jobs offered to new native hires was higher relative to the complexity of lost jobs. Finally, we find evidence that such reallocation was larger in countries with more flexible labor laws.”

In this article, Professor Philip Martin writes that:

“Comparisons with past recessions suggest that the global nature of the 2008-09 recession could affect migrants differently than in the past for three major reasons. First, during this recession one region is not benefiting economically at the expense of another, so that migrants cannot shift to alternative destinations, as when high oil prices attracted migrants to the Gulf countries while doors to migrants closed to Western Europe.

“Second, the first effects of recession are being felt in cyclically sensitive industries such as construction and manufacturing, where last-hired and often male migrants may be among the first to be laid off. What is less certain is whether laid-off migrants will remain in destination countries or return to their countries of origin, as with jobless migrants in Spain, and whether female migrants in service jobs will be laid off or have their wages reduced.

“Third, there is far more interest in remittances and their contribution to development in migrant-sending countries than during previous recessions. Remittances are far higher than in the past, and are expected to remain high even as foreign direct investment and other flows of funds to developing countries slow (Ratha et al, 2008). The governments of migrant-sending countries may develop financial instruments to attract more remittances, such as offering migrant bonds with attractive returns, or use the specter of more unauthorized migration in a bid to preserve jobs for migrant workers or to request financial aid from industrial countries (Chamie, 2009). Many international organizations have urged countries employing migrants not to quickly shut their doors.

“Fourth, immigration is less likely to be affected significantly in the United States than in other traditional immigration countries because a higher share of US immigrants enter under family unification preferences (Papademetriou and Terrazas, 2009). Immigration to Australia, Canada, and New Zealand, on the other hand, may be more affected by the recession because half or more of the immigrants are admitted under economic criteria that give priority to those most likely to obtain jobs.”

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Migration and the 2008 financial crisis

This Migration Policy Institute‘s report explores the impacts of the global financial crisis that began in September 2008 on migration flows, immigration policies, remittances, and on migrants themselves. The report first takes a look at the recession’s effect on differing migrant streams — unauthorized, temporary, permanent, and humanitarian — and offers inflow and return migration data trends for major migration corridors around the globe: United States and Mexico, United Kingdom/Ireland and the Accession 8 countries, Spain and Romania/Morocco, Gulf States and India/Bangladesh/Philippines/ Nepal, and between rural and urban regions of China.

Authors then turn their attention to the various ways in which immigrant-receiving countries have responded to the economic crisis. Features and outcomes of such policies are examined: Examples from Taiwan, South Korea, Australia, and the United States show how some nations have tightened admission requirements, and eliminated or reduced the number of work permits and admission grants for economic migrants. Case studies from Spain, Japan, and the Czech Republic shed light on “pay-to-go” schemes which offer economic incentives to migrant workers who voluntarily withdraw their residence and work rights.

The impact of the recession on remittance flows is examined next. While the overall picture is one of sharp remittance decline, the report found significant variances in remittance “shocks” among recipient countries. By grouping top remittance recipients by world region, the report examines these shocks in greater detail, identifies regional trends in remittance flow, and offers possible explanations for differences.

The final section of the report describes how the recession has affected the financial well-being of immigrants.

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Migration and recession

A Migration Policy Institute report shows that immigrants, particularly men and youth, have been disproportionately hit by the global economic crisis that began in fall 2008 and now confront a reality of dwindling budgets for public services and immigrant integration programs, this report prepared for the BBC World Service reveals. The report, which has a particular focus on five North Atlantic countries—Germany, Ireland, Spain, the United Kingdom, and United States—finds that the unemployment gap between immigrant and native workers has widened in many places. It offers analysis of a number of trends, including the fact that some immigrant-destination countries that historically have been countries of emigration such as Ireland, Greece, and Portugal, may be reverting to earlier trends.

Overall immigration to developed countries has slowed sharply as a result of the economic crisis, bringing to a virtual halt the rapid growth in foreign-born populations over the past three decades. The number of foreign workers caught attempting to enter illegally at EU maritime borders fell by over 40 percent from 2008, 2009, and 2010, while apprehensions at the U.S.-Mexico border since 2007 have declined by almost the same magnitude.

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The slavery of migrant domestic workers

Dr Virginia Mantouvalou conducted an empirical study, a series of interviews with 24 migrant domestic workers who arrived in the UK on this visa. She reports the following:

“Since 2012 migrant domestic workers arrive in the UK under very restrictive visa conditions. The Overseas Domestic Worker visa does not permit them to change employer and ties them to the employer with whom they arrived for a non-renewable period of six months. Domestic workers, particularly when they live in the employers’ household, are a vulnerable group of workers. They are also often excluded from labour protective laws. The UK visa has been heavily criticised by many for creating further vulnerability, and has even been linked to slavery. Between 15,000 and 16,000 such visas are issued each year, according to the Home Office, which does not provide any further information on arrivals but produces data on the nationality of the employers. About 80 per cent come from a very small number of countries in the Middle East.”

“Before arrival, workers’ salaries were reported to range between £100-250 per month, but could be as low as £50 per month. Interviewees reported working between 12 and 20 hours a day with no day off. Almost all interviewees said that they were not allowed out of the house unaccompanied. Many said that they did not eat at the same time as the employers and that nutrition was not always sufficient.”

“The employers still kept the workers’ passports and sometimes threatened them that, if they escaped, the police would imprison and deport them. … Almost all interviewees escaped their employers and became undocumented. One of the workers said that she asked her former employer to return her passport to her, but the employer asked her £2,000 for it. The majority of the interviewees said that they only learned after they escaped that they had no right to remain in the UK or work for another employer.”

“In 2015 the UK adopted the Modern Slavery Act. … An independent review by barrister James Ewins was published in December 2015. Ewins recommended a universal right to change employers for overseas domestic workers, as well as two and a half years maximum stay.”

The full article here.

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The case of Spain

Report from Bruegel on migration to Spain.

“During the first decade of the twenty-first century, Spain experienced one of the largest waves of migration in European history, relative to its population. Shortly after signing the Treaty of Adherence to join the European Community in 1985, Spain went from being a sender to a receiver country.”

“Between 2002 and 2014, Spain received an accumulated immigration inflow of 7.3 million and a net flow of 4.1 million, making it the second-largest recipient of immigrants in absolute terms among OECD countries, following the United States.”

Spain went from having a total foreign population of 2% in 2000 to approximately 12% in 2011.

“This migration episode was largely concentrated during the first decade of the century, peaking in 2007. After the financial crisis the number of foreigners leaving Spain rapidly increased, while inflows became weaker, leading to much lower net flows (becoming modestly negative between 2012 and 2014).”

Between 2002 and 2014 the vast majority of migrants came from Europe (3.4 million), Latin America (2.5 million) and Africa (1.3 million, many from Morocco). … The report “Immigration and the Welfare State in Spain” by “Obra Social La Caixa” argues that educational level largely depends on the origin of the migrant; while migrants from Latin American and African countries have lower educational attainment, the contrary is true for Europeans.

“Although some voices claim that immigration to Spain may have had redistribution effects across Spaniards and immigrants in terms of employment and wages, there is empirical evidence suggesting that this was not the case (Carrasco et al, 2005) prior to the financial crisis. The study estimates an elasticity of employment rate with respect to the proportion of immigrants of -0.02. This result suggests that an increase of 10% in the proportion of immigrants (as it is the case for Spain between 1998 and 2009) would lead to a decrease in employment of native workers of around 0.2%.
The resulting story seems quite straightforward. Before the crisis, the Spanish economy was in need of young, “low-skilled” workers willing to accept relatively low salaries. Immigration raised employment figures and promoted economic growth. Although the integration of migrants into the labour force was very successful before 2008, the financial crisis led to a disproportionate increase in unemployment rates among migrants, even holding constant educational attainment, according to Eurostat data.”

The full report here.


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Effect of migration on wages

As shown by Jonathan Portes, the estimated impact of migration on wages of people in semi-skilled and unskilled services (care homes, bars, restaurants, shops, cleaning etc.) is smaller than previously thought.

The finding comes from the paper, entitled, “The impact of immigration on occupational wages: evidence from Britain”, by Stephen Nickell and Jumana Saleheen

“In the latter cases, the coefficients indicate that a 10 percentage point rise in the proportion of immigrants working in semi/unskilled services –  that is, in care homes, bars, shops, restaurants, cleaning, for example – leads to a 1.88 percent reduction in pay.”

This means that there is less than 2% reduction in pay for an equivalent 10% increase in migrants working in the sector. The above paper is an update of a previous paper published in 2008 , where the authors found a 5.2% reduction in pay corresponding to a 10% increase in immigration.

An LSE evidence analysis found that:

“Empirical research on the labour market effects of immigration to the UK finds little overall adverse effects of immigration on wages and employment for the UK-born…The less skilled are closer substitutes for immigrants than the more highly skilled. So any pressures from increased competition for jobs is more likely to be found among less skilled workers. But these effects are small (Manacorda et al, 2011; Dustmann et al, 2005, 2013; Nickell and Saleheen, 2008).”

“It is hard to find evidence of much displacement of UK workers or lower wages, on average. Immigrants, especially in recent years, tend to be younger and better educated than the UK-born and less likely to be unemployed. But there have been some effects. The less skilled may have experienced greater downward pressure on wages and greater competition for jobs than others, but these effects still appear to have been small.”

Mette Foged and Giovanni Peri studied refugees arriving in Denmark between 1991 and 2008, and found that the presence of refugee-country immigrants encouraged low-skilled native workers to get higher paid and more specialised jobs.

Low pay is NOT due to migration, but the casualisation of work (zero hours contracts etc.), the separation between productivity and profits, inequality between employees, low trade unions’ contractual power etc.

Here are a few reports/articles:

Wage growth and productivity growth

Wages, productivity, and demand 

Low Pay Britain (Resolution Foundation Report)

Low pay, low productivity cycle

UK’s low productivity

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Syrian refugee crisis

“An estimated 9 million Syrians have fled their homes since the outbreak of civil war in March 2011, taking refuge in neighbouring countries or within Syria itself. According to the United Nations High Commissioner for Refugees (UNHCR), over 3 million have fled to Syria’s immediate neighbours Turkey, Lebanon, Jordan and Iraq. 6.5 million are internally displaced within Syria. Meanwhile, under 150,000 Syrians have declared asylum in the European Union”, according to the European University Institute.

Learn about the crisis here:

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