DEGREE PLUS DO WE NEED MIGRATION?

DEGREE PLUS DO WE NEED MIGRATION? ROBERT SUBAN ROBERT SUBAN Department of Banking & Finance University of Malta

Lecture Outline What is migration? Different forms of migration? How do we measure migration? Migration Myths What are the views of stakeholders on migration? Degree Plus 2

General Remarks - Based on data and previous research - In other words, based on facts not opinion - Apply in general but differences between countries - Bold statements but reality is more nuanced - Mainly economic/legal migration - What are we talking about? - Migration concerns around 4 million persons per year globally - These are figures for legal migration only - Illegal migration - no official figures (difficult to trace) - Globalisation of migration (how do we know? By looking countries of origin of migrants) - There are traditional migration countries but new one - Remittances from migrants represent US$ 167 bn while official aid to developing countries represent US$ 107 bn Degree Plus 3

What is migration? Migration is the movement of people from one place to another Can be within the same country We will be talking about international migration Degree Plus 4

Different forms of migration Economic migration Work related Political migration Escape political, ethnic or religious persecution or situation of armed conflicts Ex: refugees, asylum seekers, temporary protection Family reunification 2 nd and 3 rd generation problems Migration due to marriage One of the spouses/partners is foreigner Marriages of convenience Illegal migration I will be talking mainly about economic migration Degree Plus 5

New forms of migration Temporary migration (circular migration) The migrant goes in a foreign country for a short period of time (a few months up to a few years) and already knows when he/she will return to country of origin What motivates such migration? Seasonal workers Acquire a skill/experience/language Build up a capital to purchase a house or start a business Degree Plus 6

Difficult to estimate Illegal migration However, we can get an idea of its magnitude US study showed that 40% of legal migrants were illegal at some point in time How much return? Most of illegal migrants have entered the territory with a legal visa/document but overstay In order to reduce illegal migration we control borders But, there is a game of cat and mouse between authorities and illegal migrants The stricter the policies, the higher the incentive for fraud Degree Plus 7

Is migration a new phenomenon? On a global level no Remember migration waves after the second world war Migration waves in the 19 and 20 th century to US Slave trade Countries like USA, Canada and Australia are a result of massive immigration But for some countries yes There are countries which were countries of origin up to a few years ago and which are now countries of destination Ex: Spain, Portugal, Ireland, Italy We also have countries which are both at the same time Ex: A lot of European countries which entered the EU Malta Degree Plus 8

How do we measure migration? Very difficult to measure (numbers not always reliable) Various methods exist Population registers each person must register with local council (whether native or foreign) Ex: Belgium Surveys these are usually conducted at the border methodology problems Ex: migration into France represents 200,000 persons but there are 80 million persons who cross the border every year How can you capture a phenomenon through a survey which has a size of 1/400 (approximately 0.25%)? Net flows migrants inflows migrants outflows Progress need to be done in this area (however controversial) Degree Plus 9

Migration Myths In the following slides, I am going to debunk several pre-conceived ideas about migration Not everyone might agree with them These are usually conveyed by the media or politicians These represent a problem because if policy is based on false truths or wrong assumptions then we will be implementing wrong policies Degree Plus 10

No need for migration as population is increasing There is no need for migration as the overall country population is increasing However, it is migration (net migration) that is sustaining population growth. Without migration some countries would have a decline in population (see next slides) But there are differences between countries on the extent to which migration contributes to the increase in population in that country 25% France (because high birth rate); 50% US; 80% UK; +100% in Germany (without migration we would have a decline in population) We also know that soon there will a surge in deaths (baby boom deaths) which will reduce the rate of population growth As a result, net migration flows will become the first source of population growth in all countries even if there are no changes to current migration policy Degree Plus 11

Inflows of foreign population into selected OECD countries Thousands 2003 2004 2005 2006 2007 Belgium 68.8 72.4 77.4 83.4 93.4 Germany 601.8 602.2 579.3 558.5 574.8 Japan 373.9 372 372.3 325.6 336.6 Netherlands 73.6 65.1 63.4 67.7 80.3 Spain 429.5 645.8 682.7 803 920.5 Sweden 48 47.6 51.3 80.4 83.5 Switzerland 94 96.3 94.4 102.7 139.7 Australia Permanent 125.9 150 167.3 179.8 191.9 Temporary 244.7 261.6 289.4 321.6 368.5 Canada Permanent 221.4 235.8 262.2 251.6 236.8 Temporary 243.3 244.3 246.7 268.1 281.2 France 136.4 141.6 135.9 135.1 128.9 Ireland 42.4 41.8 66.1 88.9 89.5 Italy 319.3 206.8 181.5 252.4 United Kingdom 408.6 497.9 466.4 509.8 501.8 United States Permanent 703.5 957.9 1122.4 1266.3 1052.4 Temporary 1233.4 1299.3 1323.5 1457.9 1606.9 EU-25 2211.2 2861.3 2761.6 2938.8 3280.1 Degree Plus 12

15 10 5 0-5 -10-15 Change in OECD working-age populations over the period 2005-2020, with zero net migration (as a percentage of the population in 2005) Series4 Ireland Iceland 13 Italy Germany Hungary Finland Greece Sweden Austria Spain Switzerland Portugal Poland Denmark Belgium OECD Slovak Republic Canada Netherlands United Kingdom France Norway Luxembourg Australia United States New Zealand Degree Plus Japan Czech Republic

No need for migration as there is intra-eu mobility Since the Treaty of Rome (1957), one of the principles of the EU has been the freedom of movement of workers between member states This intra-eu mobility was supposed to alleviate labour shortages and reduce unemployment However, in practice there is much less mobility within the EU than expected and compared to a country like the US (even if we take into account mobility within individual EU countries) (even in Malta) EU preferential treatment of EU workers (community preference) but still not fully the case (transitional arrangements) Furthermore, we cannot subsititute between EU and non-eu as they do not take the same type of jobs (ex: low skilled jobs) Degree Plus 14

Is migration due to poverty? Migrants leave their country of origin due to extreme poverty If this was the case, then migrants would originate from the poorest countries in the world This is not the case Ex: Mexico, Philippines, Morocco, Algeria, Tunisia If we look at sub-sahara Africa we have Senegal and Ghana Moreover, it is not the least educated in these countries who migrate (why requires costs + inspiration) Why? Usually when countries start developing we have emmigration then when these countries reach a certain level of development we have again immigration Ex: Spain, Italy, Portugal, South Korea, Taiwan, Malta These countries went through a similar transition Degree Plus 15

Migration has increased substantially during the last few years We live in an age of unprecedented mass migration Not the case when we consider global levels Migration has increased in line with world population growth so in relative terms migration has not increased Maybe to a certain extent true for Europe (direction has changed). It is the first time that Europe is facing mass migration What about boat people (irregular migrants) EU total migration is about 2.5 million per year Boat people represent only a few tens of thousands (1 or 2% of total) There is no migration crisis Degree Plus 16

Can migration solve population ageing related problems? Ageing of population which results from greater life expectancy presents various challenges Higher fiscal costs due to higher medical costs and pension costs Number of ageing population will increase over time which exacerbates problem mentioned above At the same time, fertility rates (birth rates) have declined so the ratio of active to non-active persons is declining creating more fiscal imbalances (pay-as-you-go pension system) Migration can help by having more active persons, having workers taking care of old people, workers taking jobs of people retiring and migrant workers having more children than native population Furthermore, fertility rates have been declining in surrounding countries as well But, it is impossible to eliminate ageing Degree Plus 17

Migration causes brain drain Brain drain is when highly skilled/educated migrants leave their country of origin As a result, the countries of origin, which also tend to be poorer/lower developed countries, are deprived of valuable human capital Therefore brain drain further hinders their economic development In some countries 50% of nurses/doctors leave Not entirely true Why? Highly skilled/educated leave due to: Unattractive working conditions Lack of opportunities Degree Plus 18

Does migration lead to increased unemployment? Migrants take the jobs of native population and are willing to accept lower conditions of work thereby driving the native population out of work Unemployment is due to: Cyclical unemployment (fluctuations in demand in the economy) can lead to shortages Frictional unemployment (transition from one job to another. This is considered normal and not a source of problem) Structural unemployment (skill mismatches) vacancies cannot be filled with current stock of unemployed persons As long as migration either helps to satisfy labour shortages or skill mismatches, it will not lead to an increase in unemployment Degree Plus 19

Migration is due to differences in economic conditions Migration between two countries is determined by economic differences between these two countries Some also mention differences in population density Economic Migration is primarily motivated by demand If there is no demand for labour migrants will not go If demand for migrants cannot be met through legal migration then it will be met via illegal migration Degree Plus 20

Migrants do not contribute to economic growth Migrants are only taking resources from the countries of destination and send back to their countries of origin all the money earned (remittances) Legal migrants pay taxes, social security contributions, consume, etc Furthermore, migrants enable native workers to work in more skilled jobs Migrant workers enable a higher women participation rate (nannies and taking care of old people) Migrant workers can enter new sectors of the economy Migrant workers fill labour shortages and help sustain the ageing population Migrant workers enable to sustain overall economy Degree Plus 21

What type of jobs do migrants take? Stratification of labour market Either low skilled jobs (those that the native population does not want to do) Either highly skilled jobs (those for which there is not enough native population or native population does not have skills required) Odd jobs (those that have specific requirements, such as unusual timings) Migrant workers tend to be over-qualified for the jobs they are doing which is a waste of human capital Problem of recognition of qualifications Degree Plus 22

What do the employers say? Employers are in favour of migration Migrant workers tend to be more flexible Migrants workers already have the skills and thus need no training Migrant workers can help alleviate shortages, especially in sectors of the economy where cannot re-locate Migrant workers do not constitute a threat (apply to small businesses where business is based on intangible asset that cannot be protected via a patent) Ex: a hairdresser, plumber, etc. Degree Plus 23

What do the unions say? migrant workers are undermining conditions of work by accepting lower wages being more flexible not being unionised not reporting situations of employer abuse not being aware of current legislation and practice Degree Plus 24

What do the politicians say? it varies between countries but is dependent on the economic situation of each country usually when there is low unemployment and the economy is booming, politicians will tend to be less hostile to economic migration sometimes they will have a very tough discourse on migration (media) but in practice they will adopt a much more pragmatic approach Degree Plus 25