The consequences of eastwest migration in Europe

1
The consequences of east-west migration in Europe

• Simon Commander
• Bucharest
• 14 June 2008

2
Context and questions

• Europe has experienced one of the largest
  voluntary movements of people in recent times
• Since 2004 big migrations westward from EU
  Accession countries
• as a share of population migration has ranged
  from around 0.75-1.5 in Baltics, Poland and
  Slovakia
• Poland probably accounts for largest absolute
  number of migrants at gt1m
• chain process as migrants go west from Accession
  8 countries, inflows from further east (e.g,
  Ukraine)
• most migrants are young, educated and unmarried
• What are the consequences for both sending and
  receiving countries?
• As yet, surprisingly little researched and/or
  quantified
• New EBRD research project will ask these
  questions
• What impact do migrants have on the receiving
  economy?
• Must large scale migration of the educated
  constitute a brain drain?
• Through what channels do receiving countries
  benefit and who are the losers?

3
Receiving countries case of UK

• For brevity, use only evidence from UK in this
  presentation
• despite huge data shortcomings
• Immigration from Accession 8 countries to the UK
  has been large
• For example, Worker Registration Scheme (WRS) had
  500,000 registrations between 2004 - end 2006
• but WRS probably underestimates total (e.g., self
  employed do not need to register)
• LFS data suggests c350,000 A8 people resident in
  UK by mid-2006 of which 70 had arrived since
  2004
• 1 in 3 new immigrants since 2004 from A8
• They account for under 1 of working age
  population but just over 7 of total immigrant
  population of working age

4
Receiving countries case of UK

• Most A8 immigration has been concentrated in
  London and South East
• Most migrants work in services (25) but also in
  manufacturing (20) and construction (15)
• A8 migrants tend to be young, relatively skilled
  and more likely to be male
• but evidence suggests matching has mostly been to
  relatively low skill jobs

5
Receiving countries case of UK

• Debate on economic impact of recent migration
• In short run, capital and technology are fixed so
  the main impact is on the supply of labour
• Impact depends on whether immigrants are
  substitutes or complements
• Impact on resident population depends on whether
  immigrants are different re skills, education etc
• Findings regarding impact on GDP per capita
  suggest little or no effect
• Evidence on possible externalities for example,
  rising skill share density and diversity
  difficult to pin down

6
Receiving countries wages in UK

• Dustmann et al (2007) find that immigration has
  generally had positive effect on residents wages
  but not for low wage group
• Magnitudes 1 increase in share of immigrants in
  working age population has led to a
• 0.6 increase in median wage
• 0.4 increase at 9th decile
• but 0.5 fall for 1st decile
• Group worst affected tends to comprise earlier
  migrants and ethnic groups
• Macroeconomic effects Blanchflower (2007)
  suggests that migration growth has tended to damp
  wage growth and possibly lower the NAIRU
• through increased fear of unemployment due to
  increases in labour supply
• migrants remit to their home countries lowering
  impact on domestic consumption
• firms may substitute labour for capital and lower
  investment demand

7
Receiving countries unemployment in UK

• Several studies suggest that impact of A8
  migration on near term unemployment has been
  small
• Blanchflower et al (2007) find that regions with
  largest increases in immigration have seen
  smallest rises in their unemployment rates more
  opportunities attract
• but measurement issues e.g., possible movement
  by residents in response to migration
• narrow measure of unemployment used
• even so, wide agreement that immigration has
  close to zero effects in long term
• Some evidence that there may have been a negative
  impact on youth unemployment
• resident youths may have lost out for entry-level
  jobs
• but correlation between incidence of immigration
  and youth unemployment is weak
• national minimum wage may be relevant

8
Receiving countries public services, finance and
housing in UK

• Large range of estimates but general lack of
  precision
• depends on what costs and benefits are included
• immigrant groups very heterogeneous
• A8 immigration likely to have had a small short
  run positive impact on public finances
• due to composition and rules regarding access to
  benefits
• some evidence of localised congestion in
  education and health services
• impact on housing and rental prices
• house prices higher than in the absence of
  immigration but probably not by much
• low end rental market has not increased
  disproportionately

9
Sending (transition) countries

• Some basic questions need to be asked
• What are the magnitudes of migration?
• What are the characteristics of migrants?
• Is migration temporary or permanent and with what
  mix?
• And with what consequences for output?
• Migration should permanently reduce output
  through lower labour supply
• But reduction may be tempered as capital stock
  may not adjust fully and K/L ratio stays higher
  permanently
• Also depends on the characteristics of migrants
  for example, if they were inactive or unemployed
  prior to moving

10
Sending countries - Poland

• Wide range of estimates of magnitudes
• In 2006 up to 2 million Poles temporarily abroad
  (gt2 months) or 6 of permanent residents gt15
  years
• reflects an increase of four percentage points
  since 2002
• Budnik (2007) uses LFS data to compute flows
  including migration picking up temporary migrants
• Finds that transition probability from home to
  foreign labour market was around 0.1
  pre-Accession 0.3 after Accession
• Transition probability from employment and
  unemployment to emigration post-accession was
  0.3 and 1.5 respectively
• Return migrants (small sample) had very
  significantly larger probability of finding a job
  at home than unemployed or non-participants

11
Poland average transition probabilities2000 -
2006
12
Sending countries a brain drain?

• Partly depends on what migrants did ex ante
• Evidence from Poland is that significant number
  came from unemployment or inactivity
• Is migration a temporary/circulatory phenomenon?
• IPPR has produced some (weak) evidence that it is
  
• large number of return migrants with good
  employment prospects
• Rising employment and strong wage growth is
  helping converge incomes to Western European
  levels
• Labour cost roughly doubled between 2004 and
  mid-2007
• Employer data show large jumps in reported skill
  shortages
• For example, in construction 5 reported lack of
  qualified workers in 2004 rising to nearly 50 by
  2007
• Data from receiving country ends suggests much
  heterogeneity across countries in terms of
  durations of stays

13
Sending countries a brain drain?

• Education externalities?
• migration encourages those at home to acquire
  more education
• subject to marginal person in education having
  positive probability of migration
• Probably of limited relevance in most transition
  countries due to
• initial conditions, including relatively high
  enrolment rates and educational scores given
  country income levels
• But note that there is a boom in tertiary
  enrolments and evidence of widespread up-skilling
• in the case of Poland, gross enrolment rates
  (19-24yrs) was around 18 in 1989-2003 in last
  five years gt52
• but the fact that this is widespread in CEB and
  SEE viz, occurring also in countries with low
  migration exposures suggests factors other than
  migration may dominate

14
Sending countries a brain drain?

• Other possible feedbacks include
• remittances
• large in the Balkans Bosnia gt15 of GDP
• reinvestment
• knowledge and skill transfers
• diaspora and other network effects
• Research implementation
• Requires firm level questionnaires with regional
  modules
• Use of Labour Force Surveys