Migration Policy and the Welfare State

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Migration and Development Labor Market
sessionA European Perspective
Washington, 23 May 2007
Tito Boeri Università Bocconi e Fondazione
Rodolfo Debenedetti
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(No Transcript)
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Outline

• Immigration to European-type institutions
  theoretical predictions and empirical evidence
• A closer look at welfare abuse and welfare
  shopping
• Policy issues
• Restricting welfare access by migrants
• Adopting a point system
• Introducing a pan-European safety net

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Unskilled migration to imperfect labour markets

• With a minimum wage

• With semi-rigid wages

w
w
Ls
Ls
w0
w
w1
Ld
Ld
L
L
N
N
Unemp
Unemp
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However

• Econometric studies find very mild effects of
  unskilled migration on wages and unemployment of
  natives
• And opinion polls indicates that Europeans are
  not too worried about the labor market impact of
  immigration (1 out of 2 states that we need
  immigrants to work in certain sectors of our
  economy)

Source Eurobarometer 64, June 2006.
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Perhaps because migration substitutes low
internal mobility
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And under centralised bargaining may improve the
labor market also in the South
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Growing Concernson welfare of respondents
stating that minority groups exploit the system
of social welfare
52
51
2000
2000
50
49
48
47
1994
46
45
1997
44
43
42
EU 12
EU12
EU 15
EU 15
Source EU 12, Eurobarometer 1994, 2000 EU 15,
Eurobarometer 1997,2000.
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Stronger concerns in countries with a richer
welfare state
Unconditional correlation between perceptions of
welfare abuse and generosity of welfare systems
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Self-selection
Social welfare and the skill composition of
migrants
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Are really migrants abusing welfare?

• Evaluating residual welfare dependency of
  migrants (non-EU citizens) based on ECHP data
  2001
• In the ECHP 2112 non-EU migrants accounting for
  3.75 of the respondents (under-representation)
• Is there a residual effect of migrant status on
  benefit receipt after controlling for personal
  characteristics?

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Migrants are over-represented among beneficiaries
of several transfers..
Odds Ratios
3
2.5
2
1.5
1
0.5
0
Pension
Sickness Benefits
Social Assistance
Family Allowances
Unemployment Benefits
Housing Allowances
Education Allowances
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Residual dependency on Unemployment Benefits of
non-EU citizens
Country migrant_nonEU Observations Pseudo R-squared
Germany -0.28 (0.03) 21733 0.19
Denmark 0.43 (0.09) 10342 0.13
Netherlands 0.16 (0.11) 17082 0.06
Belgium 0.17 (0.06) 10055 0.2
France 0.08 (0.05) 19821 0.1
United Kingdom -0.28 (0.12) 15176 0.14
Ireland 0.33 (0.22) 7108 0.18
Italy -0.18 (0.11) 19441 0.11
Greece -0.13 (0.07) 14520 0.18
Spain 0.1 (0.1) 17659 0.14
Portugal 0.13 (0.08) 16827 0.12
Austria -0.02 (0.07) 8337 0.19
Finland 0.02 (0.07) 9997 0.11
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Residual Dependency on Social Assistance and
Housing benefits of non-EU citizens
Country migrant_nonEU Observations Pseudo R-squared
Germany -0.19 (0.05) 21696 0.67
Denmark 0.29 (0.16) 10281 0.75
Netherlands 0.16 (0.15) 17082 0.69
Belgium 0.01 (0.09) 9986 0.63
France -0.07 (0.06) 19788 0.48
United Kingdom -0.45 (0.13) 15166 0.68
Ireland -0.26 (0.33) 6978 0.72
Italy 0.16 (0.10) 19441 0.09
Greece -0.16 (0.09) 14520 0.17
Spain -0.08 (0.16) 17655 0.15
Portugal -0.09 (0.09) 16827 0.45
Austria -0.01 (0.08) 8321 0.54
Finland 0.14 (0.1) 9956 0.58
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The reaction of Governments
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Tightening everywhere, mostly in rich welfare
state countries
www.frdb.org index of the stance of migration
policies (increasing in restrictions)
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A vicious circle?

• Perceptions of welfare abuse support tightening
  of migration policies resulting in more illegal
  (hence less skilled and not paying social
  security) migration.
• This further supports perceptions of welfare
  abuse making stricter migration policies even
  more popular.

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Policy options

• 3 possible ways out
• Closing the welfare door to migrants
• Selecting migrants introducing a point system
• Harmonising minimum guaranteed income schemes a
  EU-wide safety net

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Closing the welfare door?

• US experience suggests that it is too difficult
  to enforce these restrictions
• Evidence that cutting access to welfare reduces
  migration to rigid countries (by 1,5-3 for men,
  while migration of women increases!) with no
  effects on the skill composition
• Problems of assimilation
• Equity considerations

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A points-based system?

• Skilled migration is consistent with
  redistributive institutions it reduces income
  inequalities in the recipient.
• Simplification of migration policies (including
  asylum)
• Issues enforcement risk of brain drain,
  equity considerations.

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Brain drain may not be harmful to LDC growth
Source Docquier Rapoport (2004)
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Effective in selecting migrants(IALS scores)
Germany
New Zealand
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Migration policies are already getting selective

• Tightening everywhere of migration policies
  towards the unskilled
• While race to attract highly skilled migrants
• Explicit point systems in a increasing number of
  countries (Canada since 67, Australia since 84,
  New Zealand since 91, Switzerland since 96, UK is
  gradually adopting it)

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A EU-wide safety net?

• EU-wide minimum welfare floor (Atkinson (1998))
  preventing a race to the bottom in
  non-contributory transfers
• Important design features (need to harmonise in
  absolute levels, adjusted to PPP)
• Costs (not too large actually MGI at 430 Euros
  for singles costs about 30 billion, ½ of the CAP)
• If provided as citizenship right, necessary to
  coordinate migration policies as well.

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In any event

• Migration policies and social policies ought to
  be more closely integrated
• Welfare state when fiscal spillovers are
  perceived as important poses problems of
  co-ordination across jurisdictions of welfare
  minima (and migration policies)