Blog Post

Migration policy in the great recession

What’s at stake: The great recession of 2008–09 brought the worst falloff of global economic activity since the Great Depression as measured by trade, industrial production and a host of other economic indicators. But the effects of the recession have also seeped into other aspects of policy around the world — including migration. Stemming from […]

By: Date: July 11, 2010 Topic: Global Economics & Governance

What’s at stake: The great recession of 2008–09 brought the worst falloff of global economic activity since the Great Depression as measured by trade, industrial production and a host of other economic indicators. But the effects of the recession have also seeped into other aspects of policy around the world — including migration. Stemming from increased unemployment rates, many countries made changes to migrant policy that largely encouraged both migrant residents to leave and discouraged new immigration.

Mike Nicholson and Pia Orrenius of the Federal Reserve Bank of Dallas show that the expansion that spurred immigration throughout much of Europe came to an abrupt end with the 2008 financial crisis and slowdown in world economic growth. Countries also responded to rising unemployment rates with policies designed to limit foreign-born workers’ access to labour markets.  The most common policy changes included tightening numerical limits or imposing categorical limits on immigrant inflows, paring back lists of shortage occupations and changing eligible occupations for temporary migrants. Nations also limited the opportunities for migrants to adjust their legal status or renew their work permits. Through these initiatives, lawmakers sought to help domestic workers by limiting foreign competition during a severe economic downturn. While the intent of these measures is clear, their bite is somewhat uncertain. In hard times, labour protectionism has limited impact because migration naturally falls off. An extreme example was the Great Depression, when deteriorating economic conditions led to an 85 percent decline in the immigrant inflow between 1930 and 1932. During the Great Recession, rising unemployment rates across many advanced economies have deterred would-be migrants, leading to steep declines in flows along the major global migration corridors. Effects of the migration resistance could peak after the recession ends, the authors say. Demand for labour and migration are expected to rebound as the economy recovers, but increased demand could clash with restrictions on foreigners in the labour market. But some countries have already started reversing migration policies enacted during the recession. Switzerland, for example, has upped some of this year’s work permit quotas after cutting them in half at the beginning of the year, and Malaysia is permitting some foreign recruitment in manufacturing.

Doris Meissner, a senior fellow at the Migration Policy Institute, argues that the foreign-born workers who fill lower-paying jobs are typically first-hired/first-fired employees, allowing employers to expand and contract their workforces rapidly. As a result, immigrants experience higher employment than natives during booms – but they suffer higher job losses during downturns, including the current one. She also point out that of the approximately 10.8 million immigrants who are in the US illegally, about 40 percent arrived legally but overstayed their visas. As for the flow of illegal immigrants, apprehensions along the U.S.-Mexico border have declined by more than 50 percent over the past four years, while increases in the size of the illegal population, which had been growing by about 500,000 a year for more than a decade, have stopped. This decline is largely due to the recession, but stepped-up border enforcement is playing a part.

With immigration issues coming to the forefront once again, it’s a good time to review the evidence on its effects. Robert Shapiro presents some thoughts on the effects of immigration on the economy. First, there’s simply no evidence that the recent waves of immigration have slowed the wage progress of average, native-born American workers. Overall, in fact, the studies show that immigration has increased the average wage of Americans modestly in the short-run, and by more over the long-term as capital investment rises to take account of the larger number of workers. Behind those results, however, lie winners and losers – although in both cases, the effects are modest. Among workers, the winners are generally higher-skilled: For example, when a factory or hotel hires more low-skilled workers, demand also increases for the higher-skilled people who manage those workers or carry out other professional tasks for an enterprise that’s grown larger. The losers are generally the lower-skilled workers who have to compete for jobs with recent immigrants.

Real Time Brussels reports the latest Eurostat numbers on the EU’s new citizens. France overtook the U.K. as the country signing up most new citizens in 2008. Some 137,320 people acquired French citizenship against 129,260 in the UK. In the previous year, 164,450 people acquired British citizenship and 137,320 French. Germany was in third place with 94,470 new citizens, compared with 113,030 in 2007. In the European Union as a whole, 696,000 people acquired citizenship, compared with 707,000 in 2007. But Sweden tops the list in terms of the number of new citizens (30,460 in 2008) as a proportion both of the total population and of the number of resident foreigners in the country. Most new EU citizens were from Morocco (68,823), Turkey (49,546) and Ecuador (27,322).

*Bruegel Economic Blogs Review is an information service that surveys external blogs. It does not survey Bruegel’s own publications, nor does it include comments by Bruegel authors.


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