In observance of the International Migrants Day, Dec 18
Today, one in every three migrants in the world is in a European country. Despite what you might think, they are not all in high-income Western European countries. In both Eastern and Western Europe, the number of migrants increased rapidly over the last four decades. For example, in Kazakhstan, almost 20 percent of the population is immigrant,and in Ukraine and Russia, immigrants make up 10 percent and 8 percent of the population, respectively.
There are several factors that led to this rapid increase in migration. First, intra-regional migration is especially high in Europe, as an integral part of overall regional economic integration in Europe and Central Asia (ECA). Even though just one third of migration takes place within regions in other parts of the world, 80 percent of migrants in ECA choose to move within the region. Second, ECA countries are geographically close to several lower-income regions with significant young and underemployed populations, such as Middle East, North Africa and Sub-Saharan Africa. Also, some of the recent conflicts and civil wars in these regions led to large number of refugee inflows. For example, Turkey hosts close to 4 million Syrian refugees, in addition to economic migrants who make up close to 6 percent of the population.
What makes people want to migrate to a foreign country? Like in other important personal decisions, potential migrants weigh economic costs and benefits in deciding whether to move, and where to. Wage gaps and differences in employment opportunities, costs associated with physical distances, cultural and social adaptation, burdens imposed or preferences granted by the policy environment, access to health, welfare, education benefits – all play an important role in this decision.
Demographic composition of the ECA countries and the resulting labor market dynamics are also important in shaping migration patterns.With rapidly falling fertility and mortality rates, almost every country in the region is rapidly aging. Migrants – who are disproportionately of working age population – increase the size of the labor force. As the countries in the region continue to age over the foreseeable future, we will see even more demand for migrants. And these migrants will have to come from outside the region since aging is a region-wide phenomenon.
What does this mean for the destination countries? There is an extensive literature on long-term benefits of migration. As people move across markets, labor shortages are reduced, migrant workers earn higher incomes, and firms who employ them, and consumers who use the services and goods they produce, all benefit. Highly-educated and skilled migrants boost innovation and productivity across the whole economy.
The literature on the short-term labor impacts of migration is less conclusive, however. Research suggests that immigration does not have significant average wage effects, but there are potential displacement effects for workers who most directly compete with immigrant workers.Trying to move to different locations or professions may be disruptive and costly, particularly if they are low-skilled or older. In contrast, workers whose skills complement those of the immigrants frequently experience significant gains.The political opposition and anti-immigrant sentiments in destination countries are often caused by these displacement costs which tend to be concentrated, immediate and shorter term.The overall benefits, in contrast, are long-term and diffuse, and, as a result, often discounted.
So, what can we do to address the shorter-term costs and reduce resistance to immigration?
Policymakers can assist affected workers in destination countries by designing programs to retrain them; and adjusting education systems for young people so that they acquire skills and do not compete with lower-skilled immigrants.
There should be relocation assistance for workers who need to change occupations, cities, or sectors of employment. Transitory welfare benefits and unemployment insurance payments are possible components of such a program.
Financing of these adjustment programs become a hurdle in most instances. One solution is replacing the quota regimes that govern migration policies with tax regimes. The beneficiaries of labor mobility– migrants, firms who employ them, and consumers who consume their products and services – can be taxed the same way any other import is. These policies may take the form of an additional income tax, a visa fee, or even a visa auction system.
Another innovative idea is generating a market for work permits where citizens can rent out their work permit to immigrants. Such fee-based systems would allow employers to move quickly and adjust to changes in labor markets.
In the end, reaping the long-term benefits of migration depends on how well immigrants assimilate in their host country. Granting work permits, allowing entry into labor markets, and a clear pathway to permanence can facilitate this integration, especially when it comes to their children.Immigrant families can help the countries in Europe and Central Asia address some of the demographic challenges they are facing, but only if proper education and social policies are implemented along with immigration policies.
Blog – Is there a policy remedy for brain drain in Europe, by Asli Demirguc-Kunt and Cyril Muller
Blog –A New Policy to Better Integrate Refugees into Host-Country Labor Markets, by Asli Demirguc-Kunt, Michael Lokshin and Martin Ravallion