3. Labour immigration Flashcards
Theresa may view on immigration
Do not need net migration in hundreds of thousands - immigrants plug labour shortages and we should attract best talent - but not all is the best talent
- Welcome students coming to study - too many not returning home though
- Another reason is EU migration - unbalanced due to growth of British economy
- Numbers coming from Europe unsustainable, rules have to change
What is the general pattern of net migration in the UK
More people moving to the UK than leaving every year since 1994
Gap between in and out wideend since then, started to stabilise around 2005 at around 600,000 in, 350,000 out.
Net migration has increased since 2019 - net migration is steady and possitive - immigration always exceeds emigration
What are the migration rules in the EU?
Free movement is fundamental right guaranteed to EU citizens
Members:
- Right to move and reside for up to 3 months
- Right of redicence for over 3 months if employed or self employed, sufficient resources or student - or family member of EU citizen
Over last 10 years, increases in net migration - a growing importance of EU citizens to net long term international migration
What is the balance of different immigration for different EU countries in 2016? What has been the effect since?
50% of total EU immigration is EU15 countries
29% is EU2 countries
22% is EU8 countires - rapidly growing since 2014 when employment restrictions lifted
Recent studies shown EU net migration fallen since 2016, but began stabilising in 2018
What were the most popular inflow and outflow destinations?
Inflows:
India - 58,000
China - 52,000
Italy - 27k
USA - 26k
Romania - 26k
Outflows:
Poland - 24k
Australia 23k
France 22k
Spain 21k
USA 20k
What are the reasons for migration?
Majority work related - 300k
Next study related - 100-200k
Accompany/joining family, other or not stated all between 30-90k
What was the effect on immigration following the referendum?
Drop in work immigration, rise in study immigration
Net migration to UK, 2018, was 273,000
Increased during last years, peaked 320,000 in 2005
- 596,000 people immigrated in 2016, mostly EU countires
- Significant increase in immigration for work - Romanian and Polish
- Important factor of students at university
What determines whether migrants move or not
Self selection:
- Migrate if income gain exceeds cost of leaving
- Immigrant flow self selected - not all wish to move
- Importance to who migrates in order to evaluate impact on labour market
Positive and negative selection:
Borjas 1987 - higher salaries in the destination countries than in native country for:
High skill workers (low income inequality in source) -> positive selection
Low skill workers (high income inequality in source country) -> negative selection
(Graphed on page 1)
What are the short run effect of immigration?
Substitute for native labour force:
SR:
- Production with capital and labour - in SR capital fixed
- If wages in the UK greater than source, people migrate from source to UK
- Immigrants and natives are perfect substitutes competing in the same labour market
(Denote N as native and L as total labour)
Supply curve shifts out, wages fall, total employment rises
- Natives who work falls to N1 (shift down original supply curve)
- Greater capital reutnr
Illustrated page 1
What is the long run effect of immigration?
Both capital and labour mobile
- In SR lower wage, raise returns to capital
- Firms can now hire workers at lower wage, rasiign productivity
- Increases capital stock
- Demand for labour then also shifts to right, increasing salaries back to original level, employment rises more
This is because capital expands as firms take advantage of cheap labour - shifts out labour demand curev
What would be the effect if immigrants and native are complements?
Immigrants make natives more productive:
High skill immigrants allow further specialisation
- Low skill immigrations free up natives to shift into more complex jobs
Immigrants and natives not competing in same labour market:
- Increase in number of immigrants shifts up the demand curve for native workers
- As demand shifts out, native wages rise, native employment rises
On page 1
What are some examples of evidence of the labour market impact of migration?
Exogenous supply shocks:
USA - Maribel boat lift
Israel - russian immigrants
France - after Algerian independence
UK
Studies correlate wages anad measures of immmigration penetration across countries - if immigration bad, natives working in cities pentrated by immigrants should be worse off than natives working in cities that immigrants avoid
What was the Maribel boat lift?
1980 - Castro allowed all Cubans who wanted to emigrate to US from Mariel harbour
- 125,000 between May and September
- Miami labour force rose 7%
- Mariel much less educated 57% without high school diploma
Unemployment rate rose in Miami from 8.3 to 9.6
Comparison cities - 10.3 to 12.6
Comparison cities - Atlanta, Houston, LA
- No effect on unemployment rate or wages of less skilled non Cuban population in Miami
- Rapid absorption of Cubans into labour force
- Created ogoing debate if immigration lowers wages
What are potential problems of the case?
Endogeneity:
- Not random allocation of immigrants across cities
- Cluster of immigrants in prosperous cities - spurs positive correlation between immigration and local employment conditions
Local labour markets not closed:
- Natives respond to SS shock by leaving cities, re-equilibrates national economy
- Miami population grew at 2.5% between 70-80, after 80 rate was 1.4% - natives moved elsewhere
Evidence for US:
- All markets affected by immigration, not only those penetrated by immigrants
- Unit of observation is national labour market; not local market
- Wage impact of immigrants in the US
What is the evidence for the other 3 countries listed before
Israel:
- Natural experiment of mass migration, Russian jews allowed to emigrate - most went to Israel - 610,000, 7% of israeli population
- In 90s 20% increase in population
- Russian Jews were more skilled than natives - fail to reject no significant impacts - immigration entered occupations with low wages
France:
- 1962 algerian indepdencen ended - 900,000 French born expatriates returned to France, 1.6% of population
- Similar education to natives - very small decline in wages
UK:
- Immigrants to UK on average better education
- Varied composition of immigrants relative to natives by skill and region
- Small negative effect at bottom of distribution, small positive at top - but no average wage effect
- Immigration depresses earnings of previous immigrants instead of natives.
- Small returns of education for natives, small deterioration for previous immigrants.
