Thursday, 10 September 2009

The economic benefits of immigration

Sli Eile: While not seeking to open a debate on the Lisbon Treaty in this post, I feel obliged to comment on a claim made by a certain organisation (Cóir), recently, in regard to the impact of immigration on economic growth in Ireland. Here is what it said in a leaflet widely circulated in Dublin:

“We now know that up to a million foreign workers arrived looking for employment (Central Statistics Office). According to Minister Brian Lenihan, this helped to cause the crash. Now overseas workers make up almost 20% of our unemployed (CSO).”

This type of dangerous nonsense economics must be quashed. The issue also needs to be confronted on the doorstep, in the pub and at the kitchen table. You will find people who believe in these untruths but are disinclined to admit it (which is a reason that I do not entirely buy the survey-based claim that the rejection of Lisbon I had little to do with voter concerns about migration – some people will just not admit it).

First a few facts:

1 Nowhere do CSO figures support the claims about the number of migrants. It is estimated that the annual net inflow of persons over the 10 year period 1999-2008 was 41,000 per annum, giving a total cumulative figure of over 400,000.

2 The CSO has estimated that in the first quarter of this year, there were 462,300 persons aged 15 or over who were not Irish nationals. Of these an estimated 287,000 were in employment and a further 49,400 were unemployed;

3 Of those in employment, 35% were in ‘Accommodation and food service’; 23% were in ‘Administrative and support service’; 20.1% in ‘Information and Communication’

4 It is true that close to 20% of those on the live register are not Irish nationals (June 2009 figures). The unemployment rate for this group is higher than the overall proportion in the labour force at approximately 16%. However, researchers have found no evidence for ‘welfare tourism’ (see below).

As for causing the economic crash? Research by Klaus Zimmermann recently published in EU Labour Markets After Post-Enlargement Migration concluded that free mobility of workers has a positive economic impact and is estimated to have added €24 billion to the GDP of the EU as a whole.

In a recent report by the Irish Times on this book:

Alan Barrett of the ESRI, who contributed a chapter to the book, calculated that the large inflow from the EU accession countries post 2004 increased Ireland’s GNP by 5.9 per cent as well as made us all wealthier on average: GNP per capita increased by 1.7 per cent as a result.
(The book, which was published on 25 September may be obtained for €129.95. I suspect that not that many EU workers will be rushing out to buy it. Some economists will, even after they take a 20% pay cut on their principal income sources as some are recommending.)

The Irish Times article reports:

The number of people from the EU’s new states living in Ireland grew from just 10,000 in 2002 to 200,000 in 2008. Barrett calculates that in the absence of this migration, wages in Ireland would have risen 7.8 per cent: as the Irish economy saw its competitiveness erode, partly due to inflating wages over this period, migration helped contain the problem.
So, the mobility of workers is a good thing and this is what the European Project is about. At the same time, workers rights and labour market standards need to be safeguarded and improved. I think that we owe more to the EEC/EU over the last 30 years in this regard than to successive Irish Governments.

Migration is here to stay, and will ebb and flow as we progress through the 21st Century. Some analysts project a huge movement of people away from the equator towards the North as the effects of global warming work their way through.

Europe and Ireland must figure a way to better integrate and empower new communities. Arguably, the flow of migrant labour – particularly skilled labour – to receiving countries has been a major factor in higher economic growth in those regions (and a drain on growth in the sending countries). Research on the causes of post-war recovery in Europe shows a strong positive impact from workers migrating to countries like Germany in the 1950s and 1960s. Switzerland emerged as a high-income country in the 20th century, starting from a low economic base in the 19th century. Part of its success has been linked to immigration of skilled workers.

Ireland is fairly unique in European terms in terms of the extent to which recent migrants are, on average, more highly educated (but under-employed relative to their skills) than the rest of the population. Along with New Zealand and Australia, Ireland is also unique among the 30 OECD Member Countries (Programme of International Student Assessment) in the extent to which immigrant students perform better in Science than their peers here. Check out the next Young Scientists exhibition to see what I mean.

Let's recall that we were once scattered wide and far and enjoyed the benefits of employment in the new world, NHS in Britain and freedom in many places to contribute to new societies and economies.


Proposition Joe said...


"... in the absence of this migration, wages in Ireland would have risen 7.8 per cent"

Of course this downward pressure on wages doesn't apply to those sectors of the economy that place artificial barriers in the way of immigrants (spurious Irish language requirements, restrictions on mid-career recruitment) and/or have rigid pay-scales in place that are unrelated and unresponsive to the normal forces of supply and demand.

If the competitiveness benefits applied uniformly accross the economy, then it would be valid to promote this as a positive side-effect of immigration. But the "hurray, its driving down someone else's wages!" argument is a tad hard to swallow.

Barry said...

I think Joe is right. The middle classes are the first to defend the free movement of people in the EU but the last to feel its effect in terms of job prospects and wages. They are protected in a way that people in more working class professions are not.

That said, I abhor Coir’s message here and have fought anti-immigrant vitriol in the pub and at the kitchen table more than once over the last few years.

Slí Eile said...

The key point was about the positive impact on economic development arising from immigration. As for its impact on wages by sector - here it isw probable that the supply of labour helped moderate wage growth in some sectors. I am not sure about the 'middle classes'. It is true that some people on low wages and on social welfare hold negative views about migrants. More data are needed rather than impressions and anecdotes.

While immigrants are strongly represented in sectors like retail, hotels and construction there is also a fairly high proportion in finance. The proportions in the public service vary from less than 4% in public administration to over 14% in the health services. Education attainment levels are higher - on average - among migrants.

Proposition Joe said...


No dispute that education levels are higher among migrants, the pertinent question though is why so few of these highly qualified workers manage to break into the public sector (outside of health which has had a very long tradition of open hiring practices, and also heavily uses temporary contracts for junior doctors etc. which encourages mobility).

"More data are needed rather than impressions and anecdotes."

Well the data is there, for example in the 2006 census numbers.

Contrast the size of the red and blue bars for the hotels & restaurant sector in this graph versus the public administration & defense sector in this one

I'm sure you'll agree that the contrast is very striking.

Further data may be found in the article from which I lifted those graphs.

I'd argue that the highly restrictive hiring and promotional practices in the public sector are effectively keeping qualified immigrants out of those jobs. And those restrictive practices are kept in place largely via union agitation, in order to insulate the incumbents' wages from the normal forces of supply and demand. Those of course they'd be very slow to admit it, but the net effect of not leveraging the pool of highly qualified migrant labour is a lower quality and more expensive public service.

Anonymous said...

One of the points on immigration that I think has neve really been tackled is that the large increase over the last decade was as associated with the boom as the influx of cheap credit. Without one there would not have been the other.

We received a large nbumber of people to work on sites building houses for nobody, working in a hotel sector with way too many hotels and in shops selling on credit.

Much of the immigration should not have happened because it was into a bubble and was not required.