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  • Mathieu Provencher

Economics of migration

(picture from Wix's library)

Many media outlets have tried to cover the Economics of migration in response to the latest movement of people into Europe (mostly refugees). They tend to present specific cases and have people debate on how this event could be good or bad for Europe. I will do something a bit different, as usual, by giving you guys some of the Economic theory trying to explain migration in general. These arguments can be applied to any migration situation, so feel free to analyse the current European situation with these tools.

Let's start with two little definitions: (1) Immigration is from the perspective of the receiving country. The immigrants are those that come from outside and settle in your country. (2) Emigration is from the perspective of the country of "origin". The emigrants are those that leave your country to go somewhere else. I will cover both perspectives in this article as Economics is interested on the effect of migration on everyone.

We can now build a fairly intuitive understanding of why people may want to emigrate. The emigrants are generally part of the labour supply of a country (if they are in the labour force of course) and aim at being part of the labour supply of another country. That may be because of bad conditions in their country (labour and/or living conditions) or just because the conditions in the target country are significantly better. Emigrants face two general forces: the gains of emigrating (better work, safer environment, living improvements) and the costs of emigrating (fares to be paid, travel time and hardship, leaving their loved ones behind). As long as the benefits are higher than the costs, it's beneficial to emigrate.

That's all nice but we also need to understand why countries may want immigrants. Countries receiving immigrants are part of both the labour demand and the labour supply. Countries may wish to receive immigrants because they lack certain types of workers for example. They may have a greater demand for that type of workers than their current supply. "Importing" labour (in a certain way) could help their economy, thus making them more open to receiving immigrants. On the other hand, workers that are already there may not want more people to compete with them for work. More supply of labour may mean that salaries will decrease and unemployment will increase, which will make such workers (or potential workers) unwilling to receive immigrants.

This leads us to the demand and supply of labour in both countries. Economics predicts that emigration can lead to higher salaries and lower unemployment in the country of origin (because of lower supply for labour) while it can lead to lower salaries and higher unemplyment in the receiving country (because of higher supply for labour). This is unfortunately where many people draw conclusions on the effects of migration... which is of course wrong.

While the beneficial effects mentioned above can indeed be seen in the country of origin (scarcity of labour leads to a higher price for it while people leaving the country should also lower unemployment), they are more than often dwarfed by the negative impacts on the whole economy. Emigrants tend to be the ones that are capable enough to make it, which means that productive (and perhaps educated) workers are leaving the country of origin. We call this phenomenon "brain drain", which can be quite destructive for the future of an economy. The exact opposite can be said for the receiving country, in which future growth can be much higher thanks to these capable and productive immigrants.

All of this depends greatly on one factor: who is migrating? The more productive the migrants, the more painful it will be for country of origin (in both the short and long term) and the more beneficial it will be for the receiving country (again immediately and in the future, especially if their skills are recognised).

Low productivity migrants, on the other hand, can be somewhat good for the country of origin (resources were needed to care for these individuals, which can now be used more productively) and bad for the receiving country (these individuals are not participating in productive activities of the country and may be costly through social programmes). These types of migrants are probably the source of anti-immigration sentiments that tend to be prominent in countries where illegal immigration is problematic.

The last bit of our model I want to cover are the changes in migration patterns. It is indeed possible for a country of origin or for a receiving country to have an impact on emigration or immigration related to them. Anything affecting either the benefits migrants receive or the costs of migrating can lead to more or less migration.

On the costs side, the country of origin can make it easier or harder to leave. Policies aimed at blocking people from leaving tend to go against human rights but they are unfortunately used in a number of countries. In the receiving country, more strict standards for immigrants (using a point system like in Canada for example) or implementing immigration quotas can reduce such flows. Also, increasing monetary requirements for immigrating can reduce their numbers.

On the benefits side, better social and economic conditions in the country of origin can convince more people to stay. The receiving country could also offer lower living improvements (by means of discrimination or zonification for example) to immigrants in order to discourage more people from coming.

I am not going to take a position on what is best towards migration. I am simply sharing with you guys how Economists see these events and how we can influence these flows. Remember, Economics is a-moral... I'm not concerned about good or bad when I have my Economist's hat, I just want to understand how everything works!!!!!

Thanks for your patience and see you guys around!

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