Economics of Immigration

The Impact of Immigration on the Australian Economy

P. N. (Raja) Junankar

• Publisher: Palgrave Macmillan
• Year: 2016
• ISBN:
  9781137555250
• Topic: Economics
• Subtopic: Labour Economics
• Index: Economics

Poverty, famines, wars, and ethnic conflicts lead to large movements of refugees. The papers in this book provide an analysis of the economics of immigration. Junankar discusses why people migrate, the likely destinations for migrants, and their employment in the destination countries. He studies the benefits to the migrant families in terms of higher wages and living standards, and also studies how immigrants fare in the Australian labour markets in terms of finding good jobs, and whether there is discrimination against them. Economics of Immigration analyses the macroeconomic impacts of immigration on the Australian economy and discusses why some groups favour immigration while other groups are against it.

Junankar argues immigration has been beneficial for employment and growth; not only adding to labour supply but also to labour demand, hence leading to favourable outcomes. This collection of essays shows how immigration has helped the economic development of Australia, while also highlighting that the historical reasons for immigration lie in the colonisation of many countries in Asia and Africa.

1

Introduction

Give me your tired, your poor,

Your huddled masses yearning to breathe free,

The wretched refuse of your teeming shore.

Send these, the homeless, tempest-tossed, to me:

I lift my lamp beside the golden door.

(On a plaque at the Statue of Liberty, New York, USA)

Introduction

We are all immigrants. Evolutionary biologists tell us that human life began somewhere in Africa and then humans migrated to the Middle East and then onto Europe and Asia (see Diamond, 1998). The world is at present (August 2015) facing huge movements of refugees from war-torn countries in Africa and the Middle East to Europe. Boatloads of refugees are escaping and many of them are drowning in the sea as they seek shelter in the peaceful and richer countries in Europe. Unfortunately, many European countries want to close their doors on them, or just pass them on to their neighbouring countries. It is a sad reflection on humanity to see many of these refugees sheltering in unsafe camps with little access to food and water. From October 2013, the Italian government was sending out their ships to rescue migrants in overcrowded boats (under a plan called Mare Nostrum) but this was cut back in 2014 because of cuts in government expenditure, and more boats are now sinking. In the southern hemisphere, the “people smugglers” continue to send people in unsafe boats, and the Australian government has picked up these refugees and sent them back on naval boats to Indonesia or Vietnam. In the USA, many Mexicans try to enter illegally but are often forced back. Those who enter illegally find a better life, even though they may be in continual worry about being caught and sent back.

Many of the richer OECD countries have an ageing population and migrants; in the short run, provide a younger labour force that helps to provide for the ageing population. In the long run, a constant rate of immigration cannot help to change the demographic structure. However, as long as immigration continues for a few years, societies can benefit from a younger population. Although many migrants come from countries with larger families, usually after some time in the new country their fertility rates tend to move towards the native population’s fertility rates.

The opposition to immigration by governments is partly due to economic fears – fears about losing jobs to immigrants, cuts in wages due to increased labour supply, welfare cheats leading to higher taxes for the natives – and sometimes worries about the environment. But often it is due to their fear of political opposition by xenophobic voters. Often the fear is of “coloured” people moving into European countries, and more recently, fears of Muslims “invading” their country.

In this volume we study various aspects of immigration: who are migrants? Why do they migrate? How do they get on in the destination country? How does this immigration impact on destination countries? Does the source country suffer from this migration? Why do countries impose restrictions on immigration?

Historical background

Australia, Canada, USA, and many Latin American countries are all immigrant countries: European colonialists (from Britain, France, and Spain) took over these continents and displaced the original inhabitants by force, by skulduggery, or by passing on diseases. Colonisation disrupted the economic and social structures in those countries and people had been separated from their land and were looking for a better life. In recent years the migrant flows tend to be from former colonies to their “mother” country. Even the flow of illegal migrants from Mexico can be seen as a return to their former territory (Texas had been part of Mexico until 1836, and then was annexed by the USA in 1846). Now, of course, the European masters are in charge of their borders and have strict controls on migrants. The free movement of peoples that happened over centuries finally came to an end with the establishment of passports and visa controls after the First World War. It is interesting to note that many countries practised discrimination in terms of eligibility for entry for non-white migrants, for example Australia (White Australia Policy until 1973) and the USA until 1968.

In the past, prior to the existence of border controls, when there was a famine in Ireland in the 1840s, thousands of Irish people migrated to the USA. When there was religious persecution in the nineteenth century in many European countries, people migrated to other European countries or to the USA or Canada, and after the Second World War millions of people migrated from Europe to the USA, Canada, and Australia. A large migration of Jewish people also took place from Europe to the newly formed country Israel, which in its wake led to thousands of Palestinian refugees moving to the Lebanon, Jordan, and Syria.

In post-war Britain, when there were labour shortages and British Rail recruited thousands of workers from its former colonies in the West Indies. Former colonials from Pakistan and India moved to Britain until immigration policies tightened up in the 1960s. When East African countries were gaining independence, they were given the choice of becoming nationals of the new countries or retaining their British passports. Many of these people who retained their British passports were people of Indian origin who were trying to escape from African dictators like Idi Amin of Uganda. They suddenly found in 1968 that the British decided to change their legislation to introduce restrictions on people who held British colonial passports.

In 1956 a large number of refugees fleeing from communism in Hungary went to countries in Europe, America, and Australia. The end of communism in 1990 led to a huge migration of Jews from Russia to Israel. Many people fled from the former East European countries to richer, more developed countries in Europe and the USA. The long and eventful Vietnam War that ended in April 1975 led to large flows of migrants to various countries like the USA, Canada, and Australia. After the Sharpeville massacre in South Africa in 1960, many whites fled to “safe” countries like Britain and Australia in anticipation of black counter-attacks. Similarly, there was a big migration of whites from South Africa after the end of Apartheid and the election of a black government led by Nelson Mandela in 1994.

It is interesting that although economists have argued vehemently for free trade as a means of improving the conditions of growth and employment, they do not argue for “free movements of labour.” In the trade arena there is a World Trade Organization (WTO) that is supposed to promote the free trade of goods and services in the world. In the past decade many countries have entered into so-called free trade agreements that are in fact bilateral trade agreements. At present Australia is negotiating a free trade agreement with China although there are some objections from the Australian Labor Party as it is concerned about the free movement of low-paid Chinese labour to Australia. Australia has already signed a few of these bilateral trade agreements, but these agreements lead not only to trade creation but also to trade diversion. There is one study by Hatton (2007) that discusses the possibility of a treaty for international migration similar to the WTO but concludes that for various political and social reasons that this is unlikely to come about.

Interestingly, the European Union (EU) does have free movement of labour between its member countries although language and institutional barriers mean that these movements of labour are restricted. The Schengen Agreement (1985) allows free movement of labour without border controls between most of the EU countries (and a few non-EU countries).¹ The recent upsurge of refugees from the Middle East, Africa, and Afghanistan means that as long as the refugees enter one of the Schengen countries they are allowed to travel to any other country, which means most of them wish to travel to Germany where the economy is strong and unemployment is low.

However, the British were free to travel to their colonies, including Australia and New Zealand, without hindrance for a very long time. In fact, for many years Australia was subsidising passages to Australia for (white) Britons, the so-called Ten Pound Poms. Even now, people from New Zealand can move freely between New Zealand and Australia, although recently there have been restrictions on access to social security benefits.

Why do people migrate?

There is a simple answer to this question: people migrate to have a better life for themselves and for their children. A migration decision is not an easy one as the potential migrant leaves behind an extended family, friends, work colleagues (if employed), and a network of social contacts. Often potential migrants believe that they would move to another country for a period of time to be able to make a fortune and then return to their homeland. It is important to remember that many of the countries that were colonised by the European countries had their economic, social, and political structures devastated and hence the disruption would have caused many changes to the life style of the inhabitants. This would have led many people acquiring some knowledge of the imperial country and aspirations to the lifestyle of their former masters. Hence, it may have provided them with an incentive to migrate.

Economists explain the decision to migrate in terms of “push” and “pull” factors. Push factors include religious persecution, civil wars, international wars, famines, poverty, unemployment, etc. Pull factors include the “bright lights” of London (or New York) or as for Dick Whittington “London’s streets were paved with gold!” People move to find their fame and fortune, or to be more precise to find employment, better wages, and better living standards that include better housing, better health, and better education for their children. In formal economic terms a potential migrant looks at the net benefits of migrating by comparing the expected income (allowing for the probability of finding employment) in the destination country with the income in the source country plus the costs of migration. It is meant to be a “simple” rational calculation. However, a decision to migrate is a very complex one where although economic factors are important, social, cultural, and psychological factors also play their part. During the booming 1960s, migration to Britain and Germany increased. There is clear evidence that when unemployment rates in (say) Britain rise, migration from poorer countries fall (see Hatton and Williamson, 2009).

Who migrates? When there were no border controls the poor would like to migrate. However, the really poor do not have much information about migration possibilities and in any case they do not have the wherewithal to cover the costs of migration, travel costs are significant for people from Asia or Africa to migrate to Europe or America. Given that many countries impose restrictions on migration, migrants need not only sufficient funds but also significant levels of education to understand and negotiate the migration process. The USA has a lottery system for getting a “green card” (migrant status) so anyone who can afford the travel can be a potential migrant. Countries like Canada and Australia use a points system that requires a certain level of language skills, education, or work experience, and generally have to be in younger age groups. To put it formally, the age and education levels of the migrants in the destination country depend not only on choice of the potential migrant (the supply side) but also on the conditions imposed by the destination country (the demand side). Hence, if we see that different cohorts of migrants in, say, Australia have different levels of education it may simply be because they have changed their regulations, not that the migrants are choosing to leave when they have better educational qualifications.

Given that people want to migrate, how do they choose which country to migrate to? Before border controls were introduced people moved where they expected to find (better) employment and incomes. Generally, people moved to countries about which they had some information. Countries that had been colonised by the European powers typically had more information about the country that had ruled them, so it was the obvious first choice. Hence, people from India, Pakistan, Bangladesh, and the West Indies typically migrated to Britain, as long as they were allowed to do so. For some time, Britain allowed its former colonial subjects to migrate freely to it. People from the former French colonies of Algeria and Tunisia usually migrated to France as they had the language skills and some knowledge about France. The USA has been a magnet for migrants and refugees for hundreds of years: at one time entry was limited only for the Chinese, but Europeans could migrate freely. In recent years the most popular countries for migrants are the USA, Britain, and Germany: countries where migrants believe they can get jobs and have a decent life for their families.

Most countries have some form of border controls so that the choice of the destination country would depend on how stringent were the entry restrictions. Migration from one country to another often follows existing migration patterns. There is a tendency for migrants to congregate in enclaves or ghettoes, as new migrants have family or friends who can help in the process of settling in the new country. Fellow country people can help with finding employment, often in shops or factories where they are employed. They help with finding accommodation, shopping for the food of their country, and provide friendship and comfort.

In the past few years the wars in Afghanistan, Iraq, Syria, Liberia, and Sudan have led to huge disruption and people being made homeless and desperate. Many of these people have been desperately trying to enter the EU (primarily to get to Britain or Germany which are expected to provide employment and social security) by fleeing in un-seaworthy boats. In the process many lives have been lost and there has been a backlash against refugees in these EU countries.

Who is a migrant?

Before we analyse the impact of immigration on the destination (or source) country, we need to define who exactly is called a “migrant.” One definition of a migrant is someone who is foreign-born. By that definition, in 2013 Australia had 22.7% of its population that was of migrant stock, while for the USA 14.3% of its population was migrant (Productivity Commission, 2015). In Europe definitions of migrants differ: in Germany and Southern European countries citizenship is based on ethnicity (jus sanguinis) while in France and the UK citizenship is based on birth (jus soli).

Another definition is that migrants are those people who are foreigners, that is people may have lived in that country for ages but not taken (or been allowed to take) on the nationality of the destination country. For example, Germany had a large number of people who came under their “guest worker” programme from Turkey and the former Yugoslavia, but were not allowed to take on German nationality. In some countries like Germany and Australia, people enter the country as temporary migrants. Should these people be called migrants? In the USA there are many so-called undocumented migrants, mainly from Mexico. It is not clear how these people would be treated in surveys.

One could distinguish between “voluntary” and “involuntary” migrants. People who choose to leave their home country for another (whether for a better life, or to escape persecution or torture) are migrants. The profitable slave trade that shipped thousands of African slaves to the USA were involuntary migrants, as were the indentured labour from India to (say) Mauritiu...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures and Tables
• Foreword
• Preface and Acknowledgements
• 1 Introduction
• 2 Impact of Immigration on Recipient Economy
• 3 How do Migrants Fare in the Labour Market?
• Index