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Economic crises and migration: Learning from the past and the present

Economic crises and migration: Learning from the past and the present. L Alan Winters Chief Economist, DFID and Professor of Economics, University of Sussex with Tim Green, DFID. Outline. The current crisis The nineteenth century The twentieth century Some hypotheses

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Economic crises and migration: Learning from the past and the present

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  1. Economic crises and migration: Learning from the past and the present L Alan Winters Chief Economist, DFID and Professor of Economics, University of Sussex with Tim Green, DFID

  2. Outline • The current crisis • The nineteenth century • The twentieth century • Some hypotheses • Preliminary evidence from the twenty-first century Royal Economic Society

  3. Collapsing Trade Royal Economic Society

  4. Outlook: Trade World Trade % growth, WEO January 2010 Royal Economic Society

  5. Commodity Prices Royal Economic Society

  6. External Financing Projections(EMEs, $ billion, IIF January 2010) Royal Economic Society

  7. Projections: GDP Growth Real GDP Growth; WEO January 2010 Royal Economic Society

  8. Real GDP 1979 = 1.0 Advanced and (Emerging and Developing) Economies Royal Economic Society

  9. Outline • The crisis • The nineteenth century • The twentieth century • Some hypotheses • Preliminary evidence from the twenty-first century Royal Economic Society

  10. Population of Ireland, 1791-1901 O’Rourke, 1995 1845 Royal Economic Society

  11. Emigration to USA and GDP Growth, UK 1831-1913, Royal Economic Society

  12. Emigration of Citizens and Growth, UK 1853-1913 Royal Economic Society

  13. Emigration of Citizens and Growth, UK 1853-1913 Royal Economic Society

  14. Emigration of Citizens (lagged) and Growth, UK 1853-1913 Royal Economic Society

  15. Emigration to USA and US GDP growth Royal Economic Society

  16. De-trended emigration rates Hatton and Williamson, 2007 Royal Economic Society

  17. De-trended emigration rates Hatton and Williamson, 2007 Royal Economic Society

  18. The Evolution of Policy • Nineteenth century backlash emerged slowly • Relative unskilled wages are main factor behind tightening • Independent effect of numbers limited • Cycle affects timing not fundamental direction. Royal Economic Society

  19. Outline • The crisis • The nineteenth century • The twentieth century • Some hypotheses • Preliminary evidence from the twenty-first century Royal Economic Society

  20. The 1930s (USA) • Policy tightening over previous 40 years • Big falls in immigration to the US (5% of quotas filled in 1933) • significant returns to Mexico. • Stocks of immigrants fall. Royal Economic Society

  21. Early 1970s (W. Europe) • Significant falls in inflows to some European countries (from 869,000 in 1973 to 423,000 in 1977 for West Germany) • Policy tightens – Germany, France (ban), • few returns, stocks return to pre-crisis levels in a few years. • Guest-worker schemes end. • Immigration to Gulf starts seriously Royal Economic Society

  22. The Asian Crisis, 1997-8 • Limited impact on migration within East Asia, • Some tightening of policy, • Business lobbies against restrictions Royal Economic Society

  23. Outline • The crisis • The nineteenth century • The twentieth century • Some hypotheses • Preliminary evidence from the twenty-first century Royal Economic Society

  24. GDP Growth, Now and Then 1831-1913, UK 1980-2013, Advanced Royal Economic Society

  25. GDP Growth, Now and Then 1831-1913, UK 1980-2013, Em. & Dev. Royal Economic Society

  26. Difference (PPP) Hi vs. Lo & Mid (real GDP pc, calibrated to PPP difference in 2000, WB) Royal Economic Society

  27. Hypotheses (Destination countries) • Inflows fall with recession. • Returns may increase somewhat, but less than changes in inflows • Long-term structural effects • Migrants affected more severely than natives • Tighten immigration policies during crises Royal Economic Society

  28. 1. Inflows • Net immigration to the US, down from 1 million p.a. in 2000-6 to 500,000 2006-7. Emigration from Mexico down from 369,000 in Q2’06 to 144,000 in Q2’09 • A8 emigration to the UK, down 54% between Q1’08 and Q1’09 (since stabilised), down 57% to Ireland. • Partly linked to concentration in construction sector. Royal Economic Society

  29. Inflows cont. • Declining outflows from Bangladesh – down by about 40% yr-on-yr. • But not all flows are shrinking – little change in care workers leaving Indonesia, or Philippines emigrating to the Gulf. Royal Economic Society

  30. 2. Returns • Little evidence of large-scale returns • Possible exceptions, e.g. Poles leaving the UK, Central Asians leaving Russia. • Concern amongst governments, Uzebekistan, Philippines, Nepal establishing support programmes for returnees. Royal Economic Society

  31. 3. Long-term structural effects • Too early to tell • Declines in construction and hospitality are cyclical • Industrial output…? Royal Economic Society

  32. 4. Migrants affected worse than natives • Some evidence of shift to part-time work (US, Thailand) • Concentration in sectors such as construction only partly explains high migrant job losses in the US (OECD) • Differences in education may also be a factor in US (MPI) • Impact on unemployment appears worse for foreign-born in OECD countries. Royal Economic Society

  33. Source: OECD International Migration Outlook, 2010, forthcoming Royal Economic Society

  34. 5. Tightened immigration policies • Some tightening of policies for both permanent and temporary migration • Russia halves work permits from 4 to 2 million • UK tighter points system • Search period • Tenure limits for MNC transfers • Salary limit for ‘skilled’ up by 17.5% Royal Economic Society

  35. 5. Tightened immigration policies cont. • US stimulus beneficiaries constrained (but excess demand, so may not affect numbers) • Australia skilled quotas cut by 14% • Italy non-seasonal quota abolished (from 150,000), jail for housing illegal migrants • Spain non-seasonal quota cut 15,000 to 900 (Contingente) Royal Economic Society

  36. 5. Tightened immigration policies cont. • Malaysia • cancelled 55,000 Bangladeshi visas • Calls to lay-off foreign workers • South Korea announced closure of Employment Permit System • Thailand will not re-register foreign workers • Kazakhstan moratorium on unskilled entry Royal Economic Society

  37. 5. Tightened immigration policies - overview • Not universal however (Canada), and remains to be seen how effective measures turn out to be. • Resistance from business • Context of gradual tightening anyway – i.e consistent with policy being essentially long-run? Royal Economic Society

  38. Summary • It’s very soon to tell • Numbers have fallen • Returns – only minor evidence • Migrant burdens: some evidence of excess, but not overwhelming • Policy – no real evidence of crisis-induced backlash - yet. • Quite like experience predicts Royal Economic Society

  39. THANK YOU Royal Economic Society

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