Economic Effects of Migration

Migration can often be a hot topic and has led to political upheaval in some countries and a good deal of disunity. While it can be a difficult issue politically, however, migration makes a lot of economic sense according to many experts.

For a start, migration can provide easy access to a flexible workforce. It can lead to innovation and investment in the hosting country because of higher-level skills. Most of all it can add diversity that provides economic stability in the long run.

Nowhere has the economic effect of migration come under more scrutiny than in the UK, where Brexit has set the Union adrift from the safety net of Europe. The UK now controls its borders and has made major changes to its migration policy.

The Economic Benefits

While there are some high profile detractors, a new IMF study has shown that the migration of both low and high skilled workers brings several benefits. High skilled workers are likely to deliver value to their new home country because of their knowledge and expertise and their input can lead to greater employment and expansion of the skills base.

Low skilled workers also have an economic benefit that many don’t realise. They fill vital positions in the economy that are often difficult to recruit for.

A good example would be the current crisis that the UK faces post-Brexit. There is a shortage of HGV drivers (though this is also EU wide) but there is also difficulty filling posts for farmworkers, hospitality staff and care workers who previously may have come from abroad. This has led to shortages of fuel at petrol stations and empty shelves in supermarkets.

These economic gains are not just shared by the individuals who migrate but by others in the host country as well. Food gets to supermarket shelves, harvests have enough pickers and care costs less because wages are lower. Without migration, we could see rising prices and an impact on our ability to deliver core services at a competitive price.

Whereas the UK originally had access to a broad employment market across the EU, they now operate a skilled worker visa route and have stricter application processes. The key problem for the UK, however, is how they fill the vacancies in the important industries that were previously covered by migrants.

The Cost of Immigration

There are several economic costs for immigration but this can often be overemphasised and misunderstood, especially by those in the media.

A recent EU report looked at the pressure put on the public purse when a country accepts refugees, for example. While this may be considerable at first (for example, extra money for housing the refugee and providing financial support), the long term fiscal and social benefit could well outweigh the initial cost. Refugees who integrate begin to work and contribute to the economy through tax and contributing to their communities. The trouble is that this is too far in the future for many to consider.

According to a study by the National Institute of Economic and Social Research, changes during Brexit in the UK may have lost the economy between 91,000 and 150,000 migrant workers, many of whom were employed in critical but low paid jobs. If the UK is unable to replace these, then it could have a major impact on the economy not just in the short term but long term as well.

The UK is not the only nation struggling with the thorny issue of migration. In the US, migrants add some $1.6 trillion to the economy but much of this does not go to the ‘native’ population. In some cases, long-standing US citizens can often see their wages deflated because of large migration and populations willing to work for less. However, this is once again short-sighted. Another study found that over 10 years the effect on local populations and their wage levels was negligible and was not severely impacted by migration.

There’s no doubt that the economic effect of migration is a complex and often contentious issue. On the one hand, you have individuals worried about their jobs and how migration is going to impact this. On the other, you have plenty of research evidence that migration has a positive impact on the host country.

In places like the UK where migration from the EU has been suddenly blocked, we’re seeing the challenges that countries can face when they turn their back on their migrant population. While most people realise that controlled migration is a good thing, understanding its benefits is critical in making policy decisions and getting the balance right.