MIGRATION: Of bedsheets and bison grass vodka

Rich economies gain from high levels of migration, but the benefits are unevenly spread

FOR the past two decades or so, high rates of immigration into OECD countries have coincided with prolonged economic growth in much of the Western world. Consider Cobh, a bustling tourist town in southern Ireland which used to be famous for exporting people. Some 2.5m Irishmen and women embarked for America from its quayside, and its great and gloomy neo-gothic cathedral was paid for by remittances.

ReutersThey need her

Now, like the rest of Ireland, Cobh heaves with foreign workers. There are Poles on building sites, Latvians who own a shop selling dumplings, sauerkraut and other continental delicacies, a South African in the tourist office and another driving a taxi, Chinese in restaurants, a Bangladeshi managing a fishing business, and so on. A hotel owner says that he could not do without the migrants: when he recently advertised for a receptionist, none of the 200 applicants was Irish.

Migration can be both a consequence and a cause of economic well-being, but many people in host countries with lots of migrants have yet to be convinced of the economic benefits. A poll in November 2007, for France 24, found that 55% of Spaniards consider migrants a boon for their economy, and so do 50% of Italians, but only 42% of Britons and Germans and a mere 30% of French respondents.

Some of the hostility towards immigration seems linked to worries about the economy. If recession looms, locals are more afraid that outsiders will take their jobs or scrounge on their welfare systems. The last time that immigration in America was as high as it is now, just under a century ago, xenophobia rose as recession took hold. Today, amid concerns that a housing slide could lead to a general economic slump, American anxiety about migration is rising again. But the poor worry about immigration even when the economy is thriving.

Legal migrants usually have better job prospects than illegal ones, and the more educated outdo the rest. Not all of them stay. Nearly a third of those who crossed the Atlantic to America between 1890 and 1914—and as many as half the Spaniards and Italians—re-emigrated. Similarly, surveys today show that a majority of Poles in Britain plan to go home within a few years.

Some migrants do better not only than those left behind but also than those in their destination countries. The Institute for Public Policy Research, a British think-tank, found in 2007 that the foreign-born of many ethnic groups are both more likely to have a job and to be better paid than the average Briton. In America, over the past century, studies have shown migrants' wages catching up with, and then often surpassing, those of average Americans. Migrants' children do well too. This is not surprising. Migrants need health, skills, determination, a willingness to take risks and some entrepreneurial nous to take the plunge, which marks them out as special people.

Assuming that migrants are in work, they are bound to benefit the economy of the host country as a whole. Most simply, an expanding workforce permits faster growth. More people can do more work, and many migrants are young adults who are particularly productive. Moreover, migrants increasingly alleviate specific labour shortages in rich economies. Some economies could not function without foreign workers. In the United Arab Emirates, for instance, they make up an astonishing 85% of the population.

For the moment few other countries rely so heavily on outsiders (see chart 2), but in a number of rich countries, including Britain and America, foreigners typically make up 10-15% of the labour force and their share is rising. Around half of the new jobs created in Britain today are filled by migrants, often because they have skills that locals lack (from plumbing to banking) or because natives scorn the work (from picking fruit to caring for the elderly).

Low jobless rates in Ireland, Sweden, Britain, America and other countries with high migration suggest that, so far, foreigners are not squeezing out natives. Migrants also help to create jobs, because a good supply of labour encourages those with capital to invest more. For example, the hotel owner in Cobh, knowing he can find affordable staff, has added an extension with extra rooms. In contrast, countries where migrants have been kept at arm's length, such as Germany, complain about a chronic shortage of skilled workers such as engineers, scientists or programmers.

Just say the word

Foreign workers are often more flexible than native ones, too. Having already moved from Mexico to California, say, they are probably willing to take a job in Chicago. Migrant labour helps to keep economies on an even keel. At times of strong growth, an influx of workers reduces the risk of wage pressures and rising inflation. If growth weakens, migrants can go home or move to another country, or choose not to come in the first place. For example, the flow of Mexicans to America is probably slowing as the housing slump worsens and construction jobs disappear.

Migrants can also release skilled natives to do a job (for example by providing child care that allows a parent to go back to work). And they are consumers, too, renting accommodation and buying goods and services. The owner of the off-licence in Cobh is delighted by his Polish customers, who are fond of bison grass vodka and east European lager. Cobh's supermarket, fast-food restaurants and other shops are flourishing too.

Quantifying the impact of all this is tricky. A 2007 report by PricewaterhouseCoopers concluded that a surge in migration has helped to lift Britain's growth rate above its long-term trend. Alexandros Zavos, of the Hellenic Migration Policy Institute in Athens, reckons that immigration into Greece has recently added as much as 1.5-2.0% to its GDP every year. For countries that have long had high rates of immigration, such as America, sustained economic growth partly reflects an ever-growing workforce.

Sceptics say that migration may boost the economy as a whole, but on a per-head basis the benefits for the natives are less impressive. Migrationwatch, an anti-migration group in Britain, reckons that for the average Briton the inflow of foreigners provides just a few extra pence a week. Roy Beck, an anti-immigrant activist in America, suggests that countries with ageing workforces should try to make their economies less labour-dependent. His country is “addicted to foreign labour”, he says, and more capital investment and more training for locals would reduce the need for foreign workers. But some jobs (such as cleaning or nursing) cannot be sent abroad or mechanised. And even if more natives can be trained to do highly skilled work, shrinking native workforces in many countries could mean economic contraction.

Some of the sceptics' arguments touch raw political nerves, particularly when it comes to the least well-off natives in the host country. In America the share of national income that is going to the poorest has been shrinking in recent decades. Inequality has increased and the real wages of the least skilled have fallen. Circumstantial evidence suggests that foreigners, who typically work in less skilled jobs, might be partly to blame. According to one estimate, they make up around 28% of legal construction workers in America and over a third of maids and housekeepers. If the illegal workers could be counted, the figures would probably be much higher still.

Cheap and cheerful

Do migrants make life worse for poor natives? Studies comparing wages in American cities with and without lots of foreigners suggest that they make little difference to the income of the poorest. George Borjas of Harvard University, who compared wages for different kinds of jobs where migrants most obviously compete with natives, estimated that immigration in America in the two decades to 2000 may have kept wages 3% lower than they would otherwise have been. For the least skilled the difference may have been as much as 8%. But Mr Borjas also calculated how a rise in the number of migrants might have encouraged the creation of jobs, which reduced the impact on wages.

This tallies with the outcome of natural experiments in recent history, such as the influx of 610,000 Russian Jews into Israel in the early 1990s, the return of 900,000 Frenchmen from Algeria in 1962 or the homecoming of 600,000 Portuguese after the collapse of their empire in Africa in 1974-76. Each time the influx of workers expanded the workforce and wages dropped slightly, but subsequently recovered. Given prolonged immigration, argues Steven Camorata of the Centre for Immigration Studies, the impact is sustained. He thinks that “it's the poorest 10% [of Americans] who seem to lose out, cutting their wages by perhaps 5%.”

Worse, say the sceptics, migration may limit poor natives' chances of moving up to better-paid jobs. With changing economies that reward skills, it is anyway getting harder to move up the ladder from low-wage jobs to better-paid ones. Now migrants, especially those with skills and drive, are making life even harder for the weakest natives.

A second worry is that migrants will put a strain on public services and the tax system. It is in schools, public housing and doctors' surgeries that natives come face to face with migrants and it is often at the local and state level, where responsibility for such services usually lies, that hostility to migrants seems strongest. Local councils in Britain complain that clinics and schools are overloaded and central government is slow to dish out help, and local police in areas with many immigrants blame foreigners for a rise in crime.

In Greece, as new illegal immigrants arrive at remote spots on the border, officials complain that they lack funds for policing and social services. The prefect of Samos laments that “we are given a short bedsheet to cover our body.” In America hostility to migrants is greatest where they have recently been arriving in large numbers, not where their absolute numbers are highest (near the borders or in big cities, such as New York). Several states have passed tough new laws banning illegal migrants from using their public services.

But crowding, although likely to cause resentment, results from the unexpected arrival of those migrants, with bureaucracies taking time to allocate resources to the right places. In itself, it does not prove that migrants are a drag on public services as a whole. Indeed, migrants often make a large contribution to the public purse. When a foreign worker first arrives, usually as a young adult, fully educated and in good health, he makes few demands on schools or clinics. A legal immigrant will pay taxes just like any native; even an illegal one will contribute something (if only through the tax on those bottles of bison grass vodka). If the immigrant stays on (and quite a few do not), the benefits will diminish as he ages, but at least he has given his host country a breathing space.

To complicate matters, highly skilled migrants contribute much more to tax and social-security systems than do less skilled ones. A study in America by the National Research Council suggests that migrants with an education beyond high school contribute an average of $105,000 to the tax coffers over their lifetime. By contrast, the least educated migrants are reckoned to leave the taxman with a $89,000 hole. But migrants as a whole, in the long term and counting the contribution of their children when they grow up and get jobs,are not a drain on public services. For rich countries with ageing workforces in particular, gains from importing the young, the energetic and those willing to take risks comfortably outweigh the costs.