“Migration and Development
Labor Market session”
A European Perspective
Washington, 23 May 2007
Tito Boeri
Università Bocconi e
Fondazione Rodolfo Debenedetti
Outline
• Immigration to European-type institutions:
theoretical predictions and empirical
evidence
• A closer look at “welfare abuse” and
“welfare shopping”
• Policy issues:
– Restricting welfare access by migrants
– Adopting a point system
– Introducing a pan-European safety net
Unskilled migration to imperfect
labour markets
• With a minimum wage
w
• With semi-rigid wages
w
Ls
Ls
w0
w1
w
Ld
Ld
L
N
Unemp
L
N
Unemp
However
• Econometric studies find very mild effects
of unskilled migration on wages and
unemployment of natives
• And opinion polls indicates that Europeans
are not too worried about the labor market
impact of immigration (1 out of 2 states
that “we need immigrants to work in
certain sectors of our economy”*)
* Source: Eurobarometer 64, June 2006.
Perhaps because migration
substitutes low internal mobility
And under centralised bargaining may
improve the labor market also in the South
Growing Concerns
on welfare
% of respondents stating that “minority groups
exploit the system of social welfare”
52
51
2000
2000
50
49
48
47
46
1994
45
1997
44
43
42
EU
EU12
12
EU15
15
EU
Source: EU 12, Eurobarometer 1994, 2000; EU 15, Eurobarometer 1997,2000.
Stronger concerns in countries with
a richer welfare state…
Unconditional correlation between perceptions of
welfare abuse and generosity of welfare systems
Self-selection
Social welfare and the skill composition of migrants
Are really migrants abusing
welfare?
• Evaluating “residual welfare dependency”
of migrants (non-EU citizens) based on
ECHP data 2001
• In the ECHP 2112 non-EU migrants
accounting for 3.75% of the respondents
(under-representation)
• Is there a residual effect of migrant status
on benefit receipt after controlling for
personal characteristics?
Migrants are over-represented among
beneficiaries of several transfers..
Odds Ratios
3
2.5
2
1.5
1
0.5
0
Residual dependency on Unemployment
Benefits of non-EU citizens
Country
migrant_nonEU
Observations
Pseudo R-squared
Germany
-0.28
(0.03)***
21733
0.19
Denmark
0.43
(0.09)***
10342
0.13
Netherlands
0.16
(0.11)
17082
0.06
Belgium
0.17
(0.06)***
10055
0.2
France
0.08
(0.05)*
19821
0.1
United
Kingdom
-0.28
(0.12)**
15176
0.14
Ireland
0.33
(0.22)
7108
0.18
Italy
-0.18
(0.11)
19441
0.11
Greece
-0.13
(0.07)*
14520
0.18
Spain
0.1
(0.1)
17659
0.14
Portugal
0.13
(0.08)
16827
0.12
Austria
-0.02
(0.07)
8337
0.19
Finland
0.02
(0.07)
9997
0.11
Residual Dependency on Social Assistance
and Housing benefits of non-EU citizens
Country
migrant_nonEU
Observations
Pseudo R-squared
Germany
-0.19
(0.05)***
21696
0.67
Denmark
0.29
(0.16)*
10281
0.75
Netherlands
0.16
(0.15)
17082
0.69
Belgium
0.01
(0.09)
9986
0.63
France
-0.07
(0.06)
19788
0.48
United Kingdom
-0.45
(0.13)***
15166
0.68
Ireland
-0.26
(0.33)
6978
0.72
Italy
0.16
(0.10)*
19441
0.09
Greece
-0.16
(0.09)*
14520
0.17
Spain
-0.08
(0.16)
17655
0.15
Portugal
-0.09
(0.09)
16827
0.45
Austria
-0.01
(0.08)
8321
0.54
Finland
0.14
(0.1)
9956
0.58
The reaction of Governments
Immigration policy indexes
160
140
120
100
80
60
1994
1995
1996
1997
1998
Admission requirements
Staying requirements
Number of administrations involved
Asylum policy
1999
2000
2001
2002
2003
2004
Length of first stay
Years to obtain a permanent residence permit
Quotas
Tightening everywhere, mostly
in rich welfare state countries
www.frdb.org index of the stance of migration policies (increasing in restrictions)
A vicious circle?
• Perceptions of welfare abuse support
tightening of migration policies resulting in
more illegal (hence less skilled and not
paying social security) migration.
• This further supports perceptions of
welfare abuse making stricter migration
policies even more popular….
Policy options
3 possible ways out
1. Closing the welfare door to migrants
2. Selecting migrants: introducing a point
system
3. Harmonising minimum guaranteed
income schemes: a EU-wide safety net
Closing the welfare door?
• US experience suggests that it is too
difficult to enforce these restrictions
• Evidence that cutting access to welfare
reduces migration to rigid countries (by
1,5-3% for men, while migration of women
increases!) with no effects on the skill
composition
• Problems of assimilation
• Equity considerations
A points-based system?
• Skilled migration is consistent with
redistributive institutions; it reduces
income inequalities in the recipient.
• Simplification of migration policies
(including asylum)
• Issues: enforcement; risk of “brain
drain”, equity considerations.
Brain drain may not be harmful to LDC growth
Source: Docquier – Rapoport (2004)
Effective in selecting migrants
(IALS scores)
Germany
New Zealand
Migration policies are already
getting selective
• Tightening everywhere of migration
policies towards the unskilled
• While race to attract highly skilled migrants
• Explicit point systems in a increasing
number of countries (Canada since 67,
Australia since 84, New Zealand since 91,
Switzerland since 96, UK is gradually
adopting it)
A EU-wide safety net?
• EU-wide minimum welfare floor (Atkinson
(1998)) preventing a “race to the bottom” in noncontributory transfers
• Important design features (need to harmonise in
absolute levels, adjusted to PPP)
• Costs (not too large actually: MGI at 430 Euros
for singles costs about 30 billion, ½ of the CAP)
• If provided as citizenship right, necessary to
coordinate migration policies as well.
In any event
• Migration policies and social policies ought
to be more closely integrated
• Welfare state when fiscal spillovers are
perceived as important poses problems of
co-ordination across jurisdictions of
welfare minima (and migration policies)