The Myths and Realities of the European Migration Challenge

Recently the Graz Economics Club invited Martin Kahanec an associate professor from Central European University Budapest to give a talk on migration in Europe from a labour market perspective. On his website Martin Kahanec writes:

There is no price tag attached to my hand stretched out to refugees, people threatened by wars, and violent regimes. The humanitarian argument prevails over any cost-benefit analysis. But as a labor economist, I firmly believe it is my obligation to help us better understand the labor market impacts of immigration.

Following this motivation he starts his talk with quoting several common fears on immigration: Migrants are low skilled, take our jobs, lower wages, abuse the welfare state, shop for welfare and increase crime rates. As a scientist he does not want to blindly believe such myths but rather tries to test these hypotheses to find out whether there is any empirical evidence supporting or rejecting them. Put differently, are such kind of fears justified?

Comparing skills of immigrants in Europe and natives, he finds no substantial differences. Migrants, however, tend to fill existing labor and skill shortages and they do so more flexibly than natives. He cites several studies which empirically reject the hypothesis of increasing unemployment due to migration. In fact, there is even some evidence for job creation triggered by migration in the long run. For instance, a nurse migrating to Austria to take care for a disabled person might not take away a job but rather create new ones: The home caring she is doing might have previously been carried out by a family member which consequently was not able to fully participate in the labour market. By employing a nurse from abroad the nursing job is created and the family member may return to his or her own job. When it comes to fears about migrants abusing our welfare systems, Martin Kahanec actually comes to a very different conclusion: Migrants seem not to abuse welfare benefits but rather suffer from a lack of access which should possibly be changed as a matter of fairness. He shows that post-enlargment migration had positive effects on GDP, GDP per capita and employment rates. Given Europe’s aging population we should not fear migrants but rather actively attract them to our countries. He concludes by stating

The current migration crisis in Europe offers a potential for a triple win:

  • Provide humanitarian help to refugees
  • Revamp our migration, asylum, and integration policies
  • Benefit from the new hands and brains that can boost our labor markets

Otherwise a triple loss looms.

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2 thoughts on “The Myths and Realities of the European Migration Challenge

  1. Too bad I missed the talk. Sounds very interesting and I agree with much of it.

    One question I do have is how strong the empirical evidence in this area really is. From my cursory knowledge of it, I think nothing is firmly settled in labor economics. In particular, there still is a huge debate on the wage and unemployment effects of migration with some studies finding no effect, others finding significant negative effects. I linked to the most recent round of this debate surrounding the “Mariel boatlift” experiment in one of the last Collected Links. Given this uncertainty, I think we shouldn’t make strong claims either way.

    What we certainly shouldn’t do is dismiss a priori the idea that immigration can make some people worse off. If thousands of Syrian nurses flood the Austrian labor market, I’d be very surprised if that wouldn’t lower the wages or raise the unemployment rate of nurses. The correct reaction to that is not „Oh no, so let’s keep Syrian nurses out of the country“, the correct reaction is „Let’s see how we can help Austrian nurses get a better education or lower their taxes or find another way to avoid their income loss“.

    And then there’s the question of the costs and benefits of cultural/ethnic diversity which is very much a two-edged sword. Studies have found that diversity reduce trust and social cohesion. Diversity has also been found to increase innovativeness. Again, no strong claims to be made one way or another.

  2. I think you are absolutely right in questioning whether these findings can be generalized. In particular, the European Union has never experienced a comparable high inflow of migrants. Thus, extrapolating from past experiences is challenging and questionable. I think his main point was to emphasize that there is in fact no real evidence that immigration to Europe ever harmed the economy of the European Union thus far and hence tries to address fears in society.

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