Dealing with migration in Europe
Luis Pablo de la Horra / Aug 2018
The last months have witnessed a significant increase in the arrival of undocumented immigrants to the Spanish coasts, reaching a record level since 2006. Spain has become the main sea route to enter the European Union for thousands of people escaping poverty and war in Africa and Asia. This has caused the outrage of the right-wing parties, blaming the Spanish government for creating a pull effect when it agreed to let a rescue ship with more than 600 immigrants on board into one of its ports last June.
Yet the situation has been largely exaggerated (if not distorted) for populist purposes. First, the increasing use of Spain’s Southern coast to enter Europe isn’t new. The agreements the EU reached with Turkey in 2016 and Libya in 2017 to curb the arrival of new immigrants through Greece and Italy have pushed would-be immigrants to find alternatives, making Spain the preferred route to reach the EU by sea.
The available evidence seems to support this theory: the percentage of illegal immigrants to use Spain as a gateway to enter the EU started to increase in mid-2017, reaching its peak last month due in part to the anti-immigration stance of the new Italian government. Also, when looking at the numbers from an European rather than a single-country perspective, it becomes obvious that illegal-border crossing into the EU has fallen dramatically since the height of the migration crisis in 2015.
In any case, the current crisis is just the last symptom of the continuing failure of the EU authorities to agree on a joint legislation that facilitates the immigration process and brings an end to the never-ending tragedy of hundreds of people dying in the Mediterranean Sea every year. The refusal to tackle the roots of the problem has been in part moved by widespread prejudices about the economic and fiscal impact of immigrants, which have been taken advantage of by populist leaders, first in Central Europe and now in Italy.
The main problem with this anti-immigration wave is that it doesn’t fit the evidence. On the contrary, research overwhelmingly supports immigration-friendly policies. First, more immigrants don’t imply fewer jobs for natives. This idea is based on the fallacy of the economy as a zero-sum game: since the number of jobs is given, a job for immigrant means one fewer job for a native. The case of Germany helps debunk this myth. In the last decade, the German labor force has grown by around 8%. And yet, the unemployment rate has gone down from 7.8% in 2008 to 3.4% in 2018. Similarly, since 1950, the US labor force has more the doubled, but the unemployment rate is at historical lows today. Both examples show that population increases need not to result in higher unemployment rates.
Neither do immigrants have a substantial impact on wages in the long term. According to a recent study on the economics of immigration in the US elaborated by the National Academies of Sciences, Engineering, and Medicine, “when measured over a period of more than 10 years, the impact of immigration on the wages of natives overall is very small.” Similar conclusions can be found in a 2017 report by the Migration Observatory at the University of Oxford about the effects of immigration on the UK labor market.
Another recurrent argument against less restrictive immigration policies is linked to the perception that immigrants pose a fiscal burden to the country, making an excessive use of welfare benefits in detriment of native taxpayers, whose fiscal impact is overwhelmingly positive. It is true that the welfare state creates perverse incentives (not only for immigrants but also for natives), that, if not limited, could lead to the unsustainability of the system.
Yet the idea of immigrants as welfare-takers doesn’t correspond to reality, especially in the long term. In a survey that analyzes the existing literature on the economic impact of immigration in several countries, Sari Pekkala Kerr and William R. Kerr conclude that
“The estimated net fiscal impact of migrants also varies substantially across studies, but the overall magnitudes relative to the GDP remain modest […] The more credible analyses typically find small fiscal effects.”
Even refugees, who tend to receive more in welfare benefits in the first years of their stay due to the initial costs of resettling , end up with a positive fiscal balance (they pay more than they receive in benefits) after a few years.
Whereas the potential negative aspects are often overemphasized by immigration skeptics, the positive influence of immigrants on receptor countries is frequently overlooked. For instance, immigration has positive effects on innovation. In Europe, ethnically-diverse communities tend to be more innovative, creating positive externalities that lead to higher economic growth. Furthermore, immigration-friendly policies contribute to offset the current demographic trends in Europe: the rapid ageing of the European population threatens to jeopardize productivity growth in the near future.
The recent events show that the EU immigration system is broken. The question is: what kind of reform should European authorities implement to fully benefit from the positive aspects of immigration while preventing mafias from taking advantage of the desperation of millions of potential immigrants? A private sponsorship system would certainly improve the current status quo. Under this arrangement, private organizations (businesses, nonprofits, etc.) or individuals would be allowed to sponsor foreign workers. This would imply, among other things, paying for health insurance and other welfare-state related expenses of the sponsored workers over a period of time, removing the disincentives created by the welfare state.
One of the main advantages of a private sponsorship system is that it would facilitate economic coordination, allowing the allocation of human capital to its most productive uses on a global scale. In addition, quotas and other bureaucratic procedures would disappear, and national governments would only be in charge of performing background checks to prevent potentially-harmful individuals from entering the country. As pointed out by Ryan Khurana, Executive Director at the Institute for Advancing Prosperity,
“Private sponsorship regimes prove superior to current systems by removing the bureaucratic issues currently associated with immigration. Among these problems is the arbitrariness of certain features, such as quotas or occupational restrictions, which change over political cycles at great costs to current and potential immigrants (…) The added benefit of allowing private organizations or individuals to sponsor immigrants is that the government no longer needs to pry into personal affairs, asking why someone is coming or why someone is a sponsor.
This system would in part resemble open borders, but bypassing one of the main criticisms against free immigration, namely: the perverse incentives created by the existence of large welfare states in most European countries. An most importantly, it would provide millions of would-be immigrants with an opportunity to thrive in societies that will need them to maintain economic growth in the following decades.