The Slump and Immigration Policy

Tim HattonUniversity of Essex

andAustralian National University

University of Nottingham, 12th March 2014

Slumps and immigration policy• In the aftermath of the Global Financial Crisis many expected

a sharp fall in support for immigration and a policy backlash.• After the GFC some assessments invoked historical parallels;

others looked for reasons why this time is different. • For European countries the backlash has been milder than

some expected. The question is why. Here I examine:• 1) Immigration and the labour market: do migrants bear a

large part of the adjustment burden in a recession?• 2) Public opinion: have attitudes become more negative in the

recession, and if so, where and why?• 3) What are the political forces driving policy and what has

influenced them?

Slumps and policy in the past• US: massive tightening of policy in the early 1920s as

unemployment increased from 5 to 11 percent. • The Great Depression: sharp turn to restrictive policies in other

immigration countries: Australia, Canada, Brazil, Malaya. • The oil crisis 1973-4: Sudden stop of guestworker policies in

Europe, increasingly restrictive policies in UK and elsewhere.• 1997/8 Asian financial crisis led to restrictions and deportations,

but the crisis was short-lived. • The sharp backlash typically occurred in response to a ‘sudden

shock’ but after a long period of rising immigration and slowly mounting public opposition. Is this time different?

Immigration in recessions.

• Does immigration cushion the labour market? If so then that might mute the policy response.

• The great transatlantic migrations were very responsive to business cycles. In the 1890s US and in the Great Depression (Canada, Australia) immigration fell steeply.

• We see the same response in US net migration (including illegals) in the 1980s and 1890s.

• In these cases immigration per 1000 fell by about the same as unemployment (per 100) increased.

• This is the 10 % rule. Every 100 jobs lost results in 10 fewer (net) immigrants. What about now?

Immigration and unemployment

OECD, International migration policies and data, Stocks and flows of immigrants, 2001-2011 and OECD StatExtracts: Short-term Labour Market Statistics.

Immigration and unemployment

OECD, International migration policies and data, Stocks and flows of immigrants, 2001-2011 and OECD StatExtracts: Short-term Labour Market Statistics.

Immigration and slumps in the past

• We can see this in Europe recently, in Ireland and Spain.• But also for the UK and Sweden , where the slump was less

severe (and against a rising immigration trend). • But it requires some freedom of movement for this to work,

e.g. pre-1914, elastic illegal immigration, free EU movement. • So, net immigration bears a bit of the burden of recession. • But it provides rather modest relief to the labour market. For

non-immigrants the 10 percent rule is a 90 percent rule. • What about immigrants who stay?

Unemployment Rates in Western Europe, 2008-12

Non-immigrant men Immigrant men2008 2012 Increase 2008 2012 Increase

Austria 2.9 3.5 0.6 7.3 8.7 1.4

Belgium 5.3 5.8 0.6 14.3 17.6 3.2

Germany 6.6 5.2 -1.4 12.3 8.9 -3.3

Denmark 2.7 7.1 4.3 6.4 13.5 7.1

Spain 8.8 22.4 13.6 16.4 36.5 20.1

Finland 5.9 8.1 2.2 12.4 14.5 2.1

France 6.3 9.0 2.7 11.4 15.5 4.1

Great Britain 6.1 8.5 2.4 6.8 8.2 1.5

Greece 5.2 20.1 14.9 5.0 34.5 29.5

Ireland 7.0 17.8 10.8 8.2 19.4 11.2

Italy 5.6 9.7 4.1 5.9 12.4 6.5

Netherlands 2.1 4.6 2.5 5.3 10.5 5.2

Norway 2.4 3.1 0.7 6.0 7.2 1.2

Portugal 6.8 16.2 9.4 7.8 20.0 12.2

Sweden 5.1 6.7 1.6 11.5 16.9 5.4

Country average 5.3 9.9 4.6 9.1 16.3 7.2

The burden of unemployment• Across 15 Western European countries from 2008 to 2012

unemployment rates among native men increased from 5.3 to 9.9 percent. For foreign men from 9.1 to 16.3 percent.

• This is the ratio rule. In recessions the ratio of unemployment rates stays roughly the same but the absolute gap increases. On average it was 1.86 in 2008 and 1.84 in 2012.

• Recent studies show that the responsiveness is much greater for non-western immigrants.

• So: (1) high unemployment reduces immigration and (2) more of it falls on the foreign born. These are cushioning effects

• But: (1) increased demand by immigrants on the welfare state and (2) unemployment has fallen disproportionately on youth.

Unemployment incidence, 2008-12

Source: OECD, Labour market outcomes of immigrants, 2008-2012 (cf. Annex 2.A1)

Analysis of public opinion• Recent analysis by economists of public opinion towards

immigration stresses three themes.• 1) Labour market: fears that immigrants ‘take jobs’ or depress

wages.• 2) Welfare state : concerns that immigrants increase pressure

on welfare services and/or increase the tax burden.• 3) Prejudice: against non-white ethnic groups (possibly

exacerbated by the recession).• But this is across individuals very little analysis of changes. • So what happened in Europe? Let us look at the European

Social Survey in 2006 and 2010.

ESS Immigration attitudesESS opinion (average of 18 countries) 2006 2010 change

Scale: 0 – 10

Immigrants enrich the culture 5.75 5.71 -0.03

Immigration good for the economy 5.04 4.92 -0.12

Immigrants make country a better place to live 4.95 5.02 0.06

Scale: 2-4-6-8

Allow many of same race/ethnicity as home country

5.60 5.65 0.05

Allow many of different race/ethnicity 5.02 5.11 0.09

Allow many from poor countries outside Europe

4.93 4.91 -0.01

Countries: Belgium, Switzerland, Germany, Denmark, Estonia, Spain, Finland, France, United Kingdom, Hungary, Ireland, Netherlands, Norway, Poland, Portugal, Sweden, Slovenia, Slovakia.

What drives the change in attitudes?

• Across 18 countries public opinion to immigration is not very positive but it changed little between 2006 and 2010.

• The main decrease is in whether immigration is good for the economy.

• Cross-country correlations of changes in average opinion(next slide) show that:

• The rise in unemployment only matters for the question ‘Immigration is good for the economy’.

• The rise in social benefits to GDP ratio matters much more, and across for all facets of attitudes.

• The budget deficit, symbolic of the financial crisis, also exhibits strong correlations.

Cross-country correlations

Change in ESS Opinion (18 countries) Correlation with change in:

Unempt rate (%)

Social benefits (% GDP)

Budget deficit (% GDP)

Immigrants enrich the culture 0.18 -0.27 -0.60Immigrants good for the economy -0.57 -0.83 -0.89Immigrants make country a better place to live -0.14 -0.54 -0.66Allow many of same race/ethnicity -0.04 -0.49 -0.71Allow many of different race/ethnicity -0.15 -0.39 -0.63Allow many from poor countries outside Europe -0.27 -0.54 -0.62

Countries: Belgium, Switzerland, Germany, Denmark, Estonia, Spain, Finland, France, United Kingdom, Hungary, Ireland, Netherlands, Norway, Poland, Portugal, Sweden, Slovenia, Slovakia.

Unemployment and opinion

Social benefits and opinion

Why the modest change in opinion?

• 1) There is probably an underlying trend improvement in attitudes. (Because they are related to education).

• 2) Changes since 2006 are related mainly to concerns about the public budget, but probably reflect broader malaise.

• 3) Economic performance has varied widely across European countries, so negatives have been balanced by positives.

• 4) The salience of immigration policy has fallen. While economic concerns have spilled over into attitudes, they have also pushed immigration down the agenda. This has been helped by the slowing down of immigration.

The Economist on salience

Salience in Europe

Source: Dyrbekk (2011)

Policy: Why waste a good crisis?

• Politicians can create salience; it might be good in time of crisis to try and divert attention away from areas (the economy) where they are perceived to have failed. Also, restraints operating in normal times might be weaker.

• Policy is influenced by populist right-wing parties, which have grown since the 1980s (10 percent in early 2000s to 15 percent in 2011). And they seem to be resurgent now.

• In North Europe, these have managed to conflate or combine anti-immigration with anti-EU and anti-bailout rhetoric. (UK: UKIP; Finland: True Finns; Netherlands: Freedom Party; Norway: Progress Party, Austria: Freedom Party).

Policy and parties

• In the South, anti-immigration and anti-austerity have been linked, but only one major right-wing surge, in Greece: Golden Dawn.

• The main influence of right-wing populist parties is to shift the agendas of mainstream parties—mainly on the right but also on the left.

• So policy may become more restrictive despite relatively benign (average) public opinion.

• But there are also constraints. One is the structure of immigration itself.

Composition of entry channels

Source: OECD, International Migration Outlook 2013, Country Notes.

Employment Family Humanitarian Free OtherAustria 1.7 21.3 11.0 65.5 0.4Belgium 11.7 33.4 3.7 51.2 0.0Denmark 15.6 13.9 5.4 56.9 8.1Finland 5.6 38.4 11.0 41.3 3.7France 11.4 39.9 5.1 33.7 10.0Germany 9.0 18.6 3.8 67.9 0.7Ireland 7.7 48.9 0.4 43.0 0.0Italy 33.4 27.9 2.3 34.9 1.6

Netherlands 10.4 21.2 10.1 58.3 0.0Norway 5.8 21.4 8.9 63.8 0.0Portugal 19.7 38.8 0.2 32.7 8.6Spain 38.9 16.4 0.3 42.6 1.9Sweden 6.6 37.7 17.6 38.0 0.0UK 35.5 26.2 4.0 22.6 11.6

Policy channels

• Free (EU) migrants: No control over these, except for accession states, but issues about rights to welfare.

• Employment stream: Most of the research on migrant selectivity and the skill content of migration focuses on migration for employment. But this is less important in magnitude (and in opinion) than is often believed.

• Policy increasingly selective (Blue Card, points systems)—predates the GFC but recently introduced in some countries. Job search visas introduced in some countries e.g. Germany.

• For most countries with pro-skills policies, the scope for further restriction is fairly limited.

Policy channels (contd)

• Family reunification: a larger component of immigration that has been a focus of recent restrictive policies

• These include narrowing of eligibility by: (a) relationship, (b) income/resources, (c) language test. E.g. Denmark, France, Netherlands, UK. This process initiated pre-GFC by the family reunification directive (2003).

• The evidence suggests that countries with more inclusive policies (MIPEX) have a larger share of family migrants, so there is some scope for restriction. But the MIPEX index of reunification policies shows an overall improvement from 2007 to 2010 : EU 15, 60->62; EU25, 53->54.

Policy channels (contd)

• Humanitarian stream: A controversial issue. • Two severe policy crackdowns on asylum applicants in mid-

1990s and mid-2000s. Tougher determination procedures, reduction in support, tighter border control.

• Increasing focus on illegal immigration. CEAS initiatives on border control pre-date the crisis (Frontex), but further tightening in some countries.

• These policies helped reduce the numbers (which have also fallen for other reasons).

• The Refugee Convention is opaque, but probably not much scope left for tightening; the CEAS now easing policy (a bit).

The EU dimension• According to the IoM (2010) early post-crisis migration policy

changes in EU countries ‘were not solely restrictive’.• In asylum policy, evidence that the EU has put a floor under

tough national policies. • In family reunification policy is constrained by the ECHR (Art

8). The ECJ has challenged some national policies on income requirements and pre-entry tests e.g. the Netherlands.

• Evidence that the EU provides a coordinating mechanism that limits the ‘race to the bottom’.

• Countries that are not part of the common immigration system have shifted a bit more to restrictive policies, e.g. UK. Denmark.

Conclusions

• History suggests that severe recession is followed by reduced net immigration and a sharp policy backlash.

• In the slump the 10% rule seems to have operated. But it provided modest respite from labour market pressures.

• Public opinion overall has not shifted very much; partly as the severity of the slump has varied widely across countries.

• Opinion has responded more strongly to the rise in social spending and the budgetary crisis than to the labour market.

• Immigration has diminished in salience, but in some countries it has been conflated with anti-EU by minority parties.

• Policy makers may have wanted more draconian policies but the policy options are somewhat constrained.

Regressions on country/year fixed effects from ESS;114 obs, with country f/e and year dummies

Foreign-born (%)

Unempt rate (%)

Social Exp % of GDP

R2 (between)

Scale: 0 – 10 Immigration good for the economy -0.038

(2.04)-0.022(2.03)

-0.089(4.87)

0.495

Immigrants enrich the culture -0.047(2.88)

0.013(1.35)

-0.023(1.46)

0.258

Immigrants make country a better place to live

-0.024(1.56)

-0.001(0.12)

-0.043(2.86)

0.382

Scale: 2-4-6-8Allow many of same race/ethnicity as home country

-0.073(4.98)

0.008(0.99)

-0.036(2.52)

0.321

Allow many of different race/ethnicity

-0.041(2.95)

0.001(0.17)

-0.037(2.69)

0.294

Allow many from poor countries outside Europe

-0.038(2.70)

-0.000(0.03)

-0.045(3.25)

0.308

Country Average Opinion ScoresCountry (no of rounds) More/less

same ethnic grp

More/lessdifferent ethnic grp

More/less from poor countries

Immigrtgood for economy

Immigrtenrichculture

Immigrt betterplace

Belgium (6) 5.63 5.01 5.02 4.59 5.74 4.63Switzerland (6) 6.07 5.37 5.32 5.96 6.11 5.34Czech Republic (5) 4.93 4.46 4.47 4.20 4.42 4.25Germany (6) 6.03 5.30 5.19 5.15 5.99 4.99Denmark (6) 6.10 5.19 4.94 5.11 6.01 5.72Estonia (5) 5.65 4.62 4.07 4.60 5.16 4.33Spain (6) 5.25 5.10 5.10 5.35 5.93 5.06Finland (6) 5.44 4.81 4.62 5.33 7.13 5.46France (5) 5.42 5.05 4.87 4.85 5.27 4.60Great Britain (6) 5.30 4.91 4.76 4.56 5.00 4.62Greece (4) 4.76 3.79 3.73 3.53 3.47 3.21Hungary (6) 5.34 3.90 3.66 3.84 5.21 4.09Ireland (6) 5.68 5.30 5.22 5.20 5.65 5.46Netherlands (6) 5.43 5.20 5.01 5.08 6.10 5.06Norway (6) 6.01 5.45 5.42 5.58 5.89 5.18Poland (6) 5.94 5.56 5.60 5.17 6.43 5.73Portugal (6) 4.51 4.32 4.26 4.67 5.18 4.03Sweden (6) 6.49 6.32 6.28 5.49 7.03 6.23Slovenia (6) 5.57 5.22 4.99 4.34 5.18 4.60Slovakia(5) 5.55 5.05 5.02 4.22 5.04 4.40