Labour market performance and migration flows - European ...

Chapter IIThe impact of migration on labour markets in Arab Mediterranean countriesIntroductionMigration can profoundly reshape the labour market of migrant sending countries, which is influencedthrough a variety of closely intertwined channels, such as direct impact on the unemployment rate,indirect effects on incentives to actively look for a job – that can be mediated by the transfer of bothfinancial and social remittances, and the influence on the sectoral structure of the demand for labourthat can be induced by the influence that migration exerts on the pattern of consumption andinvestment. Contrasting views about the impact of migration on the labour markets of migrant-sendingcountries are expressed, ranging all the way from the expectation of a positive – and much needed –contribution due to the reduction in the unemployment rate, to concerns about the loss of relevantskills that could hinder or retard economic development. Changing perceptions of the economicconsequences of migration can most probably be traced back to the complexity of the effects thatmigration unleashes on the labour market, whose relevance differs across migrant sending countries.This paper focuses mostly on emigration, and more particularly return migration; immigration is notconsidered here, unless it can be envisaged as a direct consequence of the emigration of nativeworkers, e.g. replacement migration.The variety of relevant channels entails that a broad research question about the impact ofmigration “is more appropriate, given the complexity of relations involved [than] a narrowerquestion about, say, the impact of remittances only”, as McKenzie and Sasin (2007) argue. Theneed for a holistic approach is further strengthened by the fact that in Arab Mediterranean countriesthe usual text-book distinction between the demand and the supply side of the labour market issomewhat fictitious, given the high incidence of self-employment.Nevertheless, for the sake of analytical convenience, we pursue an indirect approach that aims atsingling out the impact of migration on various facets of the labour market. This means that theimpact of migration on main labour market outcomes, such as the level and the distribution oflabour earnings, participation and unemployment rates, is not addressed directly, but rather weattempt to infer it from the influences that migration exerts on the demand and the supply side ofthe labour market. Admittedly, some of these intermediate effects produce contrasting influenceson labour-market outcomes, so that our analytical approach might fall short of delivering anunambiguous conclusion. Still, given the limited empirical evidence that is available for thesecountries, we argue that our approach is valuable as it highlights the specific channels that deserveto be further investigated, and it warns against drawing conclusions from analyses that focus on onespecific channel. As Sen (1989) famously put it, “in social investigation and measurement, it isundoubtedly more important to be vaguely right than to be precisely wrong”.Table 1 below provides a synthetic snapshot of the structure of the analysis that will be pursued inthis paper; the four rows identify the features of the labour market that can be expected to beinfluenced by the emigration of native workers. As far as the supply side of the labour market isconcerned, we will assess the impact of emigration on a country’s endowment of labour, and howthe behavior of the economically active population which does not leave the country is influencedby the process of migration. With respect to the demand side of the labour market, we will analyzehow migration exerts an indirect influence due to the changes it induces on the prevailing pattern ofhousehold consumption, and through the investments and the choice of entrepreneurial models inthe case of domestic firms. The columns of Table 1 conversely identify the various facets ofemigration that can exert an influence on the labour market. We consider the effect due to theprospect of migration, by the actual migration of domestic workers and by their eventual return totheir home countries. Furthermore, we analyze how remittances – intended both as the financialtransfers made by migrants and as the transfer of ideas across countries – can influence the labourmarket. Indeed, though migrants’ remittances are the most evident economic counterpart of theinternational mobility of workers for migrant sending countries, the role of social remittances thatLevitt (1998) defines as “the ideas, behaviours, identities and social capital that flow fromreceiving country to sending country communities” could be substantial as well.113