Labour market performance and migration flows - European ...

Chapter IIIEU Migration Policy towards Arab Mediterranean Countries and its Impact on their Labour MarketsIntroductionAt the end of the 1990s, empirical research and policy debates revolving around the effect ofemigration on the economic development of origin countries received additional impulses.Until that time a common consensus had prevailed: the impact of migration on economicdevelopment was considered more positive than negative, and was thought to be the result of twodivergent forces. The first negative force was brain drain which not only involved the departure ofeducated migrants, but also the natural selection of the most brilliant and risk-prone among the poolof potential migrants. The positive force was remittances which were considered to be beneficialboth for the aggregate economy and for the migrant’s family (Kapur 2005, Adam and Page 2005).It was commonly argued that remittances alleviated poverty, increased schooling levels andreduced child labour and were useful for the sending country’s balance of payments. Moreover, thedebate concentrated on the likely profitable use of remittances, mostly employed in consumptionand for buying a house or a piece of land, and only partially for productive investments. Policyinterventions tried to favour the allocation of remittances in more productive assets by grantingloans to start a business or to buy a house even before the migrant’s return to the origin country.Two lines of research have, however, cast doubt on this common vision pertaining to the effects ofmigration on the origin country: on the one hand, the negative effect of brain drain and, on theother, the positive effects of remittances were both questioned.The “brain drain-brain gain” literature (Stark, Helmenstein and Prskawetz 1997, 1998; Mounford1997; Beine M, Docquier F., Rapoport H., 2001, 2003) shows how the augmented probability ofsuccessful emigration among the more educated stimulates investment in education among potentialmigrants. The result is an increase in the number of educated workers in the origin country. While partof this labour force will eventually migrate, a more educated labour force, beneficial to the growth andlong-term development of the country, will remain in the country, and thereby attract foreigninvestments.The other strand of literature highlights the negative effects of remittances on short- and long-termgrowth (Chami et al 2005). The negative effect consists in reducing the incentives for participation inthe labour market and hence brings about a subsidized economy.Nevertheless, it is noteworthy that whereas empirical evidence on the second point exists, evidencerevolving around the brain gain effect is very limited (Faini 2006). Thus, a widespread view is thatmigration is good for the migrant and for his/her close family because it alleviates their poverty, but itis not positive in the long run either for the migrants’ relatives or for their country. By creating asubsidized economy, it forces future workers to follow emigration patterns as employment prospects inthe origin country remain slight.In the light of these doubts, the compromise on which the migration policies of the above-mentioneddestination countries was based was no longer valid. Permanent migration was accepted by destinationcountries even if they “wanted labour more than people”. Still, in many instances, various difficultiesin migrant integration both in society and in the labour market were striking. Also, some third-countrynationals were more successful than others in integrating into the society of destination countries. Thelong-term costs that the host country had to bear in integrating foreign migrants were compensated for,it was believed, by short-term benefits in the goods’ market.Furthermore, host countries had already many problems induced by immigration: competition in thelabour market (no significant evidence exists on negative effects caused by migration on native wagesand only weak evidence exists on its effects on native employment); the cost for the welfare state (noevidence of welfare shopping, evidence of a larger than average use of welfare, but not if theindividual characteristics of the migrants are considered) and assimilation (significant evidence thatthey do not economically assimilate with natives) which results in difficult economic and social163