Labour market performance and migration flows - European ...

Chapter IFinal Reportorganised in Beirut, Lebanon, an Expert Group Meeting on International Migration and Developmentin the Arab Region: Challenges and Opportunities. The contributions to that meeting review all therelevant topics in this respect (see, for instance, Gallina 2006).5.1 Effects of Outward Migration on Labour Markets in AMCs: Literature Review23As for the interaction between labour markets and international migration, the literature on howimmigration affects labour markets in receiving countries is enormous and sophisticated (see Aydemirand Borjas 2007 for the US and Canada and Lumpe 2007 for a general review). In contrast, the researchon how emigration affects the labour markets in sending countries in comparatively small. Indeed, verylittle is known about the impact of emigration on the AMCs labour markets. Research so far has focusedon the macro- and microeconomic impact of remittances based on the analysis of the pattern ofexpenditure. However, the size of labour migration has reached a level where it is not possible to ignoreanymore the impact it has on education strategies and investment, labour market participation, localwages and other aspects of local labour markets.Emigration was seen as a safety valve reducing the supply of workers in the 1970s and 1980s.According to some authors (Nassar 2005), in certain countries emigration has reduced unemploymentrates. They add that if all emigrants return unemployment would shoot up. However, little is knownabout the impact of emigration on labour demand, incentives to work, wages, contracts, female laboursupply, or young people’s labour supply. But, with migration levels from AMCs likely to peak at morethan half a million a year between 2010 and 2020 if current migration rates are maintained, theimportance of this economic development for their labour markets can hardly be exaggerated.A first order effect of migration is, indeed, its impact on the labour supply of the countries of origin(and hence reducing unemployment in labour abundant countries such as AMCs), as shown in the firstrow of Figure 5.1.1. However, the high degree of segmentation of AMC labour markets (see Section2.2) reduces the impact of migration on unemployment levels. Beyond that, the impact of the differentstages of migration on education strategies and hence skills availability, incentives to work, wages andlabour demand is potentially significant. Indeed, outward migration affects national labour market inmany ways and through many channels. Figure 5.1.1, based on existing literature and economicanalysis, undertakes the systematization of those effects from a theoretical point of view, reviewingthe positive, negative or neutral or contradictory effects on the performance and the structure of labourmarkets of different stages of migration (Prospect to migrate, Actual migration, Remittances or ReturnMigration) through nine different channels (including labour supply and demand and the degree ofinformalization of the economy, as well as its factor endowments); this holistic approach is morerelevant than the frequent limitation of the analysis to the impact of remittances.This notwithstanding, effects related to social capital (and so-called social remittances) have beendeliberately left outside the analysis, although they are implicitly considered as part of the positiveeffects of return migration24. The same applies to the impact of migration networks (which mainlyaffect the prospects for migration and whose effects correlate with the level of migration). Finally, thelevel of unemployment as such has also been left outside the Table, since it is determined throughsome of the channels appearing in the Table, such as the labour participation rate (a decrease in thisrate reduces unemployment) or reservation wages (an increase in the minimum wage a worker is readyto accept in order to work will increase the unemployment at prevailing wages). So Figure 5.1.1allows us to infer, for instance, that the prospect to migrate increases reservation wages (somethingwhich is empirically observed in Lebanon, for instance), or that remittances may decrease the labour23 Literature review throughout this section draws heavily from the Thematic Background Paper on The Impact of Migration on the Labour Markets in Arab Mediterranean Countries: Abibliographical Review, commissioned for this Study (Marchetta 2009).24 They are considered, however, in the Thematic Background Paper (Marchetta 2009) and in the National Background Paper for Algeria (Bouklia-Hassane and Talahite 2009).67