Immigration and Emigration: Wages Gained and Lost

Article excerpt

Immigration is a highly charged issue in many developed countries. A leading thesis is that immigrants depress the wages of native workers, especially the low skilled. In a paper titled "The Wage Effects of Immigration and Emigration" (Working Paper 16646, National Bureau of Economic Research, December 2010), Frederic Docquier, Caglar Ozden, and Giovanni Peri not only rebut this notion, but also find that emigration, a little-studied phenomenon in developed countries, has exactly the effect wrongly attributed to immigration.

Using an aggregate production model well known in the literature, the authors simulate the wage effects of both immigration and emigration, apart from other changes in the economy, to assess the impact of global labor movements during 1990-2000 on the wages of those who do not migrate. The chief focus is on Australia, Canada, the United States, Belgium, France, Germany, Greece, Italy, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom. In each country, wage effects are examined separately on highly educated and less educated nonmigrants so that distributional effects become apparent.

The main results of the authors' analysis are threefold. First, in the countries studied, the long-run effect that immigration had on the average wages of nonmigrants ranged from no effect in Italy to a 1.7-percent increase in Australia. The effect, however, was different for the highly educated and the less educated, with the former exhibiting a small percent decrease in wages (except in the United States) and the latter finding their wages increased by a small or large percentage, depending on the country.

Second, the effect that emigration had on the averages wages of nonmigrants ranged from no effect in the United States (chiefly because few emigrate from that country) to a statistically significant -0.8 percent in the United Kingdom. As with immigration, however, the effect differed for the highly educated and the less educated, and in fact was just the opposite of the effect of immigration: those with more education saw their wages rise somewhat with emigration, while those with less education saw their wages fall, sometimes considerably, again depending on the country.

Third, immigration tended to improve, whereas emigration tended to worsen, the income distribution during 1990-2000 in the countries selected for study. That is, immigration generally decreased the wage gap between highly educated and less educated nonmigrants, and emigration generally increased the gap. The United Kingdom, Portugal, and Belgium showed declines due to emigration of 2.5 percent, 2.3 percent, and 1.3 percent, respectively, in the wages of less educated nonmigrants and increases due to immigration of 2.8 percent, 0.2 percent, and 1.1 percent, respectively, in the wages of less educated nonmigrants. …