Emigration & wages

It’s strange that it takes a guy who doesn’t own a passport to ask this - but isn’t the debate provoked by Ed Balls’ call for restrictions on intra-EU immigration rather parochial? I mean, it’s been about the effect of migration on the UK, and isn‘t asking: what impact does emigration have upon eastern European economies? This new paper  by Benjamin Elsner starts to fill this gap.
He looks at Lithuania, which experienced especially large emigration after 2004.
Now, if migration has a big impact upon wages, you’d expect Lithuanian wages to have risen in response to the fall in their domestic labour supply. 
So, did they? Yes - up to a point. Mr Elsner estimates that unmarried Lithuanian men saw their wages rise 1.4% for every percentage point of comparable workers who emigrated. This implies that it would require 2.5% of Lithuania’s workforce to emigrate to raise wages by as much as they would rise through one year of ordinary economic growth. I’m not sure whether this is a big effect or not.
For other workers, the effect is smaller. Mr Elsner found no effect of emigration upon women’s wages. And he found only a teeny effect for married men’s wages. This, he says, could be because married men have stronger ties that stop them emigrating and so cannot credibly tell their employer that they will migrate if they don’t get a pay rise, in the way that footloose single men can.
You can interpret this in three different ways.
First, insofar as there is a negative effect, Balls’ demand for immigration controls - which are, of course, emigration controls too - amounts to an attack upon the living standards of poor workers; Lithuanian incomes are only around half the UK’s. One might wonder how socialist this is.
Secondly, insofar as there is an effect, there’s a question for people like me who have been relaxed about the impact of migration upon host country‘s wages: if emigration raises wages, why doesn’t immigration reduce them?
Well, for one thing it does - there is a small adverse effect upon unskilled wages. And for another thing, there are selection effects. Immigrants fill jobs that others can’t or won’t do, so they don’t compete much with indigenous workers, and might actually raise their wages if there are complementaries between jobs - if, say, immigrant roofers allow native plasterers to get more work done. By contrast, emigrants are a more mixed bag.
I, though, would prefer to stress that we are talking small effects here. The debate about migration should not rest much upon its impact on wages. And if you are seriously worried about the living standards of working class Britons, immigration should, surely, be low on your list of concerns. Or am I being too technocratic?

Comments

[AJ]

Think I detect a rather more reasonable tone here than is usually the case when you discuss immigration, which is nice to see, but still the usual logical contortions that are evident whenever you discuss this issue.

Ed Balls' primary responsibility, if he ever becomes PM, will be to British citizens (unless he wins on a utopian internationalist ticket). But even if it were a priority for him to improve living standards in Lithuania there are many ways he could do this that don't come predominantly at the expense of low wage British workers, as is the case with high low skilled immigration.

Interesting that you think a 5% reduction in unskilled wages associated with a 10pp increase in the immigrant workforce is 'small'. What would you consider an intolerable wage reduction for those on very low wages to be? I'm sure they would like to know.

'Immigrants fill jobs that others can’t or won’t do' - very sad to see on this blog this argument about Britons not being willing to do certain jobs. Did we suddenly become too snooty in 1997? And which are the low skilled jobs that non-immigrants can't do?

No, you are not being technocratic. You are just not interested in the welfare of low skilled, low wage Brits, which the right kind of technocrat might well be.

[kevin denny]

AJ: well said. Maybe its time somebody invested in a passport...or just got out more.

[Jo Jordan]

Aren't the issues quite different? Picking strawberries in seasonal work, for example, might be quite viable for someone coming over for a working holiday and changing pounds into a weaker currency.

Money earned and SPENT in UK is a different matter. If you have to move to another place to do the work and maintain two homes and the wages don't cover costs.

Workers aren't cans of baked beans to be taken off the shelf at the warehouse and shipped to another shelf. And jobs aren't really shelves for cans to sit on.

The real question is what economic role (rather than job) does a person want to do and what training and experience do they need to acquire and in what order to achieve what they want to achieve.

After all, someone down the road from me heard of a factory that went bust in Poland. He bought it up lock, stock and barrel and carted it back to UK, with workers, and runs it profitably in middle England. That's not the story we usually hear. Now that is his story and his solution.

What is the solution that people want and how do they intend to make it happen. Given that they aren't cans of beans to be moved around at UK at someone else's whim.

When we know what they want, someone can bundle together ideas on a spreadsheet just to get some efficiency from the training dollar (but not to change their plans)and we can get behind their dreams.

It wouldn't be hard to collect these dreams either. Some interactive social media websites would do it. People would change their minds as they hear what other people want but the ideas, and the pattern of ideas that we need to fund them, would come out quite quickly.

[Igor Belanov]

If people are so bothered about a lack of jobs or downward pressure on unskilled wages, then why haven't they focused on all the women in the economy, or pension-claimants that are still working, or schoolchildren in part-time jobs, or workers commuting from the next town, or other regressive policies. Seems like they're just picking on foreigners to me.

It seems a bit pointless these days asking why politicians never question the free movement of capital.

[Igor Belanov]

Sorry, perhaps I need to make it clear that I don't advocate restrictions on women working in the economy!

[AJ]

Igor - the UK, like every other country, 'picks on foreigners' in all sorts of ways by your definition. For example we don't generally allow them to use the NHS for free or to be educated in British schools or to vote in the UK.

What characterizes the women, children and pensioners you describe is that they are (presumably) UK citizens, and in every country I know of citizenship confers valuable rights. Maybe it would be nice to live without national borders as citizens only of the world, but we don't and the UK should not go alone in pretending we do.

[Fred Kapoor]

Good post. The subject is really complex and deep, though. In my opinion, emigration is such an ambivalent phenomenom, it has always existed and it cannot be avoided. It is necessary in some cases and on the other hand it can bring a lot of problems and invonvenients for the governments and therefore for the locals.

[Igor Belanov]

@AJ

Do you think that women, pensioners and schoolchildren are diluting the labour market and depressing wages?

If not, then neither are immigrants and you are picking on the foreigners, irrespective of the citizenship arguments you've put forward.

[AJ]

@Igor - only in the sense that British women, children and pensioners are also costly to the NHS. Sure they are, but the NHS is there to serve them.

My argument is not that you should do everything you can to restrict the labour supply in order to keep wages high - that's a crazy idea. Rather my view is that it's legitimate to limit the entry of low skill foreign labour where this has an undesirable impact on the wellbeing of our poorest citizens. Yes, I reckon in the framing of UK policy we should weight the wellbeing of UK citizens higher than foreigners - but that's what we do in pretty much every area of public policy.

[LV]

Emigration from Lithuania and co. did not raise wages, because theses countries had up 20% of jobless people (Poland). There were some labour shortages - wards of Polish hospital were closing, Romania had problems too
http://www.presseurop.eu/en/content/article/13481-romanias-coming-home and currently it is expected the exodus of Czehc doctors.

[Niklas Smith]

An interesting post. I have three points to make.

1) You're right that emigration doesn't seem to have a large impact on wages paid in emigrant countries. For example, O'Rourke and Williamson[1] estimated that emigration since 1870 left the Swedish labour force 18.1% smaller in 1910 than it would have been without emigration. They estimated that migration raised urban unskilled wages by 12.8%. But in the period these wages actually rose by 191% (i.e. nearly tripled), so migration only accounted for a very small part of the rise in incomes.

2) In answer to AJ in particular, I understand that the UK government is expected to put the welfare of British citizens first. But that involves weighing any negative effects on unskilled wages against welfare gains to British citizens, for example lower prices or shorter queues (e.g. in dentristry or plumbing) that result from allowing in Polish dentists and plumbers, or indeed nurses. It's also worth noting that economic migrants are by definition willing to work and overwhelmingly young and childless, so they are net contributors to the welfare state (i.e. helping to fund the NHS and state pensions for UK citizens).

3) Chris quite rightly points out that British immigration restrictions are also restrictions on Eastern European emigration. But they would also probably be restrictions on British emigration: after all, if we restricted intra-EU migration why should we expect the other 26 members to still let Britons go to work freely in France or Germany or anywhere else? Given that, according to John Monks, there are usually more British contractors working in other EU countries than Europeans working here[2] (not to mention many British pensioners enjoying the sun in Spain or Bulgaria), how large an income cut for British emigrants forced to return home is acceptable?

[1] Cited in Hatton and Williamson, The Age of Mass Migration, pp. 198-199.

[2] http://www.economist.com/businessfinance/displaystory.cfm?story_id=E1_TPTDTGPS

[Tristan]

Seems to me that these anti-immigration people are narrow nationalists adopting left wing sentiments for power.

There's a reason the radical, anti-authoritarian left rejects political boundaries - the problems of the poor and the working class transcend these arbitrary boundaries known as borders.