It is migration, stupid

Tito Boeri, 23 June 2009

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Recessions are traditionally good times for left-wing parties, whose support for redistributive policies is perceived by voters as a sort of insurance scheme. If someone loses her job in the recession or gets poorer in the generalised downturn, there will be someone up there in the “centre of things” making sure that she receives some social support. “Nobody will be left behind” is the motto of Social Democrats. The golden age of Social Democrats in the European Parliament was in the mid-nineties when the EU was displaying a double-digit unemployment rate. The primacy of the Social Democrat group in Strasburg was lost while unemployment was converging to US levels and employment rates were approaching the Lisbon targets. But this recession, the most severe recession in the post-war period (see Eichengreen and O’Rourke 2009), has gone hand-in-hand with a landslide of right-wing and xenophobic movements across the Old Continent and a collapse of those parties historically associated with building the European welfare state.

Public opinion, migration, and welfare benefits

How could this happen? The answer is immigration. Over the last 20 years, over 26 million people have migrated to the EU15, compared with roughly 20 million to the US, 1.6 million to Australia, and less than 1 million to Japan. Since the beginning of the new millennium, countries like Ireland and Spain, now particularly hard-hit by the recession, doubled their foreign to domestic population ratios. True, these flows predate the recession and during downturns immigration also goes down; the rule of thumb is a reduction by 2% of migrant inflows per any one per cent fall of output in the destination country or of “10 migrants less per any 100 jobs lost” (see Hatton and Williamson 2009). But it is the combination of high recent immigration, the recession, and the welfare state that worries many Europeans. Data from the European Social Survey reveal that there has been a marked deterioration of the perceptions of Europeans with respect to migrants since 2002 and that this deterioration has been driven by concerns that migrants are a fiscal burden, as recipients of the generous social transfers provided in Europe, the “land of redistribution”. The fraction of EU natives asking the migrants to be repatriated if they are long-term unemployed has increased threefold in Spain, twofold in France and Italy, and between one third and one quarter in the UK and Germany.

Quite paradoxically these redistributive policies, introduced with the aim of promoting social inclusion, are turning into a weapon of mass social exclusion. Now that public deficits are skyrocketing and unemployment is back to double-digit levels, natives have legitimate concerns that even the strongest supporters of redistributive policies will be forced to cut down on welfare levels unless they succeed in restricting migration or, at least, access to welfare by migrants. However, policies introducing high fences for migrants and asymmetries in welfare access cannot be pursued by left-wing parties for ideological reasons.

Right-wing coalitions and xenophobic movements are more credible than Social Democrats in restricting migration flows and welfare access by migrants. Right-wing Italy and left-wing Spain offer a good example in this respect. In Italy, social transfers to the poor exclude a priori those without an Italian passport, regardless of whether they are legal migrants and have paid taxes, while boats of attempted migrants, including potential asylum seekers, are sent back to Libya (and nobody knows where they will be taken from there). In Spain, where social transfers include foreign citizens, the Government recently published a report documenting that migration has played a major role in the economic boom of the last decade and gave responsibilities for migration to the ministry of labour (in Italy it is the Minister of the Interior, from the Northern League, in charge).

The reassuring face of Social Democrats is turning into a nightmare precisely for those European citizens who represent their traditional constituency – blue-collar workers, low-income households, and persons living on social welfare. Does this mean that Social Democrats should either give up their ideals or be headed for the grave? Not necessarily.

Decoupling migration and the welfare state

First, it is not at all clear that measures tightening migration policies and cutting on welfare access by migrants offer the best response to the concerns of public opinion for more than a few months. This recession is bound to last for quite a long while and it is hard to enforce restrictions to migration, as pointed out by the large number of undocumented migrants living in the EU. The enforcement of cuts on welfare access by migrants is even more difficult; the experience of the US suggests that these restrictions can be challenged by court rulings and be reversed especially in those countries where there is already a large constituency of migrants, while they are from the start a source of social tensions. Thus, the policies currently favoured by voters may fail to deliver the reassuring results that they are supposed to provide.

Rather than imitating their opponents, Social Democrats may then try to decouple migration and the welfare state. This means supporting from the very first meeting of the European Parliament a common EU policy repressing illegal migration, based on a much stronger role of Frontex, the agency created in 2004 precisely with this goal, that has never taken off. It also means backing a European selective migration policy, encouraging the inflows of those migrants who are less likely to draw on welfare because there is high demand for them. Welfare systems should also be made more proactive and better grounded on insurance principles in this decoupling strategy. In particular, eligibility should be made conditional on the payment of contributions (migrants are net payers in contributory transfers everywhere) and abuse of welfare should be sanctioned both socially and administratively. Sweden is perhaps the country that made the most progress in the EU in reforming social policies along these lines. Is it just by chance that Swedish Social Democrats were the only pro-welfare group to win these European elections?

References

Boeri, T. (2009) “Migration to the Land of Redistribution”, London School of Economics and Political Science Paper, n. 5.
Eichengreen, B. and K. ORourke (2009). “The world economy is tracking or doing worse than during the Great Depression (update),” VoxEU.org, 4 June 2009.
Hatton and Williamson (2009), “Global Economic Slumps and Migration”, VoxEU.org, 29 April.

Topics: Migration
Tags: immigration, unemployment, welfare

Professor of Economics at Bocconi University, Milan; Scientific Director of the Fondazione Rodolfo Debenedetti and the founder of LaVoce. CEPR Research Fellow