Selecting Europe's immigrants

Timothy J Hatton, 3 July 2007

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There is a discernible trend among European governments towards increasingly selective immigration policies. In his previous job as France’s Interior Minister, Nicholas Sarkozy argued that: “selective immigration is the expression of France’s sovereignty. It is the right of our country, like all the great democracies of the world, to choose which foreigners it allows to reside on our territory.” The policy introduced in 2006 shifts the balance towards immigrants with skills and education, and away from immigration based on family reunification. A year earlier, the UK adopted a much heralded ‘points system’ that also shifted the balance towards labour market skills as the key criterion for permanent residence. A year before that, similar reforms were proposed in Germany, but narrowly failed to gain the assent of the Bundestag. This trend is likely to be followed before long by other countries.

Meanwhile in Brussels, the European Commission has been busy constructing the elements of a common immigration system for the EU as a whole. Under the so-called ‘Hague Programme’, the EU aims to have in place a set of immigration policies by 2010 that are consistent across participating countries. So far the process has stumbled over differences between member governments in the types of immigrants they wish to select. The idea of an ‘EU Green Card’ along similar lines to the United States has been widely debated, but not (yet) adopted. As a result it seems doubtful that a unified European Immigration policy along the lines of a points system will emerge by 2010, but at least it is a start.

Here is a puzzle. Economic theory suggests that countries gain most from importing factors of production that are relatively scarce. Like other developed regions, the EU has a far higher share of skilled workers in its labour force than does the world as a whole. That simple fact suggests that Europe should be tilting its immigration policies towards the unskilled, rather than towards the highly skilled. So why are we seeing a trend in the opposite direction? Is it really true that Europe selects too few skilled immigrants?

Cross-country comparison of the proportions of immigrants and non-immigrants by education-level reveals two key facts (Table 1). One is that, with the exception of Canada and Australia (both of which have points systems), as well as Great Britain, the proportion of highly educated individuals among immigrants is about the same as among the native-born. The other is that, among immigrants to Europe, the proportion of low-educated individuals typically exceeds 40% — and many of these have very little education. The ‘problem’ for European countries like France, Germany, Denmark and the Netherlands, is not just that of attracting the highly educated but even more of discouraging the low-educated. 

Table 1: Immigrants and Native-born aged 15+ in 2001.

 

Tertiary Educated

Less than Upper Secondary

 

Immigrants

Native-born

Immigrants

Native-born

USA

25.9

26.9

39.8

21.9

Canada

38.0

31.5

30.1

31.6

Australia

42.9

38.6

38.3

45.8

Great Britain

34.8

20.1

40.6

51.2

France

18.1

16.9

54.8

45.8

Germany

15.5

19.5

43.7

23.7

Netherlands

17.6

19.5

53.0

40.7

Denmark

19.5

18.8

48.6

41.0

Sweden

24.2

22.2

29.5

25.0

Spain

21.8

19.4

55.4

63.9

Source: Dumont, J-C. and Lemaître (2004), “Counting Immigrants and Expatriates in OECD Countries: A New Perspective,” in OECD, Trends in International Migration,  Paris, OECD,  p. 36.

So why is low-skilled immigration a problem? Let us turn first to politics and public opinion. Politicians need to heed public opinion, and adopting a tough stance on (some types of) immigration has proved to be popular of late. The common perception of low-skilled immigrants is that they come predominantly from poor and distant countries that have different cultures — something that is superficially identified by religion and skin colour. This has been compounded in recent decades by the surge of asylum seekers, who typically come from poor countries, and who have often been demonised as ‘bogus refugees’. Because a large proportion of them (we don’t know exactly what proportion) enter illegally, they are seen as abusing a system that was set up to serve humanitarian needs in order to jump the queue into developed-country labour markets.

It is not just prejudice that drives attitudes towards immigration. A number of recent studies have found that, among the native-born, the highly educated tend to be less anti-immigration. One inference that can be drawn from this is that those who face less competition from immigrants in the labour market are less likely to want tougher immigration controls. We know from other evidence that the better-educated — those with highly marketable skills — are likely to gain from low-skilled immigration (and not just through cheaper domestic services). It makes perfect sense that the skilled, who in rich countries are relatively abundant (compared to the world as a whole), should favour the immigration of the unskilled, who are relatively scarce.

But another powerful effect has been identified, which makes even those higher up in the scale of income and education want more restrictive immigration policies. This is the potential burden on the welfare state, the cost of which is borne by the middle- and higher-income taxpayers. If fiscal concerns are foremost in people’s minds, then that helps to resolve the apparent paradox of why countries that are skill-abundant should want to discourage unskilled immigration.

Such a view often confronts a fundamental objection: immigration is good for the public purse. Studies of the fiscal impact of immigration typically find that immigrants contribute more in taxes over their lifetimes in the host country than they take out in benefits. But the results are very different for different skill levels. Highly educated immigrants are large net contributors while the low-educated are net recipients. And the size of that gap depends on the host country’s labour market and its tax/benefit system. In the US, immigrants tend to have lower wages but the same (or higher) employment rates as the native-born. By contrast, in Europe, wage differences are less marked but employment gaps are larger. As the welfare system in Europe is also more generous, low-skilled immigrants are likely to be much more of a cost than they would be in countries with more flexible labour markets and less generous welfare states.

So the puzzle that I set out earlier can be resolved if we accept that fiscal concerns outweigh the traditional factor-scarcity motives behind immigration policy. But why is this trend towards skill-selective policies so recent? After all, low-skilled immigration, high unemployment and generous welfare states are not something new to most European countries. Perhaps political attitudes can help explain the trend: post 9/11 fears of terrorism and unease with Muslim communities seem to have soured attitudes towards immigrants, at least those from the Middle East and some parts of Asia.

But there is more to it than that. The eastward expansion of the EU has progressively opened the door to poorer countries whose populations have low skills and high incentives to migrate to the richer parts of the EU. For the moment, Bulgarians and Romanians are prevented from entering the labour markets of the richer member states. But this cannot last long and when the barrier goes down there will be a westward surge, just as there was from Poland to Britain from 2004. As the EU opens the door ever wider to east-west migration from accession states, the pressure grows to restrict low-skilled immigration from outside its expanding borders.

It remains to be seen if Brussels will ultimately lead the charge towards much more skill-selective immigration policies for the EU as a whole or, instead, if it will simply muddle along in the wake of initiatives taken by member states. But however it happens, the trend towards more skill-selective immigration policies seems set to continue. 

Topics: EU policies, Labour markets, Migration, Welfare state and social Europe
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Hatton discussed on:
http://blog.jacobchristensen.name/2007/07/03/unskilled-workers-wanted/

Timothy J Hatton

Professor of Economics, Australian National University and University of Essex; and Research Fellow, CEPR