The People Crunch—The Economic Crunch Is Battering Migrants

The people crunch

Jan 15th 2009
From The Economist print edition

The economic slump is battering migrants. For tens of millions of people working outside their homelands, life is becoming much more precarious


WORKERS waiting at airports: some flying off to seek modest fortunes, others returning to poor homelands whose main export is people. These images of the global labour market in the early 21st century are starting to fade as economic times get harder, both in countries that take in migrants and (partly as a result) in countries that send them out.

Consider, for example, the changing fate of the Kigezi kids, a group of young workers, mostly graduates, who gather each month to gossip about life in London. They hail from southern Ugandaan area of green hills and endemic povertyand their meetings are usually pleasant chats over a barbecue, when they compare property portfolios and community projects back in Africa.

Now, the mood is darkening. Several work in Londons troubled financial-services sector. Six months ago their prospects seemed secure, but the eruption of the worst financial crisis since the 1930s has spread anxiety. One woman, after four years of study and employment, is poised to go home. Another is distraught after an offer of a permanent job was withdrawn. More recent arrivals moan that it is tough to find work, even the menial sort. Daily living grows harder: some split the cost of housing, others walk to save on bus fares.

All are startled by the recent slide in the value of the pound. The Kigezi kids are struggling to help relatives in Uganda who, battered by high prices of rice and maize flour, send frequent requests for money. There is a feeling that its getting hard to be here. Im praying I dont receive any text messages, says one man. A few are quietly changing their mobile-phone numbers to avoid demands for cash. It is even creating bad blood with relatives who think their sons and daughters in London are no longer being helpful, he says.

Their troubles are emblematic of migrants growing woes all over the world. Rates of migration soared in recent decades as the likes of Britain and America enjoyed rapid economic growth and sucked in labour. Around 200m people now live outside their homelands, some 3% of the global population. The proportion of foreign-born people in many Western countries has surged well above 10%: this includes Greece and Ireland, from where emigrants used to leave. Spain, where a construction boom helped to create a third of all new jobs in Europe in recent years, sucked in 4m foreigners (especially from Bulgaria and Romania in the EU, plus Ecuador and other bits of the former empire) between 2000 and 2007.

As economies turn, migrants suffer. Many industries where they predominate (tourism in Ireland, financial services in Britain, construction in America and Spain) have shed jobs fast. Spanish unemployment is already 12%; many thousands of migrants are said to be claiming benefits. Spains government is seeking ways to get some to move again. It says hopefully that 87,000 will re-emigrate under a new plan of voluntary return, which lets migrants claim future unemployment benefits early, in two lump sums, if they hand in residence permits and work visas and promise to stay away for three years. As much as $40,000 is apparently on offer, per migrant. Yet few have shown interest.

As migrant workers suffer in Americageneral unemployment is over 7%, a 16-year-high, with Hispanic workers hit especiallythe message sent home is dont come. It has been received clear enough, for now. A study of 120,000 Mexican households published in November showed emigration (almost entirely to America) had slumped by 42% from two years earlier. Border arrests have fallen equally fast. The value of remittances has also tumbled, says Mexicos central bank.

Into the unknown

As long as the slump was limited to rich countries, the impact on migrants was relatively predictable: some would be diverted to faster-growing emerging economies; some might choose not to migrate; some would go home, at least for a time.

Early evidence suggested that migration was indeed slowing. Data released in November showed 577,000 immigrants arrived in Britain in 2007, 14,000 fewer than the year before (although emigration fell faster, lifting net migration). Last year probably saw a much starker drop. Similarly a survey in Ireland late last year suggested that of 200,000 Polish migrants, around a third expected to leave within a year.

On January 14th a Washington, DC, think-tank, the Migration Policy Institute (MPI), published a study of the impact of recession on migration in America. It concludes that the foreign-born population there has already stopped growing, after years of rapid expansion. Illegal migrants in particular have responded to the slump: in the past year or so the stock of unauthorised migrants has stopped rising. As the recession worsens, the number of foreign-born in America might yet decline.

But as economic misery has spread to poorer countries, the picture has been muddied. Nobody knows what to expect from a co-ordinated global downturn at a time of historically high migration. Demetrios Papademetriou, one of the two authors of the MPI study, notes that as economies such as Mexicos are also battered, the push to export migrants could rise again fast. One estimate quoted by his study suggests that, if real wages in Mexico slip by 10%, American authorities should brace themselves for a 6.4-8.7% rise in attempted illegal immigration.

Similarly in Europe, although the economic slump has hastened the re-emigration of some from rich countries (anecdotes point to Polish workers leaving a sinking Iceland faster than rats off a ship), as economies in eastern Europe also slow, migrants may opt to stay. Young and single workers may choose to move on, but migrant families, especially, may conclude that they are better off claiming welfare in rich countries than returning home.

Lessons from history

A global slump is likely to change migration flows significantly. In October the UN secretary-general, Ban Ki-moon, urged rich countries not to put up barriers against migrants during a slump, but noted that migration flows are reversing. In several instances we are seeing a net outflow from countries facing economic crises. The International Labour Organisation suggests that 20m jobs will be lost, globally, this year, and gives warning that the rich are bound to close doors.

The lessons from other big downturns suggest that migrants will suffer. Germany, France, the Netherlands and Belgium all called an abrupt halt to long-running guest-worker programmes in 1973, anticipating a painful recession that decade.

In the late 1920s and 1930s America, which had earlier seen very high rates of immigration, slammed its doors, and then kept immigration rates low for decades (see chart). As the Depression took hold, many foreign workers re-emigrated: some 500,000 left in the 1930s, with many southern Europeans moving back permanently to the old continent. In the same decade the stock of Mexicans in America fell by a dramatic 40%, as they lost jobs and many were deported. Similarly the depression of the 1890s provoked a host of migrant-hostile legislation in Argentina, America and elsewhere, as native-born workers demanded that foreign rivals be kept out.

The International Organisation for Migration (IOM), among others, now worries that once again xenophobia will rise as job competition increases between nationals and migrants. Hostility is creeping up. Deportations from America are rising fast (a record 361,000 illegal migrants were kicked out in 2008, up from 319,000 the year before). An opinion poll by the German Marshall Fund, in November, suggested that a majority of Americans and Europeans regard migration as a problem, not as an opportunity.

Britons and Americans, in particular, are hostile to foreign workers, with over half of respondents saying that migrants steal jobs and roughly two-thirds saying that they bring higher taxes (because of claims on welfare). In turn politicians are talking even tougher about migration and, in some cases, such as Britain, are making it harder for outsiders to get legal entry.

Danny Sriskandarajah, until recently of the Institute for Public Policy Research in London, notes another concern about changing public moods. So far anxiety, for example in Britain, has been directed at the government for failing to control the influx of foreigners. A more poisonous response is one targeted at the foreigners themselves, he suggests. That might come about as unemployment rises, especially if some migrants are better able than natives to keep jobs, for example in farm or care work, perhaps because of a willingness to work long hours for low pay.

Elsewhere hostility towards migrants is already becoming substantially more brutal. In Russia, human-rights groups fear that racist attacks against foreigners will soar as the economy slows. In December, as a gang of teenage skinheads was convicted in Moscow of killing 20 migrants, an NGO, Moscow Human Rights Bureau, reported that 113 migrants had been murdered between January and October 2008, nearly twice the rate of the year before. Some 340 migrants were also wounded.

Doomsters have other reasons to worry, especially about the poor. The past few years have shown how important remittances have become in alleviating poverty and spurring investment in poor countries. In some cases they account for bigger flows of capital than aid or foreign investment. They spread wealth from rich to poor countries, but now remittances are being squeezed.

In November the World Bank suggested that total remittances to poor countries last year would be at least $283 billion. Known flows have more than doubled since 2002 (partly a result of better measurement). For many small countries they accounted for a large chunk of GDP in 2007, for example in Tajikistan (46%), Moldova (38%) and Lebanon (24%). Choke remittances, and such places will suffer.
Even for larger economies, such as India and China, remittances provide hefty flows of capital. The World Bank expected India to get $30 billion from its diaspora in 2008 and China $27 billion.

The Philippines has some 8m people abroad: their remittances provide about a tenth of total domestic output. In the first ten months of 2008 the country earned nearly $14 billion from emigrants, substantially more than the year before. But 2009 looks less rosy: the government is cutting high expectations of income from migrants, amid fears that Filipinos who work in IT and finance, especially, will lose jobs.

Elsewhere things are worse already. In November Kyrgyzstan lamented that remittances (mostly from migrants in Russia) were tumbling. Tracking such flows is hard, but an estimate by the central bank in Kenyawhere migrant money is the biggest source of foreign currency, exceeding tourismspoke of a sharp drop last year, especially from Kenyans in America.

Remittances had been seen as more resilient in an economic downturn than aid and investment flows, perhaps because the senders of cash have personal ties with the recipients. But the World Bank says some poor countries should expect outright decline in such funds. Flows to Africa, which had earlier boomed, stagnated last year; flows to parts of Latin America dropped. In November the head of the UN Conference on Trade and Development, Supachai Panitchpakdi, predicted that 2009 would see remittances to poor countries slide by 6%; but it could be worse.

A second reason to worry is that places with young, expanding populations have got used to exporting surplus labour. Morocco sends young men to Europe; Central Asian countries send them to Russia; Pakistan and other parts of South Asia pack them off to labour in the Gulf. If such exporters of humans can no longer do so, they will instead have to absorb millions more themselves: a tall order in a time of general downturn. The risk of social and political upheaval may grow.

From slowdown to spasm

A related spasm of social pain could be felt in China, where internal movement plays a big role in the economy. Some of the 140m domestic migrants (mostly rural folk who had gone to cities) risk losing their jobs. Officials know that finding ways to keep them working, or to provide them with welfare, will be essential. In December Chinas premier, Wen Jiabao, urged local governments to enact policies to create jobs especially for migrant workers.
Is there a bright side from higher rates of migration? Optimists in Europe argue that enlargement of the EU and the freer movement of workerssome 2m east Europeans now live and work in western Europemay give the continent useful flexibility during a recovery.

Late last year the European Commission suggested that young, well-educated workers will be prepared to move to find jobs. Around 80% of the recent arrivals from eastern Europe are younger than 35, and so are likely to be more mobile than their elders. The commission also suggests that relatively few countries (so far) have seen recent migrants make much use of welfare, beyond schools and clinics.
Unlike previous waves of migrants (like the South Asians who arrived in British factories in the 1950s), eastern Europeans can probably move between jobs. Poles, for example, may be well placed to move from construction to agricultural labour.

In America, too, migrants who are less reliant on welfare may be willing to move from state to state for work, or to opt for lower-skilled employment for the sake of sustaining their incomes. The bad news there, however, is that state crackdowns on unauthorised migrants, along with a border that is getting harder to cross, are making it tougher for migrant workers to flow to where they are needed. As barriers go up, migrations benefits go down.