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Migration Policy in the Great Recession by Mike Nicholson and Pia Orrenius

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Migration Policy in the Great Recession by Mike Nicholson and Pia Orrenius VOL. 5, NO. 5 JUNE 2010­­ EconomicLetter Insights from the FEDERAL RESERVE BANK OF DALLAS Manning the Gates: Migration Policy in the Great Recession by Mike Nicholson and Pia Orrenius During the downturn, The Great Recession of 2008–09 brought steep declines in world out- advanced economies put, employment and trade—all told, the worst falloff of global economic activ- as well as developing ity since the Great Depression. During the downturn, advanced economies from countries adopted Australia and Western Europe to developing countries such as Thailand and Ka- policies ranging from zakhstan adopted policies ranging from keeping new migrants out to encourag- keeping new migrants ing resident migrants to leave. out to encouraging The most common policy changes included tightening numerical resident migrants limits or imposing categorical limits on immigrant inflows, paring back lists to leave. of shortage occupations and changing eligible occupations for temporary mi- grants. Nations also limited the opportunities for migrants to adjust their le- gal status or renew their work permits. They tightened employers’ advertising requirements, or labor market tests, to Annual inflows to Ireland rose did not accelerate in the 2000s. Green give native-born workers an edge over sharply during this time as well—from card issuances averaged about 1 mil- their foreign-born competitors. Many 42,000 in 2000 to 89,000 in 2007. lion per year, the same as in the 1990s, countries also boosted immigration en- The foreign share of the population and the foreign-born population share forcement, stepping up efforts to round increased from 3.3 to 10.5 percent. rose modestly from 11.1 percent in up unauthorized immigrants and pros- Ireland was among the three EU coun- 2000 to 12.5 percent in 2008, a slower ecute their employers. tries to allow migration from the eight rate of increase than in the prior Through these initiatives, lawmak- Eastern and Central European nations decade. ers sought to help domestic workers by that joined the bloc in 2004, often The expansion that spurred immi- limiting foreign competition during a referred to as the “accession eight,” gration throughout much of Europe severe economic downturn. While the or A8.2 Irish immigrants came mostly came to an abrupt end with the intent of these measures is clear, their from Poland. Ireland also took in a 2008 financial crisis and slowdown bite is somewhat uncertain. Recessions significant number of immigrants from in world economic growth. The next diminish employment opportunities, countries outside the EU, including the year, world output contracted 0.6 per- so cross-border labor flows decline on U.S., India and China. cent, and the volume of global trade their own accord, reducing competition U.K. migration also rose in the declined 10.7 percent.3 Unemployment for jobs from foreigners. period leading up to the recession, rates skyrocketed in many countries, In fact, the immigration backlash albeit to a lesser extent since the U.K. particularly in those that had experi- could have its greatest effect after has long been a country of immigra- enced housing booms, such as Spain, the recession ends, when a growing tion. Inflows increased from 364,000 in the U.S., the U.K. and Ireland (Chart demand for labor could run headlong 2000 to 527,000 in 2007. The foreign 1). into labor market restrictions that share of the population edged up from Between December 2007 and remain in place. These could impede 4.5 percent in 2001 to 6 percent in December 2009, unemployment rates countries’ ability to recruit workers in 2007. As in the case of Ireland, many rose from 5 percent to 10 percent in sectors vital to their recovery and long- of these new immigrants came from the U.S., from 8.8 percent to 19 per- run economic growth. the A8 countries. cent in Spain and from 4.8 percent to In contrast to the new destination 13 percent in Ireland. The EU area as From Economic Boom to Bust countries of Europe, U.S. immigration a whole experienced a milder rise in In the years leading up to the Great Recession, economic expan- sion and housing booms in countries Chart 1 such as Spain, Italy and Ireland led to unprecedented levels of immigration Unemployment Rates Rise During the Great Recession in and transformed what had tradition- Many Popular Destination Countries ally been sending countries into prime destinations for migrants from within Index, January 2007 = 100* the European Union (EU) and around 350 the world.1 Ireland U.S. EU From 2000 to 2007, Spain was 300 Spain U.K. Australia Europe’s leading destination for 13.0 migrants by a large margin. Immigrant 250 inflows averaged 642,000 per year, and 19.0 the number of foreigners rose from 10.0 less than 1 million to nearly 5 mil- 200 lion. The foreign share of the Spanish population rose from 2 percent to 10.4 150 7.7 percent over this period. 9.4 5.5 Italian immigration also skyrock- 100 eted, with flows averaging 338,000 newcomers a year between 2000 and 50 2007, up from only about 50,000 in the 2007 2008 2009 late 1990s. The foreign share of Italy’s * Seasonally adjusted. population more than doubled, rising SOURCES: Eurostat; U.S. Bureau of Labor Statistics; Australian Bureau of Statistics. from 2.2 to 5 percent. EconomicLetter 2 FEDERAL RESERVE BANK OF DALLAS FEDERAL RESERVE BANK OF DALLAS EconomicLetter unemployment—from 6.9 percent to notably Ireland, Spain and the U.K. 9.4 percent. The most frequent policy approach emphasized controlling worker inflows Migration Policy Responses from outside the EU. The Great Recession caused great In 2009, Ireland stopped issuing anxiety. Many governments, including work permits to foreigners for low- in the U.S., passed stimulus packages paid occupations in addition to house- aimed at promoting consumption and hold workers and truck drivers. Spain job growth through tax rebates, infra- restricted the recruitment of certain Countries responded to structure projects and expanded social categories of guest workers in 2008 benefits. In addition, governments and 2009.6 rising unemployment sought to help individuals directly The U.K. upped salary and edu- with job-creation programs and by cation requirements for high-skilled rates with policies extending assistance to unemployed workers from outside the EU and sus- workers. pended recruitment of low-skilled non- designed to limit Countries also adopted protec- EU workers in 2009. Salary require- tionist trade and immigration policies. ments were tightened further in early foreign-born workers’ Protectionist trade policies often back- 2010.7 fire when trading partners respond Like the U.S., these countries also access to labor with similar measures. Restrictive adopted a number of policies target- immigration policies are typically not ing employers. Ireland extended its markets. subject to the same tit for tat as trade, labor market tests, requiring prospec- but reduced migration hurts migrants tive employers to advertise jobs for and poor sending countries, which eight weeks within the EU prior to often rely on remittances. Measures seeking workers from outside the targeting resident migrants can slow bloc. Furthermore, individuals renew- their economic progress and hamper ing work permits are now subject integration. to labor market tests that weren’t in Countries responded to rising force before the crisis.8 The U.K. also unemployment rates with policies doubled the job advertising period for designed to limit foreign-born work- employers seeking certain categories ers’ access to labor markets. Table 1 of skilled workers from outside the summarizes major policy changes in EU. And Spain curtailed labor market countries around the world from 2008 test exemptions for skilled “shortage” to the present. workers.9 In the U.S., the Troubled Asset These countries also adopted a Relief Program (TARP), implemented variety of measures directed toward in 2008, discouraged banks and foreigners residing within their bor- financial institutions receiving fed- ders, legally and illegally. Ireland tight- eral bailout funds from hiring foreign ened requirements for work permit workers through the H-1B program renewals and stands by naturalization for high-skilled specialty workers. In prerequisites, which result in rejec- February 2010, an executive order tion of nearly half the applicants for imposed stricter rules for employers Irish citizenship.10 The U.K. Parliament using foreign-born farmworkers.4 Since voted in July 2009 to toughen citizen- May 2009, U.S. rules also require that ship requirements for status adjusters, government contractors run all new effective in 2011.11 employees through E-Verify, a feder- Seeking to curtail illegal immigra- ally operated electronic program that tion, Ireland passed new measures checks for valid Social Security num- limiting unauthorized migrants’ access bers that match workers’ names.5 to public services, and the U.K. raised Measures aiming to protect native fines for employers of unauthorized workers were also taken in other migrants.12 A number of other coun- countries hit hard by the recession— tries have also stepped up immigration EconomicLetter FEDERAL RESERVE BANK OF DALLAS FEDERAL RESERVE BANK OF DALLAS 3 EconomicLetter enforcement. Italy has criminalized unlawful presence, authorized citizen Table 1 patrols to combat illegal migration and barred illegal migrants’ access to public Select Migration Policy Changes by Country services.13 France has launched several high profile raids, and Greek police Policy Changes drew international attention when Cut intake of skilled permanent migrants 14 percent for the 2009–10 fis- they bulldozed a migrant camp near cal year. Raised skilled migrants’ salary requirements. Redesigned critical the city of Patras. Israel created a new Australia skills list for permanent migrants to emphasize health, engineering and IT task force to combat illegal migration.
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