Understanding Migration with Macroeconomics by Unknown

Author:Unknown
Language: eng
Format: epub
ISBN: 9783030409814
Publisher: Springer International Publishing

5.2.2 The Labour Market Effects of Immigration Policies

As mentioned above, the government cannot directly control the total number of immigrants. A change in immigration can be achieved through policies that either restrict immigrant entry (e.g. visa quotas) or increase immigrant exit (e.g. deportations). We show here that the various policies that can be used to reduce a certain group of immigrant workers can have different effects on labour markets, even if they produce exactly the same decrease in the number of immigrants.

A restrictive immigration policy can be direct, such as tighter visa quotas, enforcement of deportations or shorter visa durations, or indirect, affecting immigrant entry or exit through its impact on foreigners’ incentives to enter or remain in the country. Such indirect policies could be, for instance, restricting immigrants’ access to welfare benefits, restricting their right to employment in certain sectors and so on. Such policies can reduce the migration benefit and discourage foreigners from entering into the country or encourage those already in the country to return.

In a labour market with search frictions in which wages are the outcome of bargaining, the latter indirect policies are likely to have less negative (or more positive) effects on job creation, compared to direct policies. In particular, policies that reduce immigrants’ value from staying in the country, especially while unemployed, will put downward pressure on their wage. They will make it costlier for immigrants to be unemployed and induce them to accept lower wages by worsening their bargaining position in wage setting. As shown in Eq. (5.2), and as discussed above, lower wages mean more profits for firms. Such indirect policies that reduce the migration incentive by putting downward pressure on immigrants’ wages, reduce immigrant entry (and increase exit), but increase also the employers’ surplus from employing immigrants with a positive impact on incentives to post vacancies and create jobs. Direct policies, on the other hand, such as shorter visa durations or deportations, are more likely to have a negative effect on employers’ profits. What such policies effectively do is to increase the discount factor used to evaluate the value of a job that is occupied by an immigrant worker. In terms of Eq. (5.2), shorter visa durations or a higher return probability (for instance, due to enforcement of deportations) can be captured by an increase in the rate of separation sit, which affects the value of a match negatively, since a higher separation rate means that the match is expected to last less. By reducing the presence of immigrants in the labour force all types of restrictive policies reduce the weight put on the value of matching with immigrant worker, but direct policies may also decrease that value of a match with an immigrant worker JiI, while indirect policies may increase it. If for the reasons discussed above firms generate more surplus from employing immigrants than natives JiI > JiN, then shifting weights in Eq. (5.1) from JiI to JiN will lower employers’ profits and in turn job creation. But this

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