Friday, 8 April 2011

Migration: Its (Hidden) Economic Benefits

Due to the upcoming debate on emigration organised by OPEK and ELIAMEP (details here) i just wanted to point out 2 positive economic arguments for economic migration that one never hears in the local media:

1) Migration can help our pension fund deficit.
More people are retiring and pensioners are living longer; these reasons, combined with he fact that we are having less children to replace the adults who retire, leads to pension system crisis in most EU countries.
The dependency ratio, the ratio of how many are not working relative to those of working age is increasing; as a result those who are working will have a greater pressure to subsidize the living standard of the majority who are retired or underaged. The solution could be to lower the amount given to retired persons (as advocated in the UK by its switch from final salary to an average salary pension scheme) OR to allow migration.
Migrants are in the working age bracket and thus they allow a decrease in the dependency ratio, with the social contribution allowing retired people to keep living with the income they are used to. Considering that many migrants do not get the full benefit of their welfare contributions as some emigrate back to their countries, the pensions funds of EU countries could be placed in a much sounder footing if more migration of persons of working age were initiated.

2) Migration can lead to complimentarity and increase in skills.
If developed economies have a high wage for unskilled employment then they run the risk of being uncompetitive - this is especially true for countries in the European Union since the are many countries in the EU whose cost base is much lower, thus creating an incentive for factories and offices to move from countries with a high wage environment to a low wage environment. Migrants taking up unskilled work enable local workers with the advantage of language to up-skill themselves allowing for a much more competitive products both in price and in quality. The concern must be to push for our domestic workers to up-skill themselves and thus create a complimentary cycle with the incoming migration.

If migration is not encouraged then one might actually lead to economic degradation and the movement of work positions to cheaper European destinations.

One does not deny that there are social and other problems regarding migration in our islands of Malta and Cyprus, but at least for the author the economic case for increased but controlled migration is very clear. Comments and Thoughts welcome as usual.

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