WASHINGTON, Dec 14—The global financial crisis disproportionately burdens migrants, but policy makers are still under pressure to enact new immigration restrictions. In the wake of the crisis, governments must resist these political pressures and instead recognize that migrants make a large economic contribution to both host and home countries, contends a new policy brief by Uri Dadush and Lauren Falcao.

Key Points

  • Migrants increase economic welfare in host countries by lowering the costs of crucial services, improving international competitiveness in industry, and strengthening domestic demand and investment.
  • Migration responds to the demand for labor in host countries. The number of migrants increases during economic booms and decreases during busts, thereby minimizing competition between migrants and native-born workers. Unemployment hits migrants hardest and deters their arrival.
  • New restrictions on immigration may be counterproductive as they are hard to overturn and can discourage migrants from returning home temporarily.
  • Migration restrictions hurt developing countries. Over 80 percent of migrants are from developing countries and their remittances—estimated to be $305 billion in 2008—are essential sources of foreign exchange and help countries fight poverty.

Policy Recommendations

  • Policy makers need to better explain migrants’ contribution to their own citizens’ economic welfare.
  • Host countries should avoid policies that punish migrants, as they are inefficient and will hurt firms and individuals that depend on migrants.
  • Governments should adopt policies that promote the integration of migrants because they will maximize economic benefits in the long term and minimize tensions during economic downturns.
  • Collaboration between host and home countries and temporary migration programs can help take full advantage of the economic benefits of migration and reduce frictions.

“Governments must recognize that migrants are an economic asset rather than a liability and thus shape their reaction to the global financial crisis, including migration and social policies, accordingly,” write Dadush and Falcao. “Failure to do this would result in both short- and long-term economic welfare losses and could lead to a disastrous escalation of social tensions.”

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NOTES

  • The Carnegie International Economics Program monitors and analyzes short- and long-term trends in the global economy, including macroeconomic developments, trade, commodities, and capital flows, and draws out policy implications. The current focus of the Program is the global financial crisis and the policy issues raised. Among other research, the Program examines the ramifications of the rising weight of developing countries in the global economy.
  • The International Economic Bulletin draws on the expertise of Carnegie's global centers to provide a candid view of the economic crisis and its political implications. Addressing the momentous challenges of the economic downturn will require objectivity, and the ability to analyze the political dimensions of reforms around the world.