Study notes

Labour Migration (Labour Markets)

  • Levels: AS, A Level
  • Exam boards: AQA, Edexcel, OCR, IB

Cross-border migration of people from one country to another has become an increasingly important feature of our globalising world and it raises many important economic, social and political issues.

Labour migration - revision video
  • More than 200 million people live in countries in which they were not born
  • Estimates compiled in 2009 suggested 580,000 to 820,000 Chinese migrants were living in Africa. In 2012 the figure is likely around 1 million
  • The global stock of international migrants grew by 38 per cent from 1990 to 2010. However, international migrants still constitute a very small fraction of the world population, just 3.1 per cent (213.9 million) in 2010
  • Migration is overwhelmingly from less developed to more developed countries and regions
Net migration figures for the UK economy

Factors affecting migration

  1. Differences between in wages for equivalent jobs
  2. Access to the benefits system of host countries plus state education, housing & health care
  3. Employment opportunities vary between nations, in particular for younger workers
  4. A desire to travel, learn a new language, build new skills and qualifications and develop networks
  5. A desire to escape repression and corruption in the country of origin especially in failing states
  6. The impact of satellite television and the internet in changing people's expectations
  7. The effects of cheaper trans-national phone calls and more affordable air travel and coach travel for example within the European Union
  8. The unwillingness of people within the domestic economy to take certain “drudge-filled" jobs such as porters, cleaners and petrol attendants
Migrant Workers as a % of a country's total population
Country Name2010Country Name2010
Qatar74.2Sub-Saharan Africa (all income levels)2.1
United Arab Emirates43.8Least developed countries1.4
Singapore38.7Korea, Rep.1.1
United States13.8India0.4
United Kingdom10.4China0.1
South Africa3.7Indonesia0.1
Source: World Bank

Economic Benefits from Cross-Border Migration

Supporters of inward labour migration have argued that migration provides numerous advantages:

  1. Fresh skills: Migrants can provide complementary skills to domestic workers, which can raise the productivity of both (a Brazilian child minder provides good quality child care at an affordable price which allows a highly paid female magazine editor to continue to work.)
  2. A driver of innovation and entrepreneurship: Inward migration can also be a driver of technological change and a fresh source of entrepreneurs. Much innovation comes from the work of teams of people who have different perspectives and experiences. Migrant networks accelerate the spread of technology.
  3. Pressure on government to reform: Labour migration can also put political pressure on failing governments and regimes e.g. a mass exodus of productive workers from Zimbabwe.
  4. Multiplier effects: New workers create new jobs, there is a multiplier effect if they find work and contribute to a nation's GDP through a higher level of aggregate demand
  5. Reducing skilled-labour shortages and expanding the labour supply: Migration can help to relieve labour shortages and help to control wage inflation. For example, recruitment of skilled workers from outside the European Union is important to many businesses in the UK, and evidence indicates they currently make a positive contribution to UK's GDP.
  6. Making a country attractive to FDI:Availability and quality of labour is known to be a key investment location factor for many businesses. In a global battle for talent, if a country is not successful in attracting and keeping skilled workers then FDI in high-knowledge industries will eventually flow to other parts of the world.
  7. Income flows (remittances): Remittances sent home by migrants add to the gross national income of the home nations. And if these remittances boost spending in these countries, this creates a fresh demand for the exports of other nations. According to the economist Professor Ian Goldin from Oxford University, in Latin America and the Caribbean, more than 50-million people are supported by remittances, and the numbers are even higher in Africa and Asia.
  8. Tax revenues: Legal immigrants in work pay direct and indirect taxes and are likely to be net contributors to the government's finances.

Supporters of allowing free movement of labour argue that labour mobility is a positive-sum game rather than a zero-sum game.

Where Britain's migrants come from

The number of people migrating to the UK has been greater than the number emigrating since 1994

Migration Matters

Migration directly impacts the migrants, their families and their employers, and also impacts development indirectly.

Development in turn impacts migration. There is no doubt that migration is a very important driver of development.

Source: World Bank, Jan 2013

Disadvantages of inward migration

On the other side there are several pressure groups campaigning for tighter restrictions on migrant workers. Some of the arguments include:

  1. Welfare costs: Increasing cost of providing public services as migrants come into a country.
  2. Worker displacement: Possible displacement effects of domestic workers
  3. Social pressures: Social tensions arising from the problems of integrating hundreds of thousands of extra workers into local areas and regions.
  4. Pressure on property prices: Rising demand for housing which forces up prices and rents.
  5. Benefit claims: Many immigrants find it hard to get work
  6. Who really gains? The benefits of migration are focused mainly on employers, especially those who take on illegal workers at low wages.
  7. Poverty risk: Migration may have the effect of worsening the level of relative poverty in a society. And many migrant workers have complained of exploitation by businesses that have monopsony power in a local labour market.

Brain Drains – Human Capital Flight

Every immigrant is also an emigrant. A brain drain is a term that describes the movement of highly skilled or professional people from their own country to another country where they can earn more money. It has been used to describe net outward migration of people from several European Union countries in recent times (notably Ireland, Greece and Spain) - another phrase for this is human capital flight.

A sizeable brain drain can bring economic costs and benefits for the sending nation. One disadvantage is that countries lose out on the benefits that might have accrued from the resources used in educating people who leave. Add to this the loss of tax revenue from those who choose to live and work overseas. A sizeable loss of skilled workers (many of whom may be younger and therefore more geographically mobile) could lead to labour shortages in the sender country, putting upward pressure on wages and labour costs. Some of this income earned overseas returns to the sender country in the form of remittances and many skilled migrants often leave only for a year or two - the percentage of permanent migration inside the EU is relatively small.

Migration’s shifting landscape (OECD)

The benefits and costs of labour migration are hard to quantify and estimate. Much depends on

  1. The types of people who choose to migrate from one country to another.
  2. The ease with which they assimilate into a new country and whether they find regular jobs.
  3. Whether a rise in labour migration stimulates capital spending by firms and by government.
  4. Whether workers who come into a country decide to stay in the longer term or whether they regard migration as essentially a temporary exercise (e.g. to gain qualifications, learn some English) before moving back to their country of origin.

Migration challenge: What do you do when one in five of your nation emigrate? Can Lithuania reverse its brain drain? (BBC Feb 2015)

Migration and entrepreneurship - here are the top U.S. companies founded by 1st / 2nd generation immigrants

  1. Apple
  2. Google
  3. IBM
  4. Oracle
  5. Facebook
  6. Amazon
  7. Qualcomm
  8. EMC
  9. eBay
  10. VMware


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