Map of Migration Flows
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Transcript Map of Migration Flows
Migrant and Host Country
Workers: Substitutes or
Complements?
Kiriya Kulkolkarn
Faculty of Economics, Thammasat University
Tanapong Potipiti
Faculty of Economics, Chulalongkorn University
Map of Migration Flows
Source: http://pstalker.com/migration/mg_map.htm
How many immigrants are there?
• World: 191 million (6% of labor force in 2005)
– Luxembourg (62% of labor force in 2001)
– Switzerland (18% of labor force in 2001)
• Source: United Nations
• USA
– 1970: 5.3% of labor force
– 2005: 14.7% of labor force
– 2000-2005: 4.1 million new immigrants (1.4-2.7 million were
undocumented )
– 86% of net increase in employment
• Source: Ottaviano and Peri, 2006, Sum et al., 2006
• Thailand
– 1987: 38,000
– 1995: 700,000
– 2007: 2-2.5 millions (6% of labor force)
• Source: Ministry of Labor, Thailand
Debates on Immigration
• Bad
• Good
• Immigrants steal jobs of local
workers.
• Immigrants allow the economy
to work more smoothly by
filling vacancies across the
jobs spectrum, at both the top
and the bottom
– 1.7 million fewer young (1634) American men were
employed in 2005 than 5 yrs
earlier
• Immigrants depress native
wages.
– Real annual wages of U.S.
natives with less than high
school education fell by 11.5%
during 1990-2004
• Fiscal cost, crime, racism
– 3D jobs
– Professionals
– Sunset industries
• Immigrants help smooth the
peaks and troughs. (Ethier,
1985)
• Immigrants make better use of
native workers.
Source: Ottaviano and Peri, 2006, Sum et al., 2006
Does the statistical evidence
support public concerns?
• “There is surprisingly little evidence to
support this… Most research finds that a
10 percent increase in the fraction of
immigrants in the population reduces the
wages of even the least skilled native-born
workers by at most 1 percent… Evidence
of immigrants reducing employment or
labor-force participation rates or increasing
the unemployment rate is even harder to
find” (Friedberg and Hunt,1999, p. 358).
Why do Burmese migrate to Thailand?
• economic motives
– Income and wage disparities
– HDI disparities
– unemployment and forced labor
– inflation, shortages, rationing
• political motives (1988, 1990 and beyond)
Some rough comparisons
Indicator
Burma
Thailand Ratio
Source
Per cap. inc. (Rupees, 195456, COL adj)
300
400
1.33
Myrdal 1967
Table 11-1
Per cap. income 1978 ($,
official exch rate)
150
490
3.27
World Dev.
Report 1980
GDP Per C apita: C urrent PPP Dollars
8,000
7,000
6,000
5,000
Thailand
4,000
3,000
2,000
Burma
1,000
Source: Bradford (2004), Burma Economic Watch
00
20
99
19
98
19
97
19
96
19
95
94
19
93
19
19
92
19
91
19
90
19
89
19
88
87
19
86
19
85
19
19
84
19
83
19
82
19
81
19
19
80
0
What do migrants typically experience in Thailand?
• Occupations
– Dirty, difficult (degrading) and dangerous. Fisheries, farming,
construction, personal services; factory work
– Among registered workers: 24% in fisheries; 18% in farming; 14%
in domestic services; others in manufacturing, mining, quarrying,
construction
– Unregistered workers in these occptns and also market/trade;
hotels, restaurants, prostitution
• Wages and conditions; job security
– Wages frequently reported as ~2/3 - 3/4 Thai equivalents
– Few rights; none for unregistered workers
• Regulatory and legal environment
– Thailand introduced permit system 1996
– Registration and legal status
• Registration costs (equiv to 1 mo. income)
Impact of migrant workers on
the Thai economy
• Opposition to admission of more workers
– 59% of Thais surveyed by ABAC thought no more workers
should be admitted; 83% believed that immigration reduces
native wages; only 10% were in favor of increased migration
(Economist, Jan 18 2007)
• Migrant workers delay the ‘sunset’ for labor-intensive industries;
these are still important contributors to Thai merchandise exports
• Over time, movement of foreign workers to industries w/ fixed
locations (agriculture, fisheries, construction etc) -- and of
investments in ‘footloose’ industries to where migrant workers are
clustered
Impact of migrant workers on Thai wages
• Sussangkarn (1996): Wages of Thai
workers
• with less than a primary education: rise by 3.5%
• with more than a primary education: fall
• Kulkolkarn and Potipiti (2007): no evidence
of the impact of immigration on Thai wages
• Bryant and Rukumnuaykit (2007):
immigration reduces the wages of Thai
workers
What does the economic theories say?
• Standard Model
– Same skill: Perfect substitute
• Immigrants lower native wages
– Different skill: Imperfect substitutes
• Immigrants may lower or increases native wages
• Efficiency Wage Model
– Small numbers of immigrants increases native
wages
– Large numbers of immigrants decreases
native wages
Stylized Facts
1. Immigrants have lower education.
2. Natives are more versatile.
3. Immigrants release native workers to do higher
wage jobs.
• The existing models has not yet captured all these
facts in one model.
• In our model, natives possess 1 unit of type-1 skill
and 1 unit of type-2 skill. Migrants own 1 unit type2 skill but (< 1) unit of type-1 skill.
My model
• Production function of the output of the
economy
1
yk
b h
a, b > 0
a+b<1
• Full employment
Lh + Lb = 1
m h + mb = m
• Production function of the intermediate
goods: h and b
Lh + m h = h
Lb + qm b = b
3 possible outcomes
• 1. Migrants work in sector h. Natives work
in sectors h and b.
• Wages are equal in both sectors.
• Some natives move to sector b after
immigration.
• Immigration decreases the wage of
natives.
3 possible outcomes
• 2. Migrants work in sector h. Natives work
in sector b.
• Natives and migrants receive different
wages.
• Immigration can increase the wages of
natives above the pre-immigration level.
• Additional migrants decreases their own
wages.
3 possible outcomes
• 3. Migrants work in sectors h and b.
Natives work in sector b.
• Natives and migrants receive different
wages.
• Additional migrants decreases native
wage and their own wages.
Migrant and Host-Country Workers:
Substitutes or Complements
• 3 stages as # of immigrants increases
1. Migrants enter into one labor submarket while
natives work in both submarkets
2. Migrants work in one labor submarket while
natives work in another.
3. Migrants work in both submarkets while
natives work in one submarket.
• The results depends also on
– Skill similarity
– Production technology
q= 0
q= 1
Impacts of Immigration
• Native wage can be
higher
• Native wage cannot
be higher
wn
wn
w*
w*
Stage 1
Stage 2
1
Stage 3
m
m
Implications
• The relationship between immigrants and
wage is not monotonic.
• Not a bell curve but an S curve
– # of immigrants, skill similarity, production
technology
• Policy that helps native workers
• Number of immigrants must be large enough
• Allow immigrants who are very different from
natives
• Limit immigrants to work only in some sectors