|Welcome to Econ 050: Economics and business that matters to the Netherlands and the world. In each episode, Northern Times editor Traci White interviews a new expert about everything from trade wars to the psychology in your shopping cart. This podcast is a co-production between The Northern Times and the Faculty of Economics and Business of the University of Groningen.|
Post-doctoral candidate Magda Ulceluse researches the intersection of immigration, employment and income equality. There are more than 9,000 businesses in the north that are owned by first generation immigrants, and work and education are what bring many immigrants here originally, but dual career partners and university graduates also need to find work. Is there any truth to the claims that immigrants steal jobs from the native population? What is the balance of brain drain and brain gain among member states? Ulceluse joined us in the studio to try and sort truth from fiction when it comes to migrants, job creation and economic growth.
On how immigration could (theoretically) reduce inequality over time:
Magda Ulceluse: The idea is that you have a country that is a sending country that has a surplus of labour but does not have enough capital to increase production and economic growth. And then you have a country that has capital but doesn’t have enough labour, but it has higher salaries, because it’s a tighter labour market, so fewer people leads to an increase in salaries, in wages. And so you have people moving from this low salary, high labour country to a low labour, high salary country and then in time, because in the sending country you’re going to have fewer people, then wages are going to grow because of competition.
On how “sending” countries become “receiving” countries:
Ulceluse: There’s this kind of cyclicity of migration that I was interested in investigating, because you had these core countries that were receiving migration, receiving migrants from the south, and then the southern countries themselves, these sending countries now receive immigration from eastern countries. And increasingly, eastern countries are also becoming countries of immigration for outside of the European Union.
What is a remittance, and can it be something other than money?
Ulceluse: Remittances are the money that migrants send back to their families, to the communities they left behind. So remittances can not only be financial, they can also be social. That is the cultural influences that people who return bring with them, for instance by living in the Netherlands, a person who returns to Romania learns new ways of cooking, learns new types of music and then brings that back to Romania. So that’s a kind of social remittance.
Has migration within the EU reduced inequality?
Ulceluse: [You have to] distinguish between what I call the old member states, so mostly the core members states in the European Union 15 – the countries that were members up until 2003 and 2004 – and then the EU 10, so the countries that [joined the EU] in 2004. So when I investigated the effect for this particular group, there was indeed a positive effect for the EU 15 countries and it was quite large. And then I found no effect for the EU 10. So an explanation for that might be that for the EU 10 countries, there’s this dynamic between so-called brain drain and brain gain, so they have people coming in. They have return migration, but at the same time, they have significant out migration. So in the long term, migration does not seem to affect much.
On why many first generation immigrants become entrepreneurs:
White: Are immigrants more ingenious and entrepreneurial, or [do they start companies] because it’s harder to get access to the job market so you do what you have to do?
Ulceluse: It’s a little bit of both. So migrants generally tend to be a bit more entrepreneurial than the native population, and that’s mostly because of self-selection. So migrants are individuals that are already taking more risks. Migration itself is kind of a risk taking activity, and usually more enterprising. So there are people are determined and have certain qualities that will make them more prone to entrepreneurial enterprises. But on the other hand, it is the situation that for a variety of reasons, including lack of local language, so people don’t speak Dutch, or non-recognition of diplomas and qualifications, so you have a diploma from Romania that is not recognized in the Netherlands – although in the European Union there are significant steps towards recognizing qualifications obtained in different member states – or even discrimination.
Are immigrants creating jobs or taking work from the native population?
Ulceluse: [It depends on] whether migrants and natives are complementary or substitutes, so whether the skills they have actually compete directly with those of the natives, or they’re complementary and then there is room for everyone in the labour market. In order to analyse that, you have to go at the specific skill level. So in a paper analyzing this case from Germany, we did exactly that and we look at the low skilled migrants and what we found out was that they are not perfect substitutes. So even though they have the same type of skills, migrants have an advantage in terms of manual skills, whereas natives are more skilled in terms of language: they know the language better. So there is this dislocation effect: migrants take the jobs in that sense from the natives, but then the natives reskill and upgrade themselves to take advantage of the language, to take advantage of their comparative advantage.