The impact of immigration (including refugee flows) can vary across contexts depending on the characteristics of migrants and the local communities in which they settle, as well as the policy environment that regulates the integration of migrants and responses of natives. Most research finds only small or negligible effects of immigration on the average labor market outcomes of natives in both developed and developing countries, however immigration can have adverse impacts (albeit relatively small) on natives with similar skills, experience, and job preferences as migrants. Immigration can also create more and better employment by encouraging natives to upgrade occupations, raising labor force participation of natives, and filling labor shortages to raise productivity. Additionally, immigration can have fiscal costs or bring fiscal benefits, and can lead to either increased or decreased service quality.
This paper examines how different policy choices can create or amplify positive economic effects of immigration and avoid or reduce negative effects. The paper covers seven topics, for each of which the authors provide examples of how some policy choices have created positive outcomes, while others have created negative outcomes.
The seven topics are as follows:
- If immigrants fill labor gaps, immigration can create jobs and raise incomes. Policies that enable immigrants to fill labor shortages can create jobs, increase labor force participation rates, and increase incomes for natives. Conversely, economic opportunities are lost when policies restrict immigrants from filling labor shortages.
- Well-designed temporary migration programs can fill critical labor needs, while also minimizing the risk of overstays. Temporary migration programs are an effective way to fill labor shortages. Whether they are accompanied by visa overstays and violations of workers’ rights depends on the incentives created by the program.
- Creating legal pathways for migration can reduce irregular migration. Policies that create legal channels for migration can decrease irregular migration (if other key elements are in place). When legal channels for migration are eliminated, irregular migration may increase.
- The fiscal impact of new immigrants is a policy choice, with potential contributions that go far beyond individual-level taxes paid. Immigrants can contribute more in taxes than they receive in government services over time, especially if policies support and enable their successful integration into labor markets. For example, in the United States, policies facilitating and incentivizing the labor market integration of resettled refugees have increased refugees’ fiscal contributions. In Germany, however, restricting asylum seekers’ access to labor markets has limited their fiscal contributions.
- Immigrants can contribute to the economy as entrepreneurs, investors, and innovators if they are allowed to. When policies lower barriers to business ownership, immigrants invest in their host economy, hire natives, and boost economic growth. For example, in Turkey, refugees are allowed to formally own and register businesses, which has facilitated investments by Syrian entrepreneurs in Turkey. This in turn has boosted employment, raised incomes, and increased tax revenues. There is also evidence that the entry of Syrian firms did not displace or prevent the entry of domestic firms. In Zambia, however, policies allow refugees to formally own businesses, but the requirements to register a business are prohibitive. Consequently, most refugees, including business owners, work in the informal sector.
- Policy decisions in migrant origin and destination countries can turn skilled migration into a drain or a gain. Many in origin countries view skilled migration as a drain on human capital and fiscal resources. However, different policy choices can make skilled migration an engine of human capital creation and fiscal revenue for both migrant origin and migrant destination countries. For example, a Global Skill Partnership between origin and destination countries can be mutually beneficial, with funding and expertise provided by destination countries to train potential migrants (and non-migrants) in origin countries, thereby strengthening origin country training institutions while at the same time preparing potential migrants for jobs in destination countries.
- With well-designed policies, immigrants can have a positive impact on the quality of service delivery. Immigration can affect service quality either positively or negatively. Policy choices, such as creating integrated health systems for refugees and host communities, can determine the impact. In Guinea, for example, government and donors cooperated to create an integrated health system that led to improved health outcomes for both refugees and host communities. In Zaire, however, an uncoordinated response led to a deterioration of the local health system. Donors invested in health centers that provided free health care exclusively to refugees, but not to host communities. In addition, donors offered high salaries to health workers in refugee health centers, and so many health workers left local clinics to work in donor-funded centers. Caseloads increased in local health centers due to refugee inflows, with fewer staff to meet the increased demand. Consequently, host communities experienced reduced quality and access to health services.
The authors argue that the effects of immigration and refugee inflows can be shaped by policies that regulate labor markets, benefits systems, and mobility. Productive policies in response to immigration and refugee inflows can create new opportunities and benefits for host countries, origin countries, and migrants.