Outline the economic factors that in theory might determine international labour migration. Using empirical studies examine the effect of welfare benefits on such migration in the US and Europe. Illustrate your essay with specific examples.

What factors determine international labour migration are numerous and difficult to rank in order of primacy. The individual’s decision to leave his native country and migrate to seek work is, however, often associated with economic considerations. These considerations can be observed within a demand and supply framework. For instance, workers may emigrate from their native labour market because of a lack of job opportunities. On the other hand, particularly for highly skilled workers, a lack of expertise in the receiving country may act as a ‘pull’ factor to labour migration. The search for higher wages and a higher standard of living for workers and their families is also clearly an important economic incentive for migration. In neo-classical terms then, international labour migration will tend to be from areas of low equilibrium wages to areas of high equilibrium wages. As Hicks surmises ‘…differences in net economic advantages chiefly in wages are the main causes of migration.’ The historiography concerning determining factors in migration has expanded greatly since the neo-classical epoch to include adaptations of the Hicks ideal and human capital theory (where migration is seen as an investment). Despite economic factors clearly being important in the decision to migrate, the literature on international migration makes clear that other factors such as family ties, social networks, colonial history, political structures and trade linkages all influence a worker’s decision to emigrate. Whilst consideration of these factors is clearly important in the context of international labour migration, they lie beyond the scope of this essay. It has been postulated by some economists that another ‘pull’ factor in international labour migration is a generous system of welfare benefits in the receiving country. Whilst some authors consider this ‘welfare magnet’ an important determining factor, it is my assertion that proving its existence is difficult and it seems likely its contribution to migrant ‘pull’ is at best minimal.
Clearly, although many other factors are taken into consideration when making the decision to migrate, economic factors are of relevance to the émigré worker. Many migrant workers leave their native land partly because of ‘pull’ factors such as better wages, improved working conditions and the contribution such improvements will make to the general standard of living of both worker and his family. In the neo-classical framework then, workers will tend to move from a country of low wages to one of higher wages. Again, on the supply side, workers may be compelled to leave their native labour market because of a lack of opportunities for work in their particular area of expertise. For instance, highly specialised workers may leave a country where their speciality is not so much in demand and move to one where there is a dearth of that particular expertise. This ‘brain drain’ phenomenon was conceptualized in the 1960’s and is particularly apparent in the migration of computer workers from the sub-continent to the UK. On the unskilled side, the migration of workers from the Caribbean to the UK in the 1950’s was partly due to the promise of a better life in Britain and the government’s desire to fill the lowliest jobs for which indigenous labour was lacking.
However, it is clear that this neo-classical explanation for labour migration is only partially sufficient. There are clear failings to the argument as expounded by Smith, Hicks and others. Firstly, the neo-classical equilibrium approach to labour migration assumes that there will be a free flow of labour from countries with low wages to countries with high wages. Clearly, the immigration policy of the receiving country is going to have a major bearing on a migrant’s decision and ability to migrate. Secondly, various studies in the EU have shown that income per head differentials only weakly affect migration levels. This indicates that other factors, aside from the economic are influential in determining the international migration of labour. In a revealing article, C.H. Wood, details three main weaknesses with the pure neo-classical determinants of labour migration. Firstly, it is noted that movement of labour from one labour market to another does not de facto result in labour market equilibrium. For example, the loss of skilled workers from the leaving country will serve to increase disparities in native wages and hence push the market out of equilibrium. Secondly, Wood notes that from a historical perspective it has not always been the case that ‘backward’, low wage economies have spontaneously exported their labour. For example, when the colonial British government required labour for mining interests in Rhodesia, land tax policies had to be used to ‘push’ labour from surrounding colonies to where there was a shortage. Wood’s final assertion is that non-economic factors may be as important in determining international labour migration as economic factors.
Immigration into Europe and US has been increasing steadily since the Second World War. Labour mobility and hence international migration has increased because of improved transport infrastructure and the falling costs of international travel. Statistics for European and US immigration are shown in tables 1 and 2 and both sets show the tendency for international migration to increase in recent years. With regard to determinants for US and European labour migration, a number of empirical studies have been carried out in order to find any observable trends. Katseli and Glystos (1989) study of German international immigration levels find that individuals are attracted to areas which have a shortage of jobs. This indicates a clear supply ‘pull’ effect where a shortage of labour encourages workers to migrate to Germany as a result of job opportunities. Further, an empirical study by Waldorf and Esparza (1988) found that for German immigration, employment opportunities in the receiving country were a more pertinent determining factor than both potential wages and income levels. Zimmerman’s empirical study (1994) aimed to examine the relative importance of push and pull factors in determining international migration to Germany. The study analyses immigration from Italy, Greece, Portugal, Spain, Turkey and Yugoslavia to Germany and uses real growth rates in the receiving country as an indicator of ‘pull’ factors and network factors and unobserved factors in the sending and receiving countries as an indicator of ‘push’ factors. Zimmerman found that the level of international immigration from the sampled countries closely followed Germany’s business cycle. This provides evidence that economic ‘pull’ factors do have some determining effect on labour migration within Europe.
On the US side a number of empirical studies have been done to examine determining factors in international migration. In particular Geary and O’Grada found that there were often strong economic reasons for migrating to the states. However, it must be noted that immigration into the United States was often determined by social and ethnic networks as described in the systemic approach of Kritz and Zlotnik. In particular heavy immigration from Mexico, although determined partly by a search for improved economic prosperity, will undoubtedly be increased because of Mexican-American social networks already assimilated into the receiving country.
It has been postulated that international immigration can be determined by the relative benefits of the welfare system of the receiving country. Freeman(1986) summarises this idea; ‘along with the high real direct wages, the social wage is part of the package of compensation that exerts an attractive pull on workers in less prosperous societies drawing them to rich countries in anticipation of better lives.’ This ‘welfare magnet’ as outlined by Freeman, is however not supported by all sources. In the United States a number of empirical studies have been carried out in order to asses the strength of the ‘welfare magnet’ on migrating people. Studies by Southwick (1981), Blank(1988) and Bojas (1992) all find that there is some ‘pull’ power of US states that offer higher than average welfare payments. However, more recent studies by Levine & Zimmerman (1995) and Walker (1994) have suggested that other factors far outweigh the pulling power of welfare benefits in the decision for labour to migrate. However, it must be noted that attempts by US states to severely restrict migrant access to welfare during the 1960’s, whilst possibly a xenophobic reaction, is perhaps an indication that the ‘welfare magnet’ was operating to some degree. On a state level, the force of welfare magnetism has also been disputed and in an article from the University of Bryn Mawr the author states ‘the most recent empirical studies find no support for the welfare magnet thesis, and instead demonstrate that poor families that migrate are no more likely to begin receiving welfare benefits than are poor families who have lived in the states for longer periods of time.’
In the European case, again empirical studies have given mixed results as to the existence of a ‘welfare magnet’. Firstly, a problem arises because of the paucity of research into the effects of relative welfare levels on international migration in Europe. A large proportion of research has been concentrated on Germany and Scandinavia and authors of such research concede that isolating welfare benefits as a pull factor is difficult given the multiplicity of factors determining migration patterns. Research by Fertig and Schmidt (2001) suggest that migrants are not only proportionately less dependent on benefits than the indigenous people, but also that migrants who are on benefits tend to assimilate into non-benefits existence fairly quickly. In contrast, in an empirical study into welfare and migration in Sweden, Hansen and Lofstrom (2001) found that migrants, constituting 11% of the population, consumed 50% of social assistance in 1996. Given the relatively generous benefits system in Sweden this does give some indication that a ‘welfare trap’ may be operating. Breuker et al use the European Community Household Panel (ECHP) survey to study the effect of welfare benefits Europe wide. They find that countries with generous welfare systems, such as the UK may act as ‘welfare magnets’ to migrants. However, it seems that to single out the ‘welfare magnet’ as an important ‘pull’ of migration is almost impossible given the paucity of comparative data and the multiplicity of interrelating factors that determine the movement of labour. However, what does seem clear is that it cannot be considered a major factor in whether people migrate or where they migrate to.
In conclusion, it is clear that certain economic factors are likely to determine a migrant’s decision to leave his country and seek work elsewhere. These factors may include poverty in the native’s country, differentials in wages or incomes, job opportunities in receiving countries or job availability in specific sectors or industries. Whilst conceding that these economic factors do play a part in determining international migration it has attempted to be shown here that purely economic factors are far from the single determining aspect of international migration. Political structures, social and ethnic networks as well as historical linkages of colonialism and trade are also germane to the direction and level of labour migration. With regard to the impact of welfare benefits on international migration in the US and Europe it seems the empirical studies are often contradictory in their conclusions. This is largely due to the difficulty in empirically testing such a broad based topic as international migration, particularly given the numerous factors that determine a worker’s decision to migrate. At best it seems the ‘welfare magnet’ acts as only a weak ‘pull’ factor to migration. In short, there is no single causal factor in determining international migration, or as Borjas surmised ‘there is no universal law that must characterize all immigration flow.’