## Addressing the Debate over the Economic Impact of Migration Remarks for the Conference on “Can Migration Work for All in Europe?”

_IMF News, January 9, 2017_

## Source details

**Canonical URL:** [Addressing the Debate over the Economic Impact of Migration Remarks for the Conference on “Can Migration Work for All in Europe?”](https://www.imf.org/en/news/articles/2017/01/09/fdmd_europen_migration_keynote_speech_bruegel)

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## Bibliographic details
- Published: January 9, 2017

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### Context and purpose
- Speaker: David Lipton, First Deputy Managing Director, IMF.
- Location and date: Brussels, Belgium; January 9, 2017.
- Objective: Reconcile the academic consensus on migration’s economic benefits with the strong public and political backlash; inform policy discussion and IMF work on migration’s economic impacts.

### Core economic arguments and analytical framing
- Partial equilibrium view (public perception):
  - Immigration raises the supply of labor, exerting downward pressure on wages for native workers of similar skill levels.
  - This perspective is salient in public opinion and political debate.
- General equilibrium and dynamic effects (economists’ response):
  - Immigrant workers may complement, rather than substitute, for native workers.
  - Immigrants spend much of what they earn, raising demand and the derived demand for labor, boosting wages and creating jobs.
  - Businesses invest to equip immigrants with capital, raising productivity and reducing downward wage pressure.
  - Native-born workers retrain and relocate to stronger labor markets or attain higher-paying jobs.
- Analogy with trade debates:
  - Like trade, immigration can create winners and losers.
  - Dynamic adjustment and business responses take time; there can be transitional losers.
  - Affected natives may need retraining or relocation.
  - Multiple concurrent forces (global financial crisis, labor-saving technological change) complicate attribution of declining living standards.

### Empirical findings reported by the IMF
- Overall conclusion: The Fund’s work aligns with the view that the economic impact of migration on receiving countries is generally positive.
- Specific empirical findings:
  - Immigration has significantly increased GDP per capita in advanced economies—because skill levels and complementarities boost labor productivity, and because influxes of working-age migrants help counteract labor shortages from demographic developments.
  - Although the top 10 percent benefit most, the gains from migration are shared across all income groups.
  - Inequality does not increase as a result of the entry of migrants into the workforce.
  - No significant negative effects were found on the middle or lower income groups in receiving countries.
- Skill composition effects:
  - Both high- and low-skilled migrants can raise labor productivity.
  - High-skilled migrants: bring knowledge, increase innovation, and boost productivity of native-born counterparts.
  - Low-skilled migrants: increase efficiency by taking jobs with applicant shortages and can prompt increases in skill levels among natives.
- Caveats and observed exceptions from other studies:
  - Some U.S. studies show migrants have negative wage effects on earlier generations of immigrants and native-born high school dropouts.
  - Some studies show immigration reduces hours worked by native-born teenagers.
  - These effects warrant investigation in the European context.

### Areas identified for further research
- Re-examine findings as experience accumulates, especially given "huge new flows in Europe."
- Better understand assimilation outcomes:
  - Rapid integration observed for many Eastern Europeans.
  - Need clearer understanding of assimilation for refugees and migrants from the Middle East and Africa.
  - Need data-driven assessment of second- and third-generation outcomes, particularly for cohorts from developing countries; existing comprehensive datasets in some countries (for example, Norway) are useful.
- More granular research on:
  - Which native groups are hurt by migration, and through what mechanisms.
  - Whether low-skilled migrants’ positive effects on native skill upgrading are as certain or significant as those from high-skilled migrants.
  - Impacts on labor markets, public services, and fiscal finances over longer timeframes.

### Policy implications and recommendations
- Governments can greatly affect short- and long-run migration impacts through policy choices:
  - Selection criteria, settlement services, work rules, educational opportunities, and cultural/assimilation policies all matter.
- Social welfare and fiscal policy considerations:
  - Determine the right balance of social welfare policies to avoid moral hazard and welfare shopping; this requires detailed understanding of migrant experiences and incentive structures.
  - Anecdotal evidence: perceived misalignment of social benefits contributed to political backlash (example cited around the Brexit vote where unemployed UK workers perceived delays in benefits relative to new migrants’ access).
  - Native perceptions of competition for limited welfare resources (public transport, health care, overcrowded schools) can exacerbate tensions—policy adjustments informed by better evidence could reduce social friction.
- Practical priorities for policymakers:
  - Be frank about winners and losers and the need for transition assistance (retraining, relocation).
  - Obtain more granular evidence to guide social welfare, labor market, and assimilation policies.
  - Continue to reassess policy responses as new evidence emerges.

### Conclusion and institutional role
- The IMF’s role:
  - Assist member countries (the 189 member countries of the IMF) in real time to design policies that integrate migrants into the mainstream.
  - Continue conducting research and learning to help countries chart courses that bring economic benefits to all and address disadvantaged groups.
- Final policy message:
  - Economic benefits of migration are well established, but more work is needed to clarify distributional impacts, transition dynamics, and effective policy responses to mitigate harms and maximize shared gains.

*Source: David Lipton, "Addressing the Debate over the Economic Impact of Migration," Remarks for the Conference on “Can Migration Work for All in Europe?”, Brussels, January 9, 2017.*

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## References

- [David Lipton](http://www.imf.org/external/np/omd/bios/dl.htm)
- [Belgium and the IMF](http://www.imf.org/external/country/BEL/index.htm)
- [Norway and the IMF](http://www.imf.org/external/country/NOR/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2017/01/09/fdmd_europen_migration_keynote_speech_bruegel_