Restricting foreign workers during a crisis hampers recovery. Just look at our past mistakes ǀ ViewComments
Over 600 years of history has taught us that economic crises, particularly those with health crises as the root cause, intensify xenophobic outbursts and result in hostile attitudes towards minorities. Periods of crisis increase xenophobic outbursts and anti-immigrant sentiments; from the Black Death, and the resulting persecution of European Jews, to swine and avian flu and now COVID-19 triggering a wave of reactions against ethnic minorities.
History also shows us that this swell of public opinion leads policymakers to target migrant workers in the hope of quickly restoring labour demand – and therefore economic stability - for natives. But policies which encourage the departure of foreign workers are ineffective, and policymakers should instead look to macroeconomics to stimulate recovery.
Every major crisis exacerbates xenophobia
Countries, including the US, have already started to introduce measures to exclude foreigners from the labour market in response to COVID-19. It’s an all-too-familiar pattern.
The atrocious persecution of European Jews, blamed in the Middle Ages for being responsible for the Black Death, continued well into the twentieth century. A 2012 study showed that the German cities where the pogroms of the 1920s were most frequent and severe were the same cities which saw the most attacks against Jews during the Black Death.
More recent examples of intensified mistrust of ethnic minorities have occurred during outbreaks of avian and swine flu. As well the immigration measures introduce by the US, COVID-19 has produced xenophobic reactions throughout the world.
A recent economic study analysed the effects of the 2008 crisis on anti-immigrant sentiments in Europe to clarify the reasons for the increased mistrust. Drawing on regional data from more than 20 European states, it shows that the rise in unemployment caused by the 2008 economic crisis led to increased distrust of immigrant population due to its supposedly unfavourable economic consequences.
This result is consistent with previous historical studies that report numerous public statements claiming that immigrants threaten native employment.
In France, the Aigues-Mortes massacre of the 1880s, the Great Depression of the 1930s and the oil shocks of the 1970s all triggered the French parliament to legislate to reduce access to labour markets for non-natives, considering them to be at the root of French workers’ difficulties to find a job.
Following the first two major crises, access to white-collar jobs (lawyers, dentists or doctors), craft and trade professions and public servant positions (which are still largely closed today to non-EU nationals), was prohibited or restricted. The government also organised the repatriation of more than 450,000 foreign workers during the 1930s to reinforce its policies to protect French workers.
In 1977, the government again considered encouraging the departure of large numbers of immigrants to offset the rise in unemployment. This was reflected in the introduction of voluntary return measures accompanied by a bonus. The failure of this policy to deliver tangible results led the government to adopt a policy of "forced returns" in 1978, aiming to reduce the foreign population by at least 100,000 people per year over five years. The policy was abandoned in December 1979, with implementation difficulties blamed.
The negligible effect of immigrants on unemployment
Restricting foreigners’ access to the labour market during times of crisis is based on a Malthusian view that presumes a fixed number of jobs. But immigrants are not only workers: they are also consumers and creators of new businesses, which foster economic activity and create jobs. Empirical work on the effects of immigration on wages and unemployment show that they are on average negligible.
Returns policies are similarly ineffective. A US study examining the effects of ending the "Bracero" programme, which sent Mexican seasonal workers to US farms for up to six months each year between 1942 and 1964, found little evidence that they were exerting downward pressure on US citizens’ wages. The suspension of the programme should have provided an incentive for employers to raise wages to attract US workers, but it had no impact.
A second study examining the repatriation of more than 400,000 Mexican US residents between 1929 and 1934 to boost employment of US nationals again found no effect. Some estimates even indicate that regions where the policy was applied more drastically were also those where US citizens’ employment rate declined the most.
Instead, the expulsion of thousands of Mexicans depressed local economies and reduced labour demand for natives, the study’s authors found.,
It is necessary to take into consideration three fundamental points when considering the effects of return policies on employment.
First, immigrants not only increase competition on the labour market, they also contribute to economies’ dynamism through their effects on entrepreneurial activity and consumption.
Second, foreign workers and unemployed nationals are not necessarily substitutable in the production process because of their differences in qualifications and skills. The return of foreign workers to their countries of origin does not automatically result in their replacement by nationals to reduce unemployment.
Finally, expelling foreign workers can, at least in the short-term, disrupt productive processes and have counterproductive effects on economies.
Macroeconomic policies are crucial to stabilise economic activity and stimulate a recovery that will stop the rise in unemployment. The International Monetary Fund (IMF) recommends directly supporting firms, albeit temporarily, through direct lending, loan guarantees and similar instruments. Such policies help viable firms remain alive during a crisis and preserve labour demand.
Public spending should also be aimed at reducing layoffs either by partly covering wages or granting enhanced unemployment benefits for temporary layoffs. In this way, governments can mitigate the negative shock to labour demand and preserve countries’ production capabilities to speed up economic recovery.
During times of crisis, attempting to curb the rise of unemployment by restricting access to the labour market for foreign workers and introducing policies to encourage their departure doesn’t work.
- Anthony Edo and Camilo Umana are economists at the Centre d'Etudes Prospectives et d'Information Internationales (CEPII) in Paris, part of the EconPol Europe research network.
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