Migration to OECD countries is rising
The topic of migration has been trending again throughout 2023. This is not surprising as many OECD countries, have experienced a significant surge in net migration over the last two years. OECD stands for Organization for Economic Co-operation and Development and it is an important intergovernmental organization consisting of mostly developed economies.A recent OECD report shows that permanent migration to OECD countries has been at a record high in 2022; 2023 figures are unavailable or only preliminary but show that migrant inflows remain very elevated compared to pre-pandemic years.
The U.K., Canada, the Netherlands, and New Zealand have seen respective increases of 37%, 28%, 27%, and more than 300% in 2022 compared to the 2019 value. All OECD countries have experienced an increase of more than 13%, on average, over the same period.
The U.S. received more than a million permanent migrants. While this is significantly more than any other OECD country, it is not that high relative to the domestic population of more than 320 million. Germany received some 640,000 permanent migrants in 2022 for a domestic population of about 84 million, followed by the U.K. with more than half a million permanent migrants, and Canada and Spain with more than 400,000 each.
The reasons for migration are work, humanitarian, and studies
For permanent migration within the OECD area, one can see a marked increase in work visas together with accompanied family visas. Family migration remains the primary reason and accounts for about 40% of all migrants while labor migration has increased to about 20%. Migration due to humanitarian reasons has increased to just over 10%, slightly higher than a few years ago.
Compared to the previous decades, the number of asylum seekers has surged in recent years to over two million in 2022. Due to the significant delay in asylum application processing, it is only in 2023 and beyond that these people will show up as humanitarian migrants. The number is thus expected to increase even more in the coming years.
In 2022, the U.S. received more than 730,000 new asylum seekers, approximately as many as the next five countries combined. This represented a 2.4-fold increase relative to 2019. Asylum seekers coming to the U.S. came primarily from Cuba (157,000), Venezuela (139,000), and other Latin American countries.
Germany and France received the second-most asylum applications, 220,000 and 140,000, respectively. Germany received the most applications from Syria, followed by Afghanistan and Turkey. For France, Afghanistan and Turkey were the main origin countries.
Geographical proximity together with the size of the existing migrant community are two of the main factors shaping asylum applications and migration decisions.
While the German number for 2022 is well below its previous record during 2015 and 2016 when the country received more than a million applicants, it is well above the number of any other previous year.
Student visas surging
There has also been a significant increase in the inflow of higher education students coming to OECD countries. The U.K. has become the clear leader with a total of more than 470,000 in 2022, compared to less than 410,000 for the United States. Canada and Australia follow with just under 280,000 and about 190,000 foreign students, respectively. However, both countries would outrank the U.K. on a per capita basis.
The top countries of origin for students are China, India, and Nigeria in the U.K. Generally, China and India are among the top origin countries of foreign students in almost every OECD country.
The labor market outcome of migrants varies by country
The overall costs and benefits of migration are hard to assess because they depend on a multitude of economic and social factors. To what extent are migrants supporting future pension systems? How much do they pay in taxes and receive in benefits? How much additional strain do they put on underfunded infrastructure systems and the housing market? How much relief do they provide for rapidly aging labor markets in rich countries that increasingly face labor shortages?
While these are difficult questions to answer, one thing is clear: Receiving countries want the inflow of migrants to fill gaps in the labor market and boost productivity. In this, countries like Canada and Australia have been particularly effective since their migration system targets “high-skilled” workers and workers in sectors that face labor shortages. The U.K. government has also aimed to move into that direction.
As the table below shows, the labor market outcome of migrants varies by country. In the U.S. and New Zealand, specifically, migrants have both a lower unemployment rate and higher employment rate than natives. For most other OECD economies this is not the case.
Large continental European economies like Germany, the Netherlands, and France particularly stand out, as migrants having a much higher unemployment rate compared to natives. A less flexible labor market (compared to the U.S.) and the difficulty of learning the local language might both be factors. Moreover, continental Europe, and Germany in particular, have received a large inflow of asylum seekers and “low-skilled” migration from the Middle East and Northern Africa in recent years.
These immigrants often lack the education and skills that are needed to add to the local labor force, especially since the labor shortage in countries like Germany is the most acute for high-skilled occupations.
Migration policies: Vibes trump economics
While demographic factors clearly show that migrants are needed, policy makers are currently pushing hard into the other direction. The U.K. government, for example, increased the threshold for skilled worker visas by a significant amount, from £26,200 a year to £38,700 a year.
As a point of comparison, this new income threshold is higher than the median salary of a full-time employee in the U.K. (about 35,000 £). Moreover, the U.K. government also aims to restrict the number of spousal and dependent visas.
While workers in some specific sectors like healthcare are exempt from the income requirement, the overall message is quite clear: You are wanted, but only if you are needed and fit into a specific category!
Preliminary data shows that permanently higher migration will stay with us
International migration decisions are determined by a large number of push and pull factors.
Push factors in the origin countries include adverse economic outcomes in emerging markets, migration crisis, climate change, wars, and famines. As many emerging markets are struggling economically, geopolitical instability has increased, and climate change is worsening, push factors will only increase in intensity.
Pull factors include record tight labor markets across advanced economies and a constant or even increasing income gap to many emerging markets. There is a significant need for workers, and companies have intensified their search for recruits from abroad. However, governments have increasingly been pushing populist agendas as domestic voters have become unhappier about migration policies.
While the OECD report only covers data throughout 2022, there are good reasons to believe that the recent surge in migration will stay with us. Preliminary data shows that 2023 was yet another high for migration: Germany’s net migration was a record 1.5 million, followed by 1.1 million for the U.S.
With the rise of populism sweeping across advanced economies, policy makers will have to carefully balance the need for more workers in the future with the fear and concerns of their constituents.