The occupational status of most immigrants
initially declines but then increases
Evidence suggests that immigrants face an
initial decline in their occupational status when they enter the host
country labor market but that their position improves as they acquire more
country-specific human, cultural, and occupational capital. High-skilled
immigrants from countries that are economically, linguistically, and
culturally different from the host country experience the greatest decline
and the steepest subsequent increase in their occupational status. In the
context of sharp international competition to attract high-skilled
immigrants, this adjustment pattern is contradictory and discourages
potential high-skilled migrants.
Why restricting labor mobility can be
In the popular immigration narrative, migrants leave
one country and establish themselves permanently in another, creating a “brain
drain” in the sending country. In reality, migration is typically temporary:
Workers migrate, find employment, and then return home or move on, often multiple
times. Sending countries benefit from remittances while workers are abroad and
from enhanced human capital when they return, while receiving countries fill labor
shortages. Policies impeding circular migration can be costly to both sending and
The success of public works programs in reducing
poverty depends on their design and implementation—in practice, they do
better as safety nets
Public works programs in developing countries can
reduce poverty in the long term and help low-skilled workers cope with
economic shocks in the short term. But success depends on a scheme’s design
and implementation. Key design factors are: properly identifying the target
population; selecting the right wage; and establishing efficient
implementation institutions. In practice, rationing, corruption,
mismanagement, and other implementation flaws often limit the effectiveness
of public works programs.
This is a revision, version 3.
This is a revision, version 3. The Indian economy entered an ongoing process of
trade liberalization, domestic deregulation, and privatization of public
sector units in 1991. Since then, per capita output has increased
significantly, while the overall unemployment rate has remained low.
However, labor force participation rates have fallen sharply, especially for
women. In addition, youth unemployment remains stubbornly high, an
overwhelming proportion of the labor force continues to work in the informal
sector, and there is little evidence of a sustained rise in wages for either
unskilled rural or factory workers.
The world’s second largest economy has boomed,
but a rapidly aging labor force presents substantial challenges
China experienced significant economic progress
over the past few decades with an annual average GDP growth of approximately
10%. Population expansion has certainly been a contributing factor, but that
is now changing as China rapidly ages. Rural migrants are set to play a key
role in compensating for future labor shortages, but inequality is a major
issue. Evidence shows that rural migrants have low-paying and undesirable
jobs in urban labor markets, which points to inefficient labor allocation
and discrimination that may continue to impede rural–urban migration.
There is no evidence that increases in the
minimum wage have hurt immigrants
According to economic theory, a minimum wage
reduces the number of low-wage jobs and increases the number of available
workers, allowing greater hiring selectivity. More competition for a smaller
number of low-wage jobs will disadvantage immigrants if employers perceive
them as less skilled than native-born workers—and vice versa. Studies
indicate that a higher minimum wage does not hurt immigrants, but there is
no consensus on whether immigrants benefit at the expense of natives.
Studies also reach disparate conclusions on whether higher minimum wages
attract or repel immigrants.
Selling the right to immigrate to the highest
bidders would allocate visas efficiently but might raise ethical
Many immigrant destination countries face
considerable pressure to change their immigration policies. One of the most
innovative policies is auctioning the right to immigrate or to hire a
foreign worker to the highest bidders. Visa auctions would be more efficient
than current ways of allocating visas, could boost the economic contribution
of immigration to the destination country, and would increase government
revenues. However, visa auctions might weaken the importance of family ties
in the migration process and create concerns about fairness and
accessibility. No country has yet auctioned visas.
Childcare provided by grandparents helps young working
mothers, but reduces the labor supply of older women
Older people in developed countries are living longer and
healthier lives. A prolonged and healthy mature period of life is often associated with
continued and active participation in the labor market. At the same time, active
grandparents can offer their working offspring a free, flexible, and reliable source of
childcare. However, while grandparent-provided childcare helps young parents (especially
young mothers) overcome the negative effects of child rearing on their labor market
participation, it can sometimes conflict with the objective of providing additional
income through employment for older workers, most notably older women.
Outmigration has contributed to increasing wages
and decreasing unemployment in the new EU member states but may also cause
The recent EU enlargements into Central and
Eastern Europe and increased labor mobility within the Union provide a
unique opportunity to evaluate the labor market effects of emigration.
Outmigration has contributed to higher wages for stayers, as well as to
lower unemployment in the source country. However, emigration has also
exacerbated skills shortages in some sectors, as well as mismatches between
skills and jobs.
Older people migrate less than young, yet with
population aging, mobility of elderly and specialized workers may
Population aging will continue in the future, in
both developed and developing countries. This may lead to lower migration,
since the desire to migrate declines later in the life cycle. In addition,
indirect labor demand effects may also reduce migration. However, migration
of the elderly, return retirement migration, as well as mobility of certain
specialist workers such as health and longer-term care providers, may
increase. Also, in a family context, the emigration of children may have
significant consequences for the elderly left behind, both in terms of
poverty risk and health care.