Economics of International Migration4 Jan Brzozowski, PhD Cracow University of Economics

Poland after 2004: labor market structure and effect of postaccession Different perspective: sending country Migrants rights: citizens of the EU, beneficiaries of the free mobility principle Post-socialist labor market structure: mismatches Demand at destination: secondary sector

Sending country perspective Migration might help to alleviate pressures on national labor market Short-term gains: exporting people, receiving remittances Still, the efficiency of such development strategy limimited in the long-run (see later El Salvador case)

EU context European Labor Market: citizens of EU are the beneficiaries of the freedom of movement principle Mobility of EU citizens – (almost) free, while the immigration of third-country citizens is restricted

Post-socialist labor market structure : communism in Poland Poland is a centrally-planned economy What does it mean?

Poland: Regained independence in 1918 Limited growth and modernization between Agriculture is still an important sector of the economy (almost 40% of GDP in 1937, while the industry makes up for 50% in 1939) 1939: 66% of Poles live in the countryside, while 36% in the cities Most of the rural sector: subsistence economy; small farms which do not produce for market, but to secure the basic needs of the household

Poland after 1945 The economy severly affected by II WR (6 million casualities) Incorporation into Eastern block Rapid industrialization, modernization and urbanization

Limits to communist modernization Poland between is not a free-market economy Poland does not receive international development assistance (Marshall Plan) Limited inflow of FDIs and limited access to credit Economic policy imposed by USSR: the development of heavy industry Limited capital for investments

Polish paradox: modernization with limited urbanization As the investments relied on internal accumulation of capital, the preference was given to the investments in industry at the expense of housing Public investments in housing limited – but there was no private sector to fil the gap Considerable share of labor force stayed in the countryside and commuted regularly to work in the cities Consequence: incomplete modernization and highly mobile population at the countryside and in the smaller cities

Mismatches on the Polish labor market Communist regime: wage grid imposed Wage levels have been imposed by central planners and the wage regime was rather flat (the gap between top-earners and the bottom was relativelly small) This situation has changed dramatically after 1989 Beginning of free-market economy: the rapid increase of the renumerations for skilled (usually tertiary-educated workers) Tertiary education becomes more attractive

Boom in the tertiary education Tertiary enrollment rate in 1990: 12.9% and in 2009: 52.7% (!)

Overeducation only 54% of tertiary education graduates were employed in positions where their qualifications were properly used The group exposed to the highest risk of over- qualification were young workers: among the individuals between 21 and 25 years 30% to 34,3% were affected by this problem

2004 EU enlargement: who leaves Poland? After 2004 the migration flow from Poland was dominated by individuals in the age group of : they constituted ca. 55% of all migrants The share of tertiary educated migrants was of a considerable amount (16,3%) Most of post-accession migrants came from rural areas (ca. 40%) and small or medium-sized cities (ca. 35%)

Kaczmarczyk and Tyrowicz (2013) Almost 700 thousand temporary migrants in 2007!

UK: shortages on labor market, but where? Felstead (2012)

CIPD (2014)

Brain drain, brain gain, brain waste? Brain drain – dynamic outflow of skilled migrants, detrimental for the home country Brain gain – inflow of skilled personel, beneficial for host countries Brain waste – skilled migrants are hired in the secondary sector, become immigrant precariat and their human capital is wasted. Later on, deskilling occurs

Poles in UK better educated than British and EU-10 workers… But they’ve got worse occupations!… even better educated than Poles in PL Kaczmarczyk and Tyrowicz (2013)

2 possible explanations Pessimistic: new Polish migrants are „the lost generation” (Iglicka, 2009). They will remain at the secondary labor market both in UK and Poland (if they decide to return), limited chances for improvement of a social status Optimistic: crowding out hypothesis (Kaczmarczyk and Okólski, 2008) – migrants help in modernization process, as they leave the underdeveloped rural areas to work in developed urban aglomerations in the Western Europe

Labor market effects: short-term 2004: unemployment rate in Poland 19.1%, 3.2 million unemployed persons 2008: unemployment rate at 7.1% and 1.2 million unemployed persons But the reduction of unemployment was not caused by massive migration alone! : ca. 1.1 million (net) migration, and unemployment was reduced by 2 million. Moreover, many migrants were employed before they have left the country Reduction of unemployment rate through migration ( ): ca percentage points (according to various estimates

Labor market effects: medium-term The average effect of migration on wages very limited: estimated growth of wages caused by migration ca. 1% ( ) Still, visible shortages in certain sectors of the economy (construction&repair sector) Return migrants: reintegration on labor markets rather succesful (closer to optimistic „crowding out” hypothesis)

And what about UK labor market Read CIPD new report on that issue (Sept 2014)