1. Departement Volkswirtschaft Departement Volkswirtschaftslehre Swiss Immigration Policies and their Impacts on the Economy LSE-Conference on Migration London, 27. June 2014 Prof. Aymo Brunetti University of Bern

2. Departement Volkswirtschaft Departement Volkswirtschaftslehre 2 Content 1. Some Numbers 2. Swiss Immigration Policy Regimes 3. Economic Effects of Free Movement of Labor 4. Regime Change 2014 5. Conclusions

3. Departement Volkswirtschaft Departement Volkswirtschaftslehre 3 1. Some Numbers > An high share of foreign born people in Switzerland: —USA: 12.9% (2010) —Canada: 19.5% (2006) —Australia: 26.8% (2010) —Switzerland: 27.6% (2012)

4. Departement Volkswirtschaft Departement Volkswirtschaftslehre 4 1. Some Numbers > A strong recent increase of immigration: Average immigration —1982 – 2002: 90’000 per year —2002 – 2012: 120’000 per year ≈ the population of Bern Average balance of migration —1982 – 2002: 25’000 per year —2002 – 2012: 60’000 per year

5. Departement Volkswirtschaft Departement Volkswirtschaftslehre 1. Some Numbers 5 Source: Swiss Federal Statistical Office

6. Departement Volkswirtschaft Departement Volkswirtschaftslehre 6 2. Swiss Immigration Regimes > The Regime between 1970 and 2002 —Numerical limits for specific groups of migrants > The Regime between 2002 and 2014 —Free movement of persons > The Regime after 2014 —Numerical limits for all groups of migrants

7. Departement Volkswirtschaft Departement Volkswirtschaftslehre 7 2. Swiss Immigration Regimes The Regime between 1970 and 2002: > Quotas per economic sector > Allocation politically decided => High quotas for agriculture and low-skilled jobs > Consequence: Low-skilled immigration => After some years: Inefficient reallocation (see next slide)

8. Departement Volkswirtschaft Departement Volkswirtschaftslehre 8 The Regime Between 1970 and 2002 Demand Driven Numerical Limits Agriculture, low-skilled jobs Medium- skilled jobs (branch 1) Medium- skilled jobs (branch 3) Medium- skilled jobs (branch 2)

9. Departement Volkswirtschaft Departement Volkswirtschaftslehre 9 2. Swiss Immigration Regimes The regime since 2002: > Free movement of persons (FMP) vis-à-vis EU/EFTA > Integral part of the bilateral treaties with the EU > Freedom of establishment for EU/EFTA migrants with an occupation or «sufficient funds» > Accepted by the Swiss population in a series of popular votes

10. Departement Volkswirtschaft Departement Volkswirtschaftslehre 10 The Regime Between 2002 and 2014 Free Movements Of Persons low-skilled jobs Medium- skilled jobs High-skilled jobs

11. Departement Volkswirtschaft Departement Volkswirtschaftslehre 11 3. Economic Effects of FML > Immigration at the core of the latest rise in hours worked Source: Michael Siegenthaler, Michael Graff, and Massimo Mannino, „The Swiss ‚Job Miracle‘“

12. Departement Volkswirtschaft Departement Volkswirtschaftslehre 12 3. Economic Effects of FML > Foreign workers do not replace Swiss workers Source: Michael Siegenthaler, Michael Graff, and Massimo Mannino, „The Swiss ‚Job Miracle‘“

13. Departement Volkswirtschaft Departement Volkswirtschaftslehre 13 3. Economic Effects of FML Effects on hours worked: > Fact: Swiss work force is decreasing (demography) > Fact: Immigration increases total hours worked > Consequence: FMP offsets decreasing Swiss work force > Consequence: Eases continued rise in GDP => Effect on per capita GDP depends on ø productivity

14. Departement Volkswirtschaft Departement Volkswirtschaftslehre 14 3. Economic Effects of FML Effects on human capital: Immigrants under FMP are highly skilled: —1986-1994: only 15% of the immigrants were highly-skilled —2002-2010: 51% of the immigrants were highly skilled => positive effect on average productivity likely.

15. Departement Volkswirtschaft Departement Volkswirtschaftslehre 15 3. Economic Effects of FML Effects on wages: > Empirical evidence (Gerfin and Kaiser, 2011) —Little pressure on wages of highly skilled workers —Wages of medium and low-skilled workers rise

16. Departement Volkswirtschaft Departement Volkswirtschaftslehre 16 3. Economic Effects of FML Effects on unemployment: > Empirical evidence (increase) —Stalder (2010): Unemployment falls less quickly under FMP > Empirical evidence (no increase) —Very low and stable unemployment rate —Siegenthaler et al. (2014): – 65-80% of migration attributed to job creation in Switzerland – 50% have a job when they come

17. Departement Volkswirtschaft Departement Volkswirtschaftslehre 17 3. Economic Effects of FML Other effects: > Social security system benefits in the short term > Possible upward pressure on real estate prices > Pressure on infrastructure utilisation

18. Departement Volkswirtschaft Departement Volkswirtschaftslehre 18 4. Regime Change 2014 Referendum on a popular initiative: > «Switzerland regulates migration independently.» > «Significant decrease of the balance of migration» > «Limited number of foreigners allowed to stay in Switzerland, using yearly maxima and numerical limits.» => February 9, 2014: 50.3% Yes

19. Departement Volkswirtschaft Departement Volkswirtschaftslehre 19 4. Regime Change 2014 Rual areas (pro) versus cities and the french part (contra)

20. Departement Volkswirtschaft Departement Volkswirtschaftslehre 20 4. Regime Change 2014 Economics: What if initiative is strictly implemented? —Likely: Some bilateral treaties canceled – Market access of Swiss companies endangered – Free movement of Swiss citizens to EU endangered —Back to the 70s? – Politics: Low-skilled immigration – Comparatively low growth benefits

21. Departement Volkswirtschaft Departement Volkswirtschaftslehre 21 4. Regime Change 2014 What next? —Negotiations with the EU —Implementation of the initiative text —Likely: Popular vote on the outcome

22. Departement Volkswirtschaft Departement Volkswirtschaftslehre 22 5. Conclusions > Low-skilled migration under numerical limits (before 2002) > High-skilled migration under FMP (after 2002) > FMP with positive effect on Swiss wealth > FMP without negative effect on Swiss wages > FMP with little effect on Swiss unemployment > FMP raised balance of migration > FMP raised concerns about migration

23. Departement Volkswirtschaft Departement Volkswirtschaftslehre 23 5. Conclusions > Uncertain future due to the February 2014 vote > Possible outcomes: —Strict implementation: numerical limits —Mild implementation: combination of numerical limits and FMP —Non-implementation: FMP