Monday 23 April 2018

Irish migration: gain or drain?

'Across the OECD, foreign-born workers are more likely to be out of work. But, somewhat perversely, this is caused by higher rates of unemployment among those with more skills
'Across the OECD, foreign-born workers are more likely to be out of work. But, somewhat perversely, this is caused by higher rates of unemployment among those with more skills
Dan O'Brien

Dan O'Brien

The quality of an economy's labour force is of ever-more importance to how it performs. Human resources, rather than physical endowments such as land and mineral wealth, are increasingly the central determinant in the wealth creation process. As such, the education, skills, adaptability, inventiveness and outlook of a country's workforce at a given time go a long way to predicting its economy's prospects.

The most important factor in determining the quality of a country's labour force is education and training. But increasingly, migration is also a factor. In a globalising world, more people are on the move. This means that the qualifications and skills of those arriving AND those departing play a growing role in an economy's stock of human capital.

As the first chart shows, Ireland was a relatively homogenous country in the 20th century. In the decades up to 2000, only around one in 40 people living here was not Irish. The 21st century brought great change, with a quadrupling of the foreign population over little more than a decade. Today, one in eight people in the state is non-national, well above the rich world average and substantially higher than in our nearest neighbour.

Recently published figures from the CSO on the qualifications and "principle economic status" of those coming and going tell us a lot about how migration is changing Ireland's stock of human capital.

Ireland's net migration (immigration minus emigration) was still in negative territory in the year to April 2015, but the gap is narrowing. Over that period 81,000 emigrated (of which 35,000 were Irish nationals) and 69,000 immigrated (12,000 were Irish).

Drilling down into the figures is revealing and - perhaps for some - surprising. Almost half of those who left Ireland to seek greener pastures left jobs, suggesting that a relative lack of opportunity for career advancement and limited pay increases are at play, rather than a strict lack of jobs. Nearly a third of the departees were students. Just 14pc were jobless (the small remainder were in an ill-defined "other economic status" group).

As this breakdown by economic status suggests, emigrants are overwhelmingly well educated, with those having a Leaving Cert or less accounting for just 6pc of departees in the year to April last. All this suggests that the brain drain effect is significant.

Thankfully, though, the economic profile of Ireland's immigrants is roughly the same as its emigrants, offsetting the depletion of human capital that emigration causes. In fact, the stats point to slightly more gain than drain when it comes to brains, something highlighted in great comparative detail in a just-published OECD report*.

As the second chart illustrates, almost half of foreign nationals in the Irish labour force are 'highly educated', the highest in the EU and one of the highest rates in the OECD (only Canada and Israel have a higher share). The difference in adult literacy scores between foreign and native-born is also one of the smallest.

The OECD goes on to examine how foreign-born people fare in their adopted country of residence. Unsurprisingly, the report finds that, on average, immigrants have tougher lives by most measures than native-born population throughout the developed world. This is true for Ireland as well, although the foreign-born here appear to be less disadvantaged than on average across the rich world, and are in some areas on a par with natives.

Take joblessness. Across the OECD, foreign-born workers are more likely to be out of work. But, somewhat perversely, this is caused by higher rates of unemployment among those with more skills (this is perverse because usually a higher level of education makes it easier to find work). By contrast, low-educated immigrants are more likely to be employed than natives.

Both of these patterns apply to Ireland - the low-skilled foreign-born are less likely to be unemployed than Irish-born, and the higher-than-average immigrant unemployment rate in Ireland is due to more well educated people being jobless.

Ireland as a whole already has one of the highest over-qualification rates for third-level graduates in the OECD, and it is higher still for foreign-born. The gap is likely to be because credentials gained abroad are not held in high esteem by employers as highly as domestic ones, as suggested by the fact that foreign-born people who studied in Ireland are no different to their former classmates in terms of being appropriately qualified for the jobs they do.

One area where Ireland is out of kilter with our European neighbours is foreign-born self-employment. Typically, immigrants are more likely to work for themselves. But in Ireland it is the reverse, and given what the hard data say about low levels of entrepreneurial achievement, that must be something of a disappointment. It might also be an issue to be considered in great depth from a policy perspective.

There are several factors which could explain Ireland's performance. The main one is likely to be the composition of Ireland's foreign population. The OECD notes that Ireland's overall outcomes for immigrants are better in part because of the more advantaged socio-economic backgrounds and the higher level of education of those arriving.

Immigrants into Ireland are predominately from developed states: three quarters are from a high-income countries, compared to the OECD average of just 44pc.

This, in turn, is explained by a number of factors, including the fact that Ireland has not traditionally had a particularly liberal approach towards humanitarian migrants, such as some of the Nordic countries. Irish governments have tended to favour job-ready recruits, not refugees.

Another factor explaining the lower-than-average share of immigrants who are self-employed is the big multinational presence, whose workforce comprises many non-nationals.

Attracting skilled inward migration has been a stated goal in several government policy plans, most notably in the Action Plan for Jobs. How to make the most of migration flows is only going to become a bigger economic policy issue in the years ahead.


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