An analysis from Davy has gotten a lot of news attention today. The research report into the Irish economy says that we wasted the boom, and issues a damning verdict on how Ireland misallocated its investment from 2000 to 2008, resulting in poor infrastructure with inadequate roads, rail, schools, hospitals and telecoms.
One area where the report is suprisingly reassuring, however, is in the analysis of emigration.
This analysis of our capital stock has one glaring omission: human capital. Looking to the medium term, this is Ireland’s greatest strength. The economy has the highest number of graduates in the 25-34 population in the EU-27, with the exception of Cyprus. That proportion (and its average quality) may depreciate somewhat if recovery does not take hold and emigration accelerates. But so far the outflow through emigration has been hyped while ignoring the mix.
First, net inward migration has turned negative mainly because immigration (people coming to Ireland) has collapsed rather than due to a surge in emigration (people leaving).
Second, a high proportion of those who have left are low-skilled and worked in construction where employment has more than halved. Construction, by its very nature, is a highly labour-intensive and low-productivity industry. Workers tend to be mobile, and emigration from this sector will not particularly dilute the quality of human capital in Ireland.
Moreover, the nascent recovery of the international-traded sectors will keep many of our graduates at home. Longer-term, investment in education must remain the salient priority.
I would dispute the assertion that there has been no surge in emigration. The emigration figures from Ireland were up 43% between 2008 and 2009, and up 145% between 2004 and 2009. The new phenomenon, of course, is that the majority of emigrants were going to the newer countries of the EU, and were thus presumably immigrants returning home. This is obviously not the same thing as suggesting there has been no upsurge in emigration.
The characterisation of the current emigrant outflow being comprised mostly of construction workers and therefore not “diluting the quality of human capital” rests uneasily with me. First, I’m not aware of recent studies that break down emigration by occupational sector (please let me know if you know of any), so I’m presuming this is based on anecdotal evidence. There appears to be plenty of anecdotal evidence asserting, however, that it is not just manual labourers but also third-level graduates who are leaving. (In today’s Irish Times alone, for example, two graduates tell their emigration tales.)
It’s also at odds with the Tanaiste’s recent comments that emigration today is comprised of those Irish young people who are emigrating “to gain experience” and “want to enjoy themselves’ and are leaving “with degrees, PhDs. They are people who have a greater acumen academically and they have found work in other parts of the world.”
So on the one hand, we are reassured that we need not trouble ourselves with the upsurge in emigration because (a) it’s really not happening and (b) it’s not going to lower the quality of our labour force, and on the other hand, we need not trouble ourselves with the upsurge in emigration because these are highly educated people “who want to enjoy themselves”.
Obviously, this is a complex issue. We’ve heard very little of ‘brain drain’ with this upsurge of emigration, because the model of “brain circulation” has largely displaced the concept of permanent loss in migration thinking. We know from the boom that networks of well-educated Irish people can be an asset for our economy, no matter where they live, and many of them may eventually return if there is a return to substantial growth.
In terms of economic costs, emigration’s toll may not be all that harsh. Obviously, in the short term, emigration is a tried-and-true safety valve; sending off surplus labour will save social welfare money, and relieving the pressure on the unemployment rate will certainly make our economic performance look better on paper. And each unemployed person who leaves is one fewer potentially angry voter when it comes to election time.
But involuntary emigration carries very high potential human costs, and any analysis that does not take those into account is not looking at the full picture. Davy might call it “hype”, but the concern over rising emigration rates reflects Ireland’s long experience with a phenomenon many of us thought was gone forever.
The Mayo Advertiser quotes opposition leader Enda Kenny on emigration:
Forced emigration is again a reality in County Mayo for an entire young generation. This spectre, which haunted Mayo for two centuries, is now back as a reality. That’s why I now receive text messages and emails from Australia, Canada, and the USA enquiring about job prospects. That’s why six young footballers have left Islandeady for foreign shores. Other clubs around the country have the same problem.
The article notes that live register figures have begun to decline from the 12,000 figure of jobless in Mayo in September 2009, due to the number of people leaving the county. Only 7,000 were unemployed in September 2008.
Economists cite emigration as a major reason why the unemployment figures released today showed a rate of 12.7%; they would be higher were the safety valve of emigration not in effect.
See the entire article:
In Ireland, it’s probably most common to think of emigration as an economic release valve. It lowers the unemployment rate, cuts the costs of social welfare, and siphons off the kind of economic pressure that in other societies might result in popular revolt. Historically, emigration is seen as a result of our poor economic situation, not a major contributor to it.
Piaras Mac Einri, in an article on IrishCentral.com, noted that Irish authorities seem complacent about the current wave of emigration. If they are, it’s possibly because they subscribe to this rather benign view of emigration’s effects in Ireland.
But what other effects does emigration have? A new study produced by researchers in Michigan suggests that emigration is not just the result of economic downturn, but is also an agent in it. Michigan has faced a severe loss of population in the last decade, losing 16,000 jobs as 63 of its 83 counties faced a decline in the number of residents.
The Economic Impacts of County Population Changes in Michigan, from the Land Policy Institute at Michigan State University, says that this emigration in itself poses serious economic challenges. It estimates it’s cost Michigan $2 billion of economic output, with $585 million lost in labour income, $346 million in property income, and $2.4 billion dollars in home equity value.
“When people leave town, so does their economic activity,” said Land Policy Institute Soji Adelaja, the lead author of the study. “This is especially true in a service economy, which depends upon people providing and needing services. The impact of these departures cuts deeper into the economy.”
“Such population loss can mean an economic vortex for a city like Detroit. Fewer people mean fewer tax revenues to provide city services. Fewer city services mean lower quality of life for people. So people are faced with tough decisions: Stick it out, or leave.”
Various sectors are particularly affected, including domestic trade, home construction, real estate rental, foreign trade, healthcare services, food services and drinking places, wholesale trade, insurance and financial services and entertainment activities, such as movie theatres. In a service-oriented economic in which people are more apt to move, these services are also more likely to move with them.
The study notes that “the loss of economic activity due to population loss is likely to be an increasingly important issue as the economy transitions further from a manufacturing-based economy to a service-based one.”
It calls for the following strategies as a remedy for Michigan’s ills:
- Population attraction strategies.
- “Right-sizing” or “down-sizing” (aligning provision of services with population).
- Policies targeted to enhance the stability of the service sector.
- Tourism-attraction strategies.
- Immigration-based strategies for economic development.
- The pursuit of federal resources to salvage Michigan’s economy.
The study is well worth a read. How much of it is relevant to the Irish situation? Will emigration be a factor in extending our current downturn? How hard are we trying to make sure it won’t be?
Related web pages:
- Land Policy Institute Website: press release with links to study
- Irish Times: Jobless figures for November unchanged at 12.5% – CSO
- Irish Central: Emigration is back with a vengeance in Ireland
A group examining public spending in the light of the crisis in the Irish economy has recommended a number of cuts that would affect services to the Irish abroad. The group, popularly known as “An Bord Snip”, released its report yesterday.
The report recommends cuts in emigrant services of one million euro. The Department of Foreign Affairs spent €15 million in 2008 on services to the Irish abroad. Of this, about ten million went to Britain, 3.5 million to the US,163,000 to Australia, 146,000 to Canada, and small sums to South Africa, Argentina, Zimbabwe and China. The government spent 1 million on Irish groups providing information to intending and returning emigrants, as well as other services of use to the Irish abroad.
Additionally, it says the scheme providing free passports to those over 65 should be eliminated. This would save €4.6 million.
The report also recommends cutting the number of embassies and consulates around the world from 76 to 55. It says embassies in lower priority countries should be sold and moved to leased property. Staff assigned abroad should have their tax-fee Foreign Service Allowance reduced by 12.5%, which would save a million euro. Ambassador posts salaries would also be downgraded.
It is likely that in a time of rising emigration, these proposed cuts would make providing services to an increasing number of Irish abroad more difficult.
Related web pages:
- Report of the Special Group on Public Service Numbers and Expenditure Programmes
- RTE.ie: Summary of recommended cuts to Foreign Affairs
- Irish Independent: Pensioners hit if free passport scheme gets axe
- EuropeanIrish.com: Recommendations to cut support for Irish emigrants
- 2008 Emigrant Services Grants
The Taoiseach held talks yesterday with the visiting US Congressional delegation led by Richie Neal, Chair of the Friends of Ireland.
Also on the delegation are:
- Rep Tim Murphy, from Pennsylvania
- Rep Donald Payne, from New Jersey
- Rep Luis Gutierrez, from Illinois
- Rep Mike Doyle, from Pennsylvania
- Rep Tim Holden, from Pennsylvania
- Rep Nydia Velazquez, from NYC
The Taoiseach’s press office said in a press release:
The Taoiseach reiterated the priority he has placed on Ireland’s relationship with the United States and looked forward to the further development of that relationship with the implementation of the recommendations of Strategic Review of Ireland-US Relations which he launched on his St Patrick’s Day visit to the US. He stressed the importance of human interaction across the Atlantic and the need to develop all opportunities to enable Irish and US citizens to visit, work and study in each others countries.
There was also a lengthy discussion of the prospects for immigration reform in the US and its implications for Irish citizens, including the Irish undocumented community (Reps. Gutierrez and Velazquez have been very active in the campaign for immigration reform and recently attended a bipartisan meeting with President Obama on the topic – see http://www.whitehouse.gov/blog/Working-Together-for-Immigration-Reform/ ).
The Taoiseach briefed the delegation on recent progress in Northern Ireland. He particularly welcomed the announcements of loyalist decommissioning. There was a discussion on how the US can continue to make a contribution to the peace process, including by assisting with economic development and as a strong example of how a varied, multicultural society can integrate and work together for the greater good.
There was also a discussion on the economic situation. The delegation updated the Taoiseach on the economic reform programme in the US, including tax refrom, while the Taoiseach responded by emphasising the Government’s strong commitment to supporting US businesses in Ireland and the transatlantic trading relationship.
Ireland’s official unemployment rate is 10.2%, the highest since 1997; this is the highest since 1997. There were 158,500 fewer jobs in the year ending March, a 7.5% fall in employment, with construction industry employment falling by 28.6%. There were 1,965,600 people employed in Ireland in the first three months of 2009, with 222,900 unemployed.
The CSO will next month release the emigration figures for the year ending in April, but the figures show that the non-Irish national labour force shrank by 8% in the year to March, while there was only a 1% decline in the number of Irish nationals in the labour force. Unemployment among non-Irish nationals was at 14.7% in quarter one, while it was 9.4% for Irish nationals. Unemployment was highest among those aged 15 to 34.
Earlier this month, the CSO’s Live Register figures, which are calculated in a different way, showed that the unemployment rate for May was 11.8%.« Previous Entries