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    Will emigration lead us down economic vortex?

    By Noreen Bowden | December 7, 2009

    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.

    of jobs, people and income means that places that are economically vulnerable are even more exposed when they lose population. On the other hand, buoyant places have the benefit of being population attraction and destination points, and service jobs follow them. Indeed, the literature has shown that knowledge-jobs follow knowledge-workers who choose where they wish to live rather than just following jobs to places with little appeal (Florida, 2002).
    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 economy 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?

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