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Many advanced economies are experiencing a shortage of labor. Wages are being driven up, sustaining inflation above central bank targets. Weakening labor markets, or wage pressure, is one of the reasons central banks intend to keep short-term interest rates at a higher level for a prolonged period. However, a potential solution to the labor shortage is migration.
The OECD reports that in 2022, there was a 26% increase from the previous year in permanent migration to advanced economies, hitting 6.1 million. Although this was the highest level shown since the OECD began keeping records in 2005, there are suggestions from preliminary figures that suggest a further increase for 2023. 59% of the increase was in Germany and 39% was in the United States. As a result of this migration, there has been strong employment growth in many countries.
Foreign-born workers have accounted for half of the employment growth in the United States since 2020. Luxembourg, Iceland, New Zealand, Estonia, and Switzerland were, however, the countries that received the most significant number of permanent migrants as a share of their populations in 2022.
With a rise from 1.7 million in 2021 to over 2 million in 2022, the OECD reports a record number of asylum applications. In the United States alone, there was an increase in applications from 190,000 in 2021 to 730,000 in 2022. Europe also had a surge of applicants from Ukraine. As of June 2023, there were 4.7 million displaced Ukrainians in OECD countries, with Germany and Poland hosting the most. However, Venezuela, Cuba, Afghanistan, and Nicaragua are the biggest sources of asylum applicants.
The flow of migrants has significant economic benefits, yet it can have a few implications. Many countries suffer from political backlash. Consequently, several OECD countries have and continue implementing new restrictions on permanent migrants and asylum-seekers. The speed of economic growth in OECD countries in the upcoming years is expected to be majorly impacted by migration policy. Migration boosts employment and addresses demographic issues; the ratio of workers to retirees is increased, which reduces the pressure on healthcare expenditures and pensions for the elderly.
The issues that demographics bring to the table are particularly acute in Europe, however. Jose Luis Escriva, Spain’s minister responsible for migration policy, has voiced that there will need to be 50 million permanent migrants in the next 25 years to stabilize the population of the European Union.
The American Immigration Council reported that more than two out of every five Fortune 500 companies had at least one immigrant or child-of-immigrant founder. In 2023, they found that 44.8% of Fortune 500 companies, about 224 companies, were founded by immigrants or their children, qualifying them as “New American” companies. Many household name companies, such as Apple and Costco, are prime examples of these companies.
Labor migration reached through routes that could lead to a permanent settlement reached a 15-year high in many countries. New Zealand showed inflow rates that were triple the previous record. With more than 70% in work and fewer than 8% unemployed, the migrant unemployment rate reached its highest on record, pushing many countries to beat the employment rate of domestic workers.
The OECD’s director for employment, labor, and social affairs, Stefano Scarpetta, said the predominantly female refugee surge from Ukraine underscored the need for governments to do more to help women enter the workplace, accounting for a majority of immigrants across the OECD; women often arrived through family routes rather than as workers or refugees. The consequences of this issue are far-reaching as there is often a blind spot in migration and integration policies for family migrants.
With migration to OECD countries at unprecedented levels, trade flows are promoted and the total imports and exports thrive. The exemplified boosted rate of migration to advanced countries has helped grow and fuel the economy, with an immense increase predicted to come in the upcoming years.
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