Immigration and the European Labor Markets

The public debate on the economic effects of migration is ancient. It is back again in Europe, as always charged with social emotions and political undertones. Widely held fears that immigrants displace national workers through underbidding of wages and working conditions appear to be backed by casual observation. Quite regularly, the media reveal cases of illegal immigrants working long hours at extremely low wages, powerfully suggesting that both immigrants and native workers suffer from migration. Yet, in striking contrast, the economic literature fails to theoretically predict and empirically document unambiguously adverse effects from migration. In fact, in the long run when prices and wages are flexible, immigration is more likely to raise welfare in both origin and recipient countries. Freeman (1993) observing that few economists actually go on to support free migration suggests that the economic theory of migration must be modified to account for economically motivated resistance to immigration.