Saturday, 26 March 2011

What about migration after crises...?

One of the contingent consequences of the depression that Greece is currently deep into is negative net migration, meaning that people will actually leave the country and seek employment elsewhere (or maybe a better future in general).
This story is all over the mainstream media. I want to look at what happened at two other countries that entered the crisis a couple of years earlier than Greece and see if this is what happened there, Latvia and Iceland.

Latvia is subject to a similar IMF program, trying to fix things partly through internal devaluation (among other measures) and is already through a shockingly deep recession, way worse than the one Greece is going through right now. Unemployment has skyrocketed and wages have been slashed (this is an internal devaluation that we’re talking about). But then again, they are into this for a while longer, let’s wait and see how things play out here until the bottom is reached (the real bottom not a temporary one) and then maybe we can compare notes. 

On the other hand the story of Iceland is better known around the world since it is being heralded as the country that didn’t bail out the banks. Well, this is not the whole story since Iceland has also seen unemployment rise dramatically (from 1,6% in 2008 to 8% in 2009) and things are far from rosy there too.

What I want to say is that adjustments like these mentioned above are always painful, no matter whether default is involved or whether an IMF-like program is. I’m not going into this here, since this isn’t the point of the post.

To come to the point, both countries have seen negative net migration explode following the breakout of the crisis.

source: Statistics Iceland, Latvijas Statistika

Of course there are some differences between the two cases. Prior to the crisis for the whole 00s decade, Latvia kept recording small population outflows, albeit significantly smaller in magnitude compared to the 90s, after all, at the time it seemed that things were looking up for the country. Iceland was witnessing positive net migration for almost the whole span of the decade, which got really heavy right before the crisis broke out.

This is not the whole story though, while Icelandic citizens kept leaving Iceland for abroad for the duration of the 00s, this was more than offset by the influx of foreign citizens coming into Iceland. What I want to emphasize is that on 2009 foreign citizens started leaving Iceland again.

source: Statistics Iceland

This is what normally should be happening in Greece right now, but is it? As far as Greek citizens leaving Greece for abroad are concerned, I think that this is true. They should be leaving in numbers by now. I think that emigration will happen in waves, the first that will leave will be highly qualified people who wish to find better employment abroad and believe that their chances there are better. The second wave would involve people with a more varied educational background, in the case that things in Greece worsen significantly (which I believe that they will).

Then we come to the issue of foreign citizens living in Greece. Well, those foreign nationals living in Greece legally that have the option of relocating in a country where the current situation is better than Greece will probably leave. Since, a large part of the people captured by official statistics fall under this category then such a trend would be possible. This is the effect that statistics about Iceland are capturing.

What about all the people living in Greece illegally or those that don’t have the option to go someplace else? Here is the wild card. I honestly don’t know. Should things in their respective home-countries be worse than Greece anyway, why should they be leaving? (I do not include in foreign nationals people that have got the Greek nationality and have settled down in Greece, they will not leave that easily either)

Add to that the number of people from MENA (Middle East Northern Africa) seeking refuge in Greece due to the unrest in their home-countries and the uncertainty about the true situation in Greece increases. Due to the geographic positioning of Greece these things literally come with the territory…

I think that it is clear that Greeks will be emigrating abroad in search of something better, but as far as foreign citizens are concerned things are not that clear at all, since there are two opposing effects at work.

As for an economic view of things, when a country’s GDP is contracting significantly, as is the case for Greece, usually emigration helps ebb the building social pressures, as it reduces the growth rate of a country’s population or in extreme cases it reduces the country’s population outright. This is what’s happening in Iceland and Latvia. But if you couple a falling GDP with a rapidly rising population you are bound to get an explosive mix…

I do not want to view things politically in any way, so I will not expand into this…

P.S. Here is two charts, the population of Ireland and Iceland.

source: Central Statistics Office Ireland

 As you can see in the chart, Ireland experienced population declines at times. I don't know why but I'm inclined to believe that it was due to emigration.

source: Statistics Iceland

The blip in the chart is the first population decline in record for Iceland and it happened after the crisis broke out...

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