For too long emigration has been dismissed as a necessary evil; a stop-gap solution to our unemployment problem. Ireland has witnessed the departure of entire generations and yet the pattern of net migration has never been so pronounced as in the last thirty years. In this period, emigration reached levels comparable to those at the time of the Great Famine and also, for the first time, Ireland experienced massive immigration, a phenomenon that has never been repeated. More recently however, the return to high levels of emigration has denuded many rural areas of their young people, and hence their future. I feel it is unrealistic and naive to believe that such dramatic population swings have had no effect on our economy. As such, the purpose of this paper is to examine some of the factors which caused such large migration swings, to assess empirical evidence pertaining to net migration and finally to consider related policy implications and the possible effects on the economy as a whole.
Nonetheless, the determinants of voluntary migration are not to be forgotten. It can, to a large extent, be explained by high wage differentials, better experience and job opportunities, family links abroad, or simply wanderlust. These variables are however, hard to quantify and as such, data collection is difficult. I have thus turned my attention to unemployment statistics which, although they have some definitional difficulties, are quite readily available. The chosen push statistics are the unemployment rate in Ireland, the United Kingdom and the rate in the ten remaining EC member countries. It is obvious why the unemployment rate in Ireland should affect migration levels. As the search for work is one of the primary reasons for migration, high levels of unemployment in Ireland will be a disincentive to stay here. By the same token, the United Kingdom and Europe are migration destinations and thus, low unemployment rates in these regions should encourage emigration from Ireland. It could be argued that America and Australia should also be included as large numbers of Irish people have emigrated there in the past, but visa restrictions, and in the case of America, high labour market flexibility, make these figures less sensitive, as statistics show permitted, rather than desired migration. Other possible spurs towards emigration include the structure of our tax system which heavily penalises young, single workers, but again, such influences are hard to measure.
When net migration was regressed on each of the independent variables, the results were quite surprising. The R-squared values in each case were lower than I expected, although the F-statistics indicated that some relationship (however slight) existed. Relatively high t-statistics (arbitrarily choosing the absolute value of 1.8 as my reference point) indicate that the models are quite a good fit, but although the nature of the relationship between Y and unemployment in Ireland was as expected (i.e. negative), I found, contrary to expectations, a negative relationship between Y and my other two variables. One possible explanation for this is that most emigrants to Britain and Europe are highly qualified and thus, in times of recession, it is the indigenous unskilled workers who suffer the brunt of the unemployment rises, making migration less sensitive to changes in the unemployment rate in these countries. It is also true that rising unemployment in the rest of the world will be reflected in the Irish economy. Thus the situation abroad may still be better than in Ireland, which implies that in spite of rising unemployment abroad, migration outflows from may still persist.
R-squared = 0.45312
Y = 19656 - 3061(X1) + 6495(X2) - 7123(X3)
but low F-statistics suggest that there is probably only a weak relationship between the variables and net migration. I re-ran the multiple regression and included a dummy variable. In doing so, I hoped to achieve a weighted regression to show that there has been a shift in emphasis in the importance of the United Kingdom, relative to the other EC member states, as an emigration destination. I arbitrarily selected 1984 as the first year this change occurred. Since Irelands entry into the EC in 1973, the importance placed on learning foreign languages has increased. Indeed, further integration within Europe through the Single European Act and the Maastricht Treaty will augment this. Although my results show no conclusive evidence, I believe that in the coming years, this trend will become more apparent, although effects will be considerably lagged, as the necessity to learn a new language and essentially, a new culture, slows down the process.
Another problem I encountered was that of multicollinearity between my supposedly independent and exogenous variables. Huge R-squared, F- and t-statistics indicate very close relationships between unemployment in Ireland, the UK and in the rest of Europe. This is, of course, only to be expected. Ireland is a small, open economy, and as the countries of the EC make up a substantial part of our trading partners, and as our interest rates (and hence our monetary policy) are determined in Europe, it is not surprising that we are inextricably locked into the fluctuations of the European business cycle. This effect has naturally become more pronounced as we move towards closer ties with Europe.
Some of the problems of multicollinearity may be overcome by lagging variables. Another method I tried, was to examine the differences in the rate of unemployment between Ireland and the UK, and Europe. I hoped that the relationship between unemployment rate differentials would be more sensitive to net migration than absolute unemployment rates. The results were however, only slightly improved.
In the basest of terms, mass emigration represents a fall in the number of consumers which, in Keynesian analysis, represents a fall in aggregate demand and hence, output. Evidence of the feedback of emigration into growth in the Irish economy is mixed and conflicting but it is indisputable that growth in the economy has not been matched by growth in the employment level. It is not unreasonable to assume that emigration could have played some part in this.
With regard to my own limited analysis, it is possible that push factors may account for a higher proportion of migration than suggested by the results. Inadequate data, oversimplification, poor selection of arbitrary values or even misspecification of the model, may have distorted the true values. If this is the case, and we are serious about halting forced emigration, the government must stimulate demand for labour and growth, so as to provide sufficient employment, and no longer rely on emigration to provide the answers.
However, if my findings are correct, the implications are even more far-reaching. This would imply that the majority of emigration is voluntary. The impact of this on growth is immeasurable. Firstly, it means that there is some innate factor in the Irish economy which encourages emigration. Whether it is the legacy of tradition or the product of our current tax and employment systems, the net effect is the same. Already, distortions of the demographic structure have created a worryingly high dependency ratio, which hinders the much needed reformation of the taxation system, thus fuelling the vicious circle of loss.
As has been the case in recent years, the brain drain is bleeding the country dry of her most precious resource. This creates an anti-entrepreneurial environment and undermines the countrys business and financial structure. The very people who are highly educated by the state, and should be creating new employment and promoting growth, are heading for foreign shores. If this is the case, the costs to society are twofold; the state loses the return on its investment in human capital and secondly, society loses jobs which would have been created and the development of an enterprise culture which is sure to follow.
The only possible response to such findings is to discover and correct the imperfections in the economy which drive these people away. This however is a long run goal. In the meantime, it is important to tap into the vast experience of our emigrants. If there truly is a shift away from the UK towards Europe as an emigration destination, it is important to know now, so that we can develop industry similar to that abroad and attract Irish nationals home to run it. In this way, it is possible to compete within an international market and still nurture an enterprise culture.
If we believe that future growth in the Irish economy depends on our ability to harness the experience and knowledge of our people, recognition and implementation of policy options which will stem emigration becomes even more urgent. In the past, we have actively encouraged emigration in the hope of shortening the dole queues. Yet, it is a false economy. Mistakes have been made in the past, but we can still use the wealth of knowledge that should be Irelands, but is, instead, distributed around the world.
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