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Greece after the 1990s immigration wave: A difficult adaptation to an economic windfall

Antigone Lyberaki Professor of economics, Panteion University. Greece after the 1990s immigration wave: A difficult adaptation to an economic windfall. LSE, March 200 6. Retrospect and Prospect. Evaluation of the 1990-2000 episode Historical watershed – unlikely to be repeated soon

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Greece after the 1990s immigration wave: A difficult adaptation to an economic windfall

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  1. Antigone Lyberaki Professor of economics, PanteionUniversity Greece after the 1990s immigration wave:A difficult adaptation to an economic windfall LSE, March 2006

  2. Retrospect and Prospect • Evaluation of the 1990-2000 episode • Historical watershed – unlikely to be repeated soon • Has altered Greece decisively • Will shape perceptions and reaction in future • Hence two items in the papers agenda • Digest what happened – • Give a narrative and derive stylised facts • Bring out tensions likely to be met in future Work in progress with Prof. Dertilis of the EHESS, Paris

  3. 3 crucial reversals in the 1990s • Greece was transformed from a country of emigration into one of immigration • Greece shifted from being a net receiver of private foreign direct investment (FDI) into a net exporter of capital • The Greek economy switched from a diverging economic performance vis a vis the EU into vigorous convergence.

  4. Migration: a facet of globalization? • Free movement of goods, services, capital, people? • Is movement of goods and capital substitute or complement to movement of people? • Substitute: if goods can move then factors of production need not move. • Complement: non-traded goods and services (childcare), imperfections (non-equalisation of prices, mainly wages), part of value chain. • Short-term effects of globalization: turmoil, societies under duress, increasing outflow of people

  5. Not unprecedented… • 1815-1914: approximately 10% of world population moved • Over the last 15 years: 3% of world population. • So, international migration is the “great absentee” of Millennial globalisation. • Qualitative new elements: 1. Different subjects 2. Different destinations So, Countries find themselves in unaccustomed roles • From migrant source to destination. • From developing world poverty to 1st world riches.

  6. European experience since 1985 • The number of migrants increased by 50%While 30% come from other EU countries65% (or 3,4% of population) come from other countriesOver half of population increase in Europe (64%) is due to migrationThe process of ageing cannot be cancelled even if there were a doubling of migrants in the years to come.

  7. Positive?Crucial questions towards evaluation • Do migrants contribute to growth? • Do they “hijack” jobs from the domestic working class? • Do they “freeze” wages? • Do they create an underclass of socially excluded groups? • What is to be done?

  8. Economic Literature : positive aspects prevail for the host Depending on: • First: the characteristics of migrants themselves (skills and adaptability) • Second: the characteristics of the receiving (host) economy. Migration tool for what? (low cost vs. quality-related competitive strength)

  9. Implications for economy of origin (sender) • Alleviation of unemployment pressure • Inflow of remittances • Family strategy: empowerment and guarding against risks and abrupt fluctuations of incomes However: brain drain and deprivation from the more dynamic elements (age and risk) Depends on whether, when and how they return

  10. Gains for would-be migrants • Life free of danger • … And corruption • Better chances for children • BUT mainly immense boost to earning potential (Jim Smith of Rand calculated that recent immigrants getting a green card gain on average $20.000 per year or $300.000 over a life-time in net present value terms).

  11. Migrants in Greece: How Many? • Legalisation process: • 600 thousands submitted application in 1997 • Plus 150 thousandGreek Pontians • PlusNorthern EpirotesPlusnon-applicants • Totalat least750 thousands • Census: • Estimated population 2000 10,5 million • «Closed population» 10,2 million • Registered in census 11 million. • Total around 800 thousandplus those not counted in census • SO:Population between 850 th. and 1 million (7%-8.5% of total).. 10-12% of the labour force.

  12. Migrants in Greece: Who? • Legalisation applications • 65% from Albania • 18% Bulgaria, Romania, Serbia, Georgia, Russia • Even if we include Pontians in migrants, then still over 50% of the total are Albanians • Majority from Southern Albania (where commercial and investment links concentrated). • Radically different from rest of Europe • Bulk of arrivals until 1998 (after pyramid scheme collapse). • In comparison arrivals since are a trickle • Very large and very abrupt change.

  13. Education level(economically active population) Greece total (%) Albanian migrants Higher 17.0% 15.2% Upper Secondary 29.4% 39.4% Lower Secondary 8.9% 21.8% Primary 37.2% 11.9% Less than primary - 7.5% 11.7% Thessaloniki Research Findings (2000)1. Educational backwardness? Relatively well educated

  14. 2. Financial situation • Family income 3,24 million GDR. • Poverty line for I person 1,3 m GDRin 1999. • Pay rates comparable to Greeks • Concentration around the minimum wage • Labour law not irrelevant • Expenditure low – large savings • Family expenditure 1,9 million GDR • Improvement through time • As the stay is extended and • Through legalisation

  15. 3. Position improves with time • Jobs improve with time • Normalisation of labour situation • 65% have health insurance • Less avoidance of minimum wage • Comparison with other studies: clear improvement • Only 18% «without papers» • Consumption standard also improving • 76% have telephone • 98% TV. 46% VCR • 16% car

  16. The 2003 Athens Survey:Key facts • Interviews in Athens 9/2003-11/2003 • Snowball sampling – informal networks • Only way to approach illegals. Otherwise bias. • Original sample frame not directly related to employment (orthogonal) • 500 structured interviews answered by household head and Conducted by private survey agency. (Kapa research). • 60 separate surveys conducted as a control by the researchers. • Data cleaned and first tabulations focus on perceptions and social factors • Fuller analysis to follow, focussing more on economic factors • Separate survey has companies as the sampling frame (130 in total) conducted, but will not be reported on today.

  17. Employment findings • Very high participation rate (though bias expected) • 96,1% for men; 65% for women. • Note gender gap (30 per cent). Similar to native gap • 88% pay social insurance contributions regularly. • Sectoral mix of sample (men): • Construction (41%), Mfg and services (30%). • Self-employed and business owners (25%). • Women (as % of population) • Domestic services 34%, 12% mfg and restaurants • 20% self-employment. 34% inactive • Job turnover very small • 75% has not changed employment over last 3 years.

  18. Income adequacy • Sample relatively well off (monthly hh income). • 30% Have income less than 900 EUR • 24% have more than 1500 EUR per month • (ECHP poverty line for 4 member household 840 EUR 2002) • Savings high but remittances over time show downward trend. • Mobility and improvement of housing conditions over time. • No ghettoes • One in three owns a car. • 74% have bank accounts.

  19. Conclusions • Community on an upward trajectory • Appears to resemble the indigenous in a number of respects • Resemblance grows over time: prone to self-employment • Individual success combined with lack of trust to all non-relatives, regardless of nationality. • Similar findings for Greeks – lack of social capital. • Situation is still fluid and attitudes ambivalent. How things will turn out depends on future policy and integration initiatives

  20. Overall comparison between Greeks and foreign-born • EU-SILC (2003): sample of 11.274. • 500 foreign-born • Confirms general picture: Though not in the top gear, immigrants are better off than groups such as women • Younger with more children and less elderly members, • less likely to receive state benefits (7,7% vs 14% of hh) • More likely to participate in the labour market if male (71,5% vs 66%) but less likely if female (by 5 percentage points) • Less likely to do supervisory work (3% vs 15%) • Less likely to hold a part-time job than women • Wages of Greek males are 18,5% higher than Greek females´, and 19,8% higher than foreign-born wages. • The largest wage differential is between women: Greek earn 33,7% more

  21. The Greek economy: from stagnation (1980-95) to growth • Impressive growth performance in the 1960-74 period (8,0), slowing down up to 1979 (3,2). • Very poor performance in 1980-87 (-0.05) and 1988-95 (1,85) periods:divergence. • New growth phase since the mid-1990s and convergence with EU. • Substantial transfer of resources from the EU throughout the last 25 years (from 1,5-3,6% of GDP annually). • Growth (despite public finance problems) continues post 2004

  22. Annual rate of increase in GDP 5 4 3 2 1 0 1996 1991 1993 1998 2000 2003 1992 1994 1995 1997 1999 2001 2002 -1 -2 European Union Greece

  23. How did the labour market absorb these immigrants? • Fast growth and high unemployment: • Two speed Labour market? • Resistance to labour market reform • The Greek paradox is that unemployment does not involve low-skill • Co-existence of unemployment with demand for low-skilled and flexible labour • The Greek economy finds itself “stuck in the middle” • Hence Low labour costs and flexibility provide a breathing space • Migrants exploit niche

  24. Accelerating employment growth

  25. Steady decline of unemployment

  26. Positive overall effect on the Greek economy 5Positive elements : • Creation of new jobs (mainly in services) • Growth speeded up • Defensive strengthening of sectors and regions • Alleviation of bottlenecks in labour market • Personal services allow women to enter the labour market However, two potential counter-developmental temptations • Abundance of low wage labour. • Strengthening of grey economy. Immigration key driver in the ‘Growth Spurt’ of the Greek economy, starting mid-90s and still unwinding

  27. New trends in immigration after 2000 • Immigration flows change. Three distinct groups alter the simple picture: • ‘Albanians’ (plus other Balkan and E. Europe) • Informal networks with 1990s migrants • Close links with Albania and source countries • Post 2008 Bulgaria and Romania in EU • ‘Third country’ migrants • E.g. Pakistan, Africa • Greater importance of trafficking • Greater cultural distance • Chinese migration • Self employed and self-contained • Part of international value chain of Chinese manufacturing.

  28. The global picture is also positive: • The potential gains from liberalising migration are far more important compared to those from removing barriers to world trade. • Dani Rodrik of Harvard : relaxing restrictions on the international movement of workers would yield benefits 25 times larger than those that would be realised by liberalising goods and capital flows. • Tito Boeri of Bocconi: migration of 3% of Eastern Europeans to Western Europe would increase the total EU GDP by up to 0.5%.

  29. Economic logic thwarted by political constraints • A temporary visa scheme (3-5 years) amounting to no more than 3% of rich countries’ labour force would easily yield $200 billion annually for the citizens of the developing nations (Rodrik) • Relaxing restrictions to migration has a compelling economic logic. But those gains can be made only at great political cost. • However, the same applies totrade, which is being liberalised.

  30. Explaining the immigration/ free trade political paradox • Is it public opinion? • It is against both free trade AND immigration equally. • Rodrik: • the beneficiaries from free trade have organised successfully and become politically effective. • By contrast, the beneficiaries of labour flows are not easily identifiable, neither known ex ante.

  31. Migration as a mirror: societies get what they deserve • Evidence (and common sense) suggest that positive attitudes to immigrants maximise economic and social benefits from migration. • Two main challenges for the rich world’s governments: • How to manage the inflow of migrants • How to integrate those who are already there.

  32. From the point of view of Greece… • All in the same neighborhood: differences in current performance BUT common future…(in the EU?) • The economic argument is easier to win… but the cultural terrain is less conducive • Essentially it is about overcoming the “fear of change” and building open societies. • How to reap the economic windfall? • How do economic and political actors respond? • Some concluding remarks

  33. The Civil Actors: Ambivalence • The Church • Tirana Anastasios vs. Thessalonika Anthimos • Civil society • ‘The Albanian flag carrier’ vs. ‘Gangs’ • The Unions • Solidarity vs Prevention of labour flexibility • The Employers • ‘Short-termism’ vs. ‘Investing in people’

  34. The political actors: Pusillanimity • The politicians: • Even when recognise positive role, afraid to say so. • Ex-minister of Labour: • ‘when confronted with an unemployed man, you cannot defend being liberal in immigration’ • The Parties • Rhetorical differences large esp after 2004 • In practise hesitant between treating as public order issue or social policy • The Government • After legalisation in 1998, very few new initiatives • Progressive outlook when confronted with EU • Yet unclear whether much is done to counter ‘street level’ discrimination by the State machinery

  35. Conclusion • The situation is becoming harder • New immigrant groups harder to integrate • Growth episode may peter out • However, there are grounds for optimism • Integration of first wave • Balkan win-win • How it will turn out depends largely on political economy.

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