Exploring the Relationship: Immigration and Unemployment Rate – A Correlation Analysis
Before discussing about the correlation between Immigration Rate and Unemployment Rate, we must discuss them Separately, Immigration Rate means the number of immigrants arriving at a destination per 1,000 populations at that destination in a given year whereas the unemployment rate is calculated by expressing the number of unemployed persons as a percentage of the total number of persons in the labor force. The labor force is the sum of the number of persons employed and the number of persons unemployed.
The talents of migrants, the capabilities of current workers, and the characteristics of the host economy are crucial factors that determine how immigration affects the Labour market. When the economy and Labour demand can respond to the rise in Labour supply, they are also likely to vary over the short and long terms.
Immigration has an impact on the labor market since it increases the number of workers in specific economic sectors. The demand for labor is also likely to rise as a result of immigration as more people become consumers, increasing demand for particular goods and services. In other words, immigration may make it harder to get a job in some industries, but it can also open up new work opportunities.
Second, immigration not only increases the labor supply but also increases the demand for labor, which results in the creation of new jobs. This is due to the “lump of labor fallacy,” which holds that the number of jobs in the economy is not constant. Consumer demand for products and services is increased by migrants, and businesses may boost production in industries that employ migrant labor (e.g., agriculture or care sectors).
Research indicates that overall immigration has little effect on the employment and unemployment rates of workers born in the UK: –
Numerous research has looked into whether immigration increases unemployment or inactivity among current workers, and the majority of them have found either little or no effects.
The Migration Advisory Committee (2018) came to three conclusions after reviewing the findings of 12 studies carried out between 2003 and 2018. First, there is little to no effect of immigration on the average employment rate or the unemployment rate of current workers. Second, when an impact is observed, it tends to be concentrated among particular groups, having a negative impact on those with less education and a favorable impact on people with more education. Third, depending on the economic cycle, as some studies have discovered, though not all have, there may be negative effects on employment or unemployment specifically during downturns.
Average salaries are not significantly affected by immigration, but the effects are not fairly distributed, low-paid workers are more likely to suffer losses than are middle- and high-paid workers: –
Reviewing 12 studies conducted between 2003 and 2018, MAC (2018) concluded that immigration had had little impact on average wages. Some studies had found a small negative impact on average wages while others found positive average effects.
Limitations and gaps in the evidences
Recognizing the methodological challenges that the examination of immigration’s influence on the Labor market encounters is vital. For instance, immigration can affect changes in salaries and employment because migrants frequently move to regions with rapid economic growth and high Labor demand. It is challenging to demonstrate causation because of this.
Another issue is that workers may leave a particular region because of international immigration and move elsewhere in the country or abroad. When this occurs, the impacts of the local Labor market on the entire nation fade, making accurate measurement by local Labor market analysis more challenging.
The reliability of data on migrants, particularly specific subgroups of migrants, which are frequently based on tiny samples of the population and can therefore produce large measurement error, presents a Third methodological difficulty.
To address these concerns, empirical research has used a variety of approaches and econometric tools, but none of them are flawless, and there will always be limitations and cautions.
Author: Sachetanand