Vol. 5, No. 5
June 2010
Federal Reserve Bank of Dallas

Manning the Gates: Migration Policy in the Great Recession
by Mike Nicholson and Pia Orrenius

The Great Recession of 2008–09 brought steep declines in world output, employment and trade—all told, the worst falloff of global economic activity since the Great Depression. During the downturn, advanced economies from Australia and Western Europe to developing countries such as Thailand and Kazakhstan adopted policies ranging from keeping new migrants out to encouraging resident migrants to leave.

The most common policy changes included tightening numerical limits or imposing categorical limits on immigrant inflows, paring back lists of shortage occupations and changing eligible occupations for temporary migrants.

Nations also limited the opportunities for migrants to adjust their legal status or renew their work permits. They tightened employers’ advertising requirements, or labor market tests, to give native-born workers an edge over their foreign-born competitors. Many countries also boosted immigration enforcement, stepping up efforts to round up unauthorized immigrants and prosecute their employers.

Through these initiatives, lawmakers sought to help domestic workers by limiting foreign competition during a severe economic downturn. While the intent of these measures is clear, their bite is somewhat uncertain. Recessions diminish employment opportunities, so cross-border labor flows decline on their own accord, reducing competition for jobs from foreigners.

In fact, the immigration backlash could have its greatest effect after the recession ends, when a growing demand for labor could run headlong into labor market restrictions that remain in place. These could impede countries’ ability to recruit workers in sectors vital to their recovery and long-run economic growth.

From Economic Boom to Bust
In the years leading up to the Great Recession, economic expansion and housing booms in countries such as Spain, Italy and Ireland led to unprecedented levels of immigration and transformed what had traditionally been sending countries into prime destinations for migrants from within the European Union (EU) and around the world.[1]

From 2000 to 2007, Spain was Europe’s leading destination for migrants by a large margin. Immigrant inflows averaged 642,000 per year, and the number of foreigners rose from less than 1 million to nearly 5 million. The foreign share of the Spanish population rose from 2 percent to 10.4 percent over this period.

Italian immigration also skyrocketed, with flows averaging 338,000 newcomers a year between 2000 and 2007, up from only about 50,000 in the late 1990s. The foreign share of Italy’s population more than doubled, rising from 2.2 to 5 percent.

Annual inflows to Ireland rose sharply during this time as well—from 42,000 in 2000 to 89,000 in 2007. The foreign share of the population increased from 3.3 to 10.5 percent. Ireland was among the three EU countries to allow migration from the eight Eastern and Central European nations that joined the bloc in 2004, often referred to as the “accession eight,” or A8.[2] Irish immigrants came mostly from Poland. Ireland also took in a significant number of immigrants from countries outside the EU, including the U.S., India and China. 

U.K. migration also rose in the period leading up to the recession, albeit to a lesser extent since the U.K. has long been a country of immigration. Inflows increased from 364,000 in 2000 to 527,000 in 2007. The foreign share of the population edged up from 4.5 percent in 2001 to 6 percent in 2007. As in the case of Ireland, many of these new immigrants came from the A8 countries.

In contrast to the new destination countries of Europe, U.S. immigration did not accelerate in the 2000s. Green card issuances averaged about 1 million per year, the same as in the 1990s, and the foreign-born population share rose modestly from 11.1 percent in 2000 to 12.5 percent in 2008, a slower rate of increase than in the prior decade.

The expansion that spurred immigration throughout much of Europe came to an abrupt end with the 2008 financial crisis and slowdown in world economic growth. The next year, world output contracted 0.6 percent, and the volume of global trade declined 10.7 percent.[3] Unemployment rates skyrocketed in many countries, particularly in those that had experienced housing booms, such as Spain, the U.S., the U.K. and Ireland (Chart 1).

Between December 2007 and December 2009, unemployment rates rose from 5 percent to 10 percent in the U.S., from 8.8 percent to 19 percent in Spain and from 4.8 percent to 13 percent in Ireland. The EU area as a whole experienced a milder rise in unemployment—from 6.9 percent to 9.4 percent.

Migration Policy Responses
The Great Recession caused great anxiety. Many governments, including in the U.S., passed stimulus packages aimed at promoting consumption and job growth through tax rebates, infrastructure projects and expanded social benefits. In addition, governments sought to help individuals directly with job-creation programs and by extending assistance to unemployed workers.

Countries also adopted protectionist trade and immigration policies. Protectionist trade policies often backfire when trading partners respond with similar measures. Restrictive immigration policies are typically not subject to the same tit for tat as trade, but reduced migration hurts migrants and poor sending countries, which often rely on remittances. Measures targeting resident migrants can slow their economic progress and hamper integration.

Countries responded to rising unemployment rates with policies designed to limit foreign-born workers’ access to labor markets. Table 1 summarizes major policy changes in countries around the world from 2008 to the present.

In the U.S., the Troubled Asset Relief Program (TARP), implemented in 2008, discouraged banks and financial institutions receiving federal bailout funds from hiring foreign workers through the H-1B program for high-skilled specialty workers. In February 2010, an executive order imposed stricter rules for employers using foreign-born farmworkers.[4] Since May 2009, U.S. rules also require that government contractors run all new employees through E-Verify, a federally operated electronic program that checks for valid Social Security numbers that match workers’ names.[5]

Measures aiming to protect native workers were also taken in other countries hit hard by the recession—notably Ireland, Spain and the U.K. The most frequent policy approach emphasized controlling worker inflows from outside the EU.

In 2009, Ireland stopped issuing work permits to foreigners for low-paid occupations in addition to household workers and truck drivers. Spain restricted the recruitment of certain categories of guest workers in 2008 and 2009.[6]

The U.K. upped salary and education requirements for high-skilled workers from outside the EU and suspended recruitment of low-skilled non-EU workers in 2009. Salary requirements were tightened further in early 2010.[7]

Like the U.S., these countries also adopted a number of policies targeting employers. Ireland extended its labor market tests, requiring prospective employers to advertise jobs for eight weeks within the EU prior to seeking workers from outside the bloc. Furthermore, individuals renewing work permits are now subject to labor market tests that weren’t in force before the crisis.[8] The U.K. also doubled the job advertising period for employers seeking certain categories of skilled workers from outside the EU. And Spain curtailed labor market test exemptions for skilled “shortage” workers.[9]

These countries also adopted a variety of measures directed toward foreigners residing within their borders, legally and illegally. Ireland tightened requirements for work permit renewals and stands by naturalization prerequisites, which result in rejection of nearly half the applicants for Irish citizenship.[10] The U.K. Parliament voted in July 2009 to toughen citizenship requirements for status adjusters, effective in 2011.[11]

Seeking to curtail illegal immigration, Ireland passed new measures limiting unauthorized migrants’ access to public services, and the U.K. raised fines for employers of unauthorized migrants.[12] A number of other countries have also stepped up immigration enforcement. Italy has criminalized unlawful presence, authorized citizen patrols to combat illegal migration and barred illegal migrants’ access to public services.[13] France has launched several high profile raids, and Greek police drew international attention when they bulldozed a migrant camp near the city of Patras. Israel created a new task force to combat illegal migration. A number of popular destinations for Asian migrants, notably Malaysia and Singapore, have cracked down on illegal migration as well.

Perhaps the most innovative policies entailed creating incentives for foreign workers to return to their home countries. Spain launched the largest such program in November 2008, seeking to encourage unemployed migrants’ departure by paying unemployment benefits in two lump sums—one given in Spain and the other delivered upon returning home. The Spanish government also paid for transportation back home. The program bars participating migrants from returning to Spain for three years.[14]

The U.K. and France adopted a similar program to encourage unauthorized migrants residing in camps in Calais, a French port on the English Channel, to return home.[15] The Czech Republic and Japan have launched programs giving foreigners greater incentives to return home and imposing restrictions on their reentry. Denmark, which has had a program operating for several years, has upped financial incentives for migrants to head back to their countries of origin.[16]

To date, the Spanish and Czech programs have attracted fewer participants than was initially projected. For example, Spain estimated that more than 100,000 migrants would return home under its program, but it received only about 8,700 applications.[17] This outcome shouldn’t be surprising. For most migrants, a lifetime income in Spain exceeds the two lump-sum benefit payments and value of the ticket home. Their home countries don’t typically offer much employment or investment opportunity. What’s more, after migrants have lived in a new country for a substantial period, they begin to integrate and are reluctant to leave. As a general rule, voluntary return programs aren’t very effective at getting settled migrants to depart. 

Recession’s Impact on Migration
Under normal circumstances, immigration policy supports more immigration in good economic times and less in bad times. During the 1990s high-tech boom, for instance, U.S. policy accommodated the rise in demand for IT workers. In 2000, the American Competitiveness in the 21st Century Act temporarily tripled the cap on H-1B visas and eased H-1B employment restrictions permanently.

In hard times, labor protectionism has limited impact because migration naturally falls off. An extreme example was the Great Depression, when deteriorating economic conditions led to an 85 percent decline in the immigrant inflow between 1930 and 1932.[18]

During the Great Recession, rising unemployment rates across many advanced economies have deterred would-be migrants, leading to steep declines in flows along the major global migration corridors. The falloff in migration has been particularly noticeable in those countries where a large proportion of foreign workers were employed in the hard-hit, business-cycle-sensitive construction sector.

Within the EU, where international labor migration is unrestricted, we can safely say that any declines have been due to market factors, not restrictions imposed by lawmakers. Immigrant inflows into Ireland from recent accession countries in Eastern and Central Europe—by far Ireland’s largest source of foreign labor—fell by 74 percent from 2007 to 2009.[19] Irish social security registrations (Personal Public Service numbers) from foreign nationals fell 63 percent from 2007 to 2009, further evidence of a drastic slowing of Ireland’s worker inflows.[20]

The number of registered foreign workers in Spain fell in 2008, the last available year of data.[21] Spain saw a two-thirds decline in the inflow of immigrants from Romania, its largest provider of foreign workers in recent years.[22] Inflows into the U.K. from the A8 countries declined 21 percent in 2008.[23] Applications for the U.K’s Worker Registration Scheme, which covers migrants from countries that joined the EU in 2004, fell 32 percent from 2008 to 2009.[24]

Outside the EU, the decline in applications for work permits or employment-based visas suggests that fewer people sought work abroad during the recession. In the U.S., applications for H-1B temporary skilled-employment visas fell by 16.1 percent from 2008 to 2009.[25] The H-1B cap of 65,000 for the 2010 fiscal year was not reached until December 2009, a drastic change over previous years, when quotas were filled within a few days of the opening for applications. And the H-1B cap for fiscal year 2011 had not been reached as of June 11, 2010. Applications for similar temporary, skilled-worker visas also fell in a number of other countries, such as  Australia (Chart 2).

Some signs of stabilization appeared in late 2009 as the world economy improved. For example, applications to Australia’s temporary Subclass 457 skilled visa program, similar to the H-1B program, and the U.K.’s Worker Registration Scheme increased over the second half of the year. More recent Australian data show that 2010 applications for Subclass 457 visas are up significantly over last year’s levels.[26]

Undocumented migration falls. Illegal migration is highly correlated with the business cycle—often more so than legal migration. One reason is that workers dominate illegal flows, while legal migration also includes family-based and humanitarian migrants.

Like legal workers, unauthorized migrants are better tolerated by authorities during economic expansions and subject to greater enforcement actions during downturns. History provides some examples, such as the 1953–54 U.S. recession, which coincided with a major Border Patrol initiative that removed thousands of Mexicans. 

The recent recession brought with it broad-based declines in illegal immigration. In Europe, the EU’s border agency, FRONTEX, estimates that undocumented migration fell 33 percent in 2009 relative to 2008. Illegal sea landings in Spain, one of the most common entry points for would-be migrants, fell 46 percent from 2008 to 2009.[27] Landings in Italy have also fallen significantly. Some of these declines can be attributed to the recession and some to the increased immigration enforcement in the Mediterranean Sea.

Along the U.S.–Mexico border, annual apprehensions of undocumented migrants fell 33 percent from 2007 to 2009 (Chart 3). Apprehensions in 2009 were down 55 percent from 2005, when the housing boom was nearing its peak. According to the Mexican statistical agency INEGI, net flows of Mexicans to the U.S. were down 61 percent from levels reached during the housing boom peak in 2006 (from 369,500 in second quarter 2006 to 144,200 in second quarter 2009).[28]

Family and humanitarian immigration steady. Tighter policies have mainly targeted labor migration, but employment-based inflows typically account for less than half of total immigration. In Western Europe and the U.S., the bulk of migration is family-based and humanitarian, both largely insensitive to economic conditions.

U.S. non-work-based immigration barely budged in the recession, with nonemployment green cards accounting for over 85 percent of legal permanent resident admissions in 2007–09.[29] If lawmakers really wanted to control total worker inflows in a recession, they would have to restrict family-based migration as well.

What Now?
Recent GDP data are increasingly positive across the globe, suggesting that the worst of the global recession may be over. Across the largest economies emerging from recession, growth in the second half of 2009 and first quarter of 2010 was respectable. The U.S. economy has grown 2.6 percent in real terms since bottoming out in second quarter 2009; Germany has grown 1.1 percent and Japan 2.5 percent. The IMF predicts that global output will expand 4.2 percent in 2010 and 4.3 percent in 2011.[30]

As the global economy recovers, the demands for labor and migration are expected to bounce back. Coincident with the slowly improving outlook, some countries have taken baby steps toward reversing the migration policy changes they implemented at the height of the recession. Italy, for example, is again allowing entry for some categories of nonseasonal foreign workers, but overall quotas remain tighter than prior to the recession. Switzerland increased its 2010 work permit quotas in some categories in May after slashing them by half in January. Malaysia has eased its strict migration policies somewhat, allowing some manufacturers to recruit foreign workers. It remains to be seen whether these and other countries can realign their labor and migration policies with their economies as the global economic recovery picks up speed.

About the Authors Nicholson is a research analyst and Orrenius is a research officer and senior economist in the Research Department at the Federal Reserve Bank of Dallas. Notes The authors thank the Transatlantic Forum on Migration and Integration (TFMI) participants, a network of migration experts assembled by the German Marshall Fund and Robert Bosch Foundation, for inspiring us to write this article, as well as providing data and anecdotes from around the world. Unless otherwise noted, migration and population data in this article are from Eurostat, the U.S. Bureau of Labor Statistics, Bureau of the Census and the Department of Homeland Security; no 2006 data available for Italy. The A8 accession countries are the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. See “World Economic Outlook,” International Monetary Fund, April 2010, p. 2, www.imf.org/external/pubs/ft/weo/2010/01/pdf/c1.pdf. Under this new rule, the Department of Homeland Security may not approve H-2A visa petitions until the Department of Labor certifies that there are not sufficient U.S. workers qualified and available to perform the labor involved and that the employment of the foreign worker will not have an adverse effect on the wages and working conditions of similarly employed U.S. workers. See “A Conversation with Lisa Roney: Tapping Technology for Immigration Enforcement,” Federal Reserve Bank of Dallas Southwest Economy, Second Quarter, 2010. See “SOPEMI Country Notes 2009: Ireland” and “SOPEMI Country Notes 2009: Spain,” available on the Organization for Economic Cooperation and Development (OECD) website at www.oecd.org/document/48/0,3343,en_2649_33931_44060528_1_1_1_1,00.html. See “Migrant Workers Face Tougher Test to Work in the United Kingdom,” U.K. Home Office, Feb. 22, 2009. See “Global Client Alerts: Ireland,” FRAGOMEN, April 21, 2009, www.fragomen.com/newsresources/xprNewsDetailFrag.aspx?xpST=GlobalAlerts&news=463; also see Migration News, vol. 16, no. 3, July 2009, University of California, Davis, http://migration.ucdavis.edu/mn/more.php?id=3531_0_4_0. See “International Migration Outlook, 2009,” OECD, June 2009. See “Presentation to the Joint Committee on the Constitution,” Immigrant Council of Ireland, Oct. 7, 2009. See “Tough New Points System for Earning Citizenship,” U.K. Home Office, Aug. 3, 2009; also see “Citizenship Points Plan Launched,” BBC News, Aug. 3, 2009, http://news.bbc.co.uk/2/hi/8180749.stm. See “Country Notes 2009: Ireland,” OECD; also see “Buyer’s Remorse on Immigration Continues,” Migration Information Source, Migration Policy Institute, December 2009, www.migrationinformation.org/Feature/display.cfm?id=759. See “SOPEMI Country Notes 2009: Italy,” OECD; also see “Migration and the Global Recession,” by Michael Fix, Demetrios G. Papademetriou, Jeanne Batalova, Aaron Terrazas, Serena Yi-Ying Lin and Michelle Mittelstadt, Migration Policy Institute, September 2009, p. 57, www.migrationpolicy.org/pubs/MPI-BBCreport-Sept09.pdf. See “Pay to Go: Countries Offer Cash to Immigrants Willing to Pack Their Bags,” Migration Information Source, Migration Policy Institute, November 2009, www.migrationinformation.org/Feature/display.cfm?ID=749. See note 13, Fix et al., p. 64. See note 12, “Buyer’s Remorse on Immigration Continues.” See note 12, “Buyer’s Remorse on Immigration Continues.” Figures from the 2001 Yearbook of Immigration Statistics, Department of Homeland Security. Despite the falloff in migration, policymakers also took matters into their own hands, deporting nearly a million Mexican immigrants, many of whom were legal immigrants. See Beyond Smoke and Mirrors: Mexican Immigration in an Age of Economic Integration, by Douglas Massey, Jorge Durand and Nolan J. Malone, New York: Russell Sage Foundation, 2003. Data from the Central Statistics Office of Ireland. Data include both the 2004 and 2007 accession countries. Bulgaria and Romania joined the EU in 2007. Department of Social Protection, Republic of Ireland, www.welfare.ie/EN/Topics/PPSN/Pages/ppsn_all_years.aspx. “Statistical Bulletin on Foreigners and Immigration,” Spanish Ministry of Labor and Immigration, August 2009, http://extranjeros.mtas.es/es/InformacionEstadistica/Boletines/Archivos/Boletin_21_Ingles.pdf. Data from “Estadística de Variaciones Residenciales,” Spanish National Statistical Institute, www.ine.es/jaxi/menu.do?type=pcaxis&path=%2Ft20%2Fp307&file=inebase&L=0. Long-Term International Migration (LTIM) tables, U.K. Office for National Statistics, www.statistics.gov.uk/statbase/Product.asp?vlnk=15053. See “Control of Immigration: Quarterly Statistical Summary,” U.K. Home Office, February 2010, http://rds.homeoffice.gov.uk/rds/pdfs10/immiq409.pdf. Figures from Nonimmigrant Visa Statistics, Visa Office, U.S. Department of State, http://travel.state.gov/visa/statistics/nivstats/nivstats_4582.html. Figures from the Australian Department of Immigration and Citizenship, www.immi.gov.au/media/statistics/statistical-info/temp-entrants/subclass-457.htm. See “Inside Spain 63,” by William Chislett, Real Instituto Elcano, www.realinstitutoelcano.org/materiales/insidespain/63_InsideSpain_ElcanoNewsletter.pdf. See “Comunicado de Prensa 351/09,” Mexican National Statistical Agency (INEGI), Dec. 28, 2009, www.inegi.org.mx/inegi/contenidos/espanol/prensa/Boletines/Boletin/Comunicados/Especiales/2009/diciembre/comunica13.pdf. Figures based on data from the Office of Immigration Statistics, Department of Homeland Security. See note 3.

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