The Effect of Low-Skilled Labor Migration on the Host Economy

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The Effect of Low-Skilled Labor Migration on the Host Economy

Migration of low-skilled workers into advanced countries remains a highly contentious issue, despite high demand for such workers to carry out a range of essential tasks, especially services.

By Uri Dadush

Published on Apr 30, 2014

Source: Knomad Working Paper

Migration of low-skilled workers into advanced countries remains a highly contentious issue, despite high demand for such workers to carry out a range of essential tasks, especially services. This systematic survey of the empirical literature on the effect of low-skilled migration on host countries suggests that fears of an adverse impact on the wages, unemployment and living standards of native low-skilled workers are largely misplaced, while the positive effects on the broad economy are significant and typically underestimated. The empirical literature is underpinned by a robust theoretical framework which suggests that migration will spur investment, induce task specialization of natives and, under certain plausible conditions, ultimately raise the demand for all workers. Host countries should recognize that they need low-skilled migrants and adjust their policies accordingly. Because migrants respond to demand, opening up new avenues for legal migration of low-skilled workers need not necessarily result in increased total immigration provided they are combined with enforcement of labor regulations among employers.

This paper was originally published by the World Bank-led Knomad partnership on migration.

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About the Author

Uri Dadush

Former Senior Associate, International Economics Program

Dadush was a senior associate at the Carnegie Endowment for International Peace. He focuses on trends in the global economy and is currently tracking developments in the eurozone crisis.

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Carnegie India does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.

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