I thank the Chairman for the invitation. He has mentioned that I was given short notice of this meeting, the result of which was I did not have much time to get a sense of what the sub-committee was about and the angles it wished to take. I decided in the note I circulated to speak in broad terms about immigration policy and its impacts. I will mention some relevant research from the Economic and Social Research Institute and try to get through my material as quickly as possible to allow members of the sub-committee to ask questions. As I said, I am not sure what the sub-committee wants from me; therefore, it is best to hand back to members as quickly as possible.
The Chairman has mentioned that this area will be examined from the perspective of social policy but, as an economist, most of my research on immigration has been on its economic dimensions. Much of what I mention will relate to these dimensions but members can ask me broad questions. If we are to go back to basics regarding immigration policy, we must ask about which policies we are talking. It is useful to think about this in two ways.
For a very long time in Ireland immigration policy has centred on the issue of entry. We have had questions about how many migrants we let in and what programmes we have in place to allow them in, but it is always about entry. There is, however, a second set of migration policies with which many other countries concern themselves, that is, that surrounding the issue of settlement and integration. In a nutshell, it is about what happens to immigrants after they arrive in the country. My first objective is to get these two issues in mind.
For the EU 25, the entry policy is essentially an open-door one and has been since May 2004. Ireland was very unusual among member states in that with the United Kingdom and Sweden it was one of the three countries that allowed full access to the labour market to persons from all the accession countries at the time. There were good economic reasons for this and there was no doubt that the fact we were willing to do so probably gained for us additional kudos in the European Union. The combination of our policy and strong economic growth obviously meant that there would be an enormous inflow into Ireland of accession state citizens. In the census taken in 2006 there were 120,000 EU ten immigrants, if I can use that term. The inflows between 2006 and 2008 suggest there were probably 200,000 such citizens living in Ireland. The inflow in recent years must be put in an international and historic context. Recently a German colleague stated to me that the inflow into Ireland between 2002 and 2008 was at the level the former West Germany experienced after German reunification in 1990. Historically, what happened in Ireland was quite extraordinary.
To a certain extent, the open door policy issue is now closed. There is not a great deal to discuss. One cannot really row back on it. There is the remaining question of what we should do vis-à-vis Bulgaria and Romania. It comes up every year. In deciding on it a number of points arise, one of which is that we need to have a clear sense of what the impact of immigration has been before we decide what we should do in the case of Bulgaria and Romania, and other accession countries also. There is considerable economic literature, to which the ESRI has contributed, on the impact of immigration. I state in the briefing note that it might be misleading to say there is a consensus, but to the extent that there is, it involves the following. The general feeling is migration has a smaller impact on GNP per head than one might think. Certainly, a massive inflow of immigrants leads to an increase in national output simply because there are more people working, but because a certain amount of the additional output accrues to the immigrants in the form of wages, the impact on GNP per head is quite modest. Every time it has been estimated it typically comes out as such.
What is a much bigger issue is the distributional impact. There is a reasonable body of research findings that shows that an inflow of low-skilled immigrants typically leads to a reduction in the wages of existing low-skilled workers, the flip side of which is that an inflow of high skilled workers typically leads to a reduction in the wages of existing high-skilled workers. What I am saying is that the average effect is small but that it can disguise significant distributional impacts. When we look at the question of what we should do in the case of Bulgaria and Romania, the extent to which immigrants from these countries might be low-skilled will have implications for low-skilled workers here. That is a matter which must always be kept in mind.
We must say when we look at immigration policy that part of our existing workforce is made up of immigrants. There is another finding in the international literature that very often a new inflow of immigrants can have a negative impact on the outcome for existing migrants because of the resulting direct labour competition.
Let us talk about the second block of policies, that is, those which concern the issue of settlement and integration. Let me run through a number of research findings from the ESRI in this regard. I have listed four points in the briefing note, the first of which is that education levels among EU ten migrants are very similar to those among the domestic population. To the extent that we view ourselves as a skilled group, this was an inflow of skilled workers. However, the data analysis we have done shows there is a significant gap between the occupations held by immigrants and those one might expect them to hold based on their occupational levels. We describe this as an occupational gap and have measured it on several occasions using CSO data. It is quite significant.
One can also examine how immigrants are faring in the labour market by looking at their wages. We have calculated wage gaps in the range of 18% to 45% for immigrants from the new member states. However, there is an important point to be made in this regard, namely, that the wage gap is not constant across all skill levels, with the gap between migrants from the ten European Union accession states and Irish natives most heavily concentrated among the highly skilled. We are not finding evidence of a wage differential for low-skilled people. This indicates that highly-skilled immigrants from the ten accession states have failed to access they types of occupations and earn the types of salaries their skill levels might suggest.
Referring back to my point on the impacts of migration in terms of skills, although we have had a high-skilled inflow from the ten accession states, its impact is more likely to have been low skilled. In other words, the impacts for the labour market have probably been at the lower end of the earnings distribution precisely because of where these people have been working. The important point to take from this is that Ireland does not have a problem with low-skill immigration. Rather, what we have is the underutilisation of highly-skilled immigrants. The policy issue that arises in this context is the question of how to design systems in such a way that one allows and facilitates migrants to move up the occupational ladder. In our research on this topic we have not been able to find evidence of occupational attainment improving over time for immigrants. One would like to think that the longer people are here, the better they are doing. However, we are not necessarily finding that to be true. In terms of our settlement policy, the challenge is to facilitate people in moving up the occupational ladder.
Everything I have said thus far relates to Ireland deciding its own immigration policy. However, an issue that is regularly discussed at European Union level is the extent to which there should be a co-ordinated policy on immigration. There are reasons that Ireland should participate in such a co-ordinated approach, but for reasons to which I have already referred, it is important that we have a highly-skilled inflow.
I am often asked whether immigrants are likely to return home in the current economic downturn. There are some 400,000 non-nationals living in Ireland and the latest ESRI forecast suggests we will have a net outflow of 30,000 next year. Even if all this outflow consists of immigrants, we will still have an immigrant population close to 10% of our domestic population. In other words, all the migrations to which I have referred will hold, regardless of the economic downturn. However, we should not take an overly short-term view of this. The economy will revive in due course and the migrant population will stay.