The eco­nom­ics of Europe's mi­grant cri­sis

The Pak Banker - - OPINION - Mo­hamed A. El-Erian

As our Eurostar train zipped from Lon­don through the Chun­nel to Paris, I couldn't help think­ing about the thou­sands of mi­grants lan­guish­ing on both sides of the Chan­nel. Once again, na­tional and re­gional po­lit­i­cal sys­tems are strug­gling to cope with a mount­ing hu­man tragedy and its spillover ef­fects in­volve dis­rup­tions to com­merce; and all this is stok­ing a po­lit­i­cal cri­sis.

The eco­nom­ics of the Chan­nel mi­grant cri­sis are quite clear, be­ing ba­si­cally about sup­ply, de­mand and reg­u­la­tory fail­ures. It also sheds light on the po­ten­tial so­lu­tions, though they will take time to ma­te­ri­al­ize. The sup­ply of mi­grants to Europe is fu­eled by waves of peo­ple flee­ing the eco­nomic and so­cial mis­ery of their home coun­tries -and, in some case, po­lit­i­cal op­pres­sion, per­se­cu­tion and vi­o­lence. They do so in hopes of a bet­ter fu­ture for them­selves and their chil­dren. The temp­ta­tion for some to try and make it all the way to the U.K., of­ten af­ter a per­ilous sea cross­ing and a fraught trip through western Europe, is am­pli­fied by the at­trac­tive­ness of an econ­omy with low un­em­ploy­ment, com­pre­hen­sive so­cial ser­vices and a coun­try where many al­ready know the lan­guage.

Although the sup­ply of mi­grants has in­creased, the de­mand for mi­grant la­bor has gone the other way. Tougher laws have made it harder and more dan­ger­ous for em­ploy­ers to hire un­doc­u­mented work­ers. And with a Euro­pean unem- ploy­ment rate of more than 10 per­cent, the de­mand is fur­ther damped.

This im­bal­ance in sup­ply and de­mand isn't one that can be sorted out by the mar­kets' nor­mal equi­li­brat­ing mech­a­nism. The mar­ket­clear­ing wage -- that is, the price that would lower the mi­gra­tion in­cen­tive while fa­cil­i­tat­ing the ab­sorp­tion of those still in­clined to risk life and limb -- is well be­low the min­i­mum wage pre­vail­ing in Europe; and any mean­ing­ful re­duc­tion in the wage would in­volve sig­nif­i­cant and un­ac­cept­able so­cial dis­rup­tions to lo­cal pop­u­la­tions in Europe.

The reg­u­la­tory sys­tems are not of much help ei­ther, pres­sured at mul­ti­ple stages, from the coun­tries of ori­gin, to the points of transit and en­try to Europe, to the fi­nal des­ti­na­tions. And where the reg­u­la­tory sys­tem is aided by phys­i­cal bar­ri­ers -- such as the English Chan­nel -- there are vis­i­ble signs for all to see of mi­grants' de­pri­va­tion and des­per­a­tion. In the process, the road trans­porta­tion of all sorts of goods is dis­rupted, caus­ing con­sid­er­able eco­nomic losses. Food rots on trucks wait­ing to cross the Chan­nel. Ve­hi­cles are im­mo­bi­lized, un­der­min­ing sup­ply chains. Pri­vate trans­porta­tion, in­clud­ing tourism, is sub­ject to long de­lays on ac­count of con­gested roads and stepped-up se­cu­rity checks. And, even if the will­ing­ness were there, the so­cial safety nets are too weak to cope with the hu­man tragedies that play out ev­ery day. All this is in­creas­ing pres­sures on politi­cians to re­solve the prob­lem. Yet ef­fec­tive so­lu­tions con­tinue to evade them, both at the na­tional and re­gional lev­els.

This isn't a prob­lem that will go away any­time soon, and for a sim­ple de­press­ing rea­son: The eco­nom­ics of this tragic sit­u­a­tion call for a com­pre­hen­sive col­lab­o­ra­tive so­lu­tion, but the best the po­lit­i­cal sys­tem is able to come up with is a piece­meal, weakly co­or­di­nated ap­proach. It is an out­come that, at best, can al­le­vi­ate some of the prob­lems; it will not solve them in a decisive and durable fash­ion.

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