Greece after the 1990s immigration wave:

A difficult adaptation to an economic windfall

LSE, March 2006

Antigone LyberakiProfessor of economics,Panteion University

Retrospect and Prospect

• Evaluation of the 1990-2000 episode– Historical watershed – unlikely to be repeated soon– Has altered Greece decisively– Will shape perceptions and reaction in future

• Hence two items in the papers agenda1. Digest what happened –

• Give a narrative and derive stylised facts

2. Bring out tensions likely to be met in futureWork in progress with Prof. Dertilis of the EHESS, Paris

3 crucial reversals in the 1990s

• Greece was transformed from a country of emigration into one of immigration

• Greece shifted from being a net receiver of private foreign direct investment (FDI) into a net exporter of capital

• The Greek economy switched from a diverging economic performance vis a vis the EU into vigorous convergence.

Migration: a facet of globalization?• Free movement of goods, services, capital,

people?• Is movement of goods and capital substitute or

complement to movement of people?• Substitute: if goods can move then factors of production

need not move.• Complement: non-traded goods and services (childcare),

imperfections (non-equalisation of prices, mainly wages), part of value chain.

• Short-term effects of globalization: turmoil, societies under duress, increasing outflow of people

Not unprecedented…

• 1815-1914: approximately 10% of world population moved

• Over the last 15 years: 3% of world population.• So, international migration is the “great absentee”

of Millennial globalisation.• Qualitative new elements:

1. Different subjects2. Different destinations

So, Countries find themselves in unaccustomed roles– From migrant source to destination.– From developing world poverty to 1st world riches.

European experience since 1985

• The number of migrants increased by 50%While 30% come from other EU countries65% (or 3,4% of population) come from other countriesOver half of population increase in Europe (64%) is due to migrationThe process of ageing cannot be cancelled even if there were a doubling of migrants in the years to come.

Positive? Crucial questions towards evaluation

• Do migrants contribute to growth?• Do they “hijack” jobs from the domestic

working class?• Do they “freeze” wages?• Do they create an underclass of socially

excluded groups?• What is to be done?

Economic Literature : positive aspects prevail for the host

Depending on:• First: the characteristics of migrants

themselves (skills and adaptability)

• Second: the characteristics of the receiving (host) economy. Migration tool for what? (low cost vs. quality-related competitive strength)

Implications for economy of origin (sender)

• Alleviation of unemployment pressure• Inflow of remittances• Family strategy: empowerment and

guarding against risks and abrupt fluctuations of incomesHowever: brain drain and deprivation from the more dynamic elements (age and risk)

Depends on whether, when and how they return

Gains for would-be migrants

• Life free of danger• … And corruption• Better chances for children• BUT mainly immense boost to earning potential

(Jim Smith of Rand calculated that recent immigrants getting a green card gain on average $20.000 per year or $300.000 over a life-time in net present value terms).

Migrants in Greece: How Many?• Legalisation process:

– 600 thousands submitted application in 1997– Plus 150 thousand Greek Pontians– Plus Northern Epirotes Plus non-applicants– Total at least 750 thousands

• Census: – Estimated population 2000 10,5 million– «Closed population» 10,2 million– Registered in census 11 million. – Total around 800 thousand plus those not counted in

census• SO: Population between 850 th. and 1 million (7%-8.5%

of total).. 10-12% of the labour force.

Migrants in Greece: Who?• Legalisation applications

– 65% from Albania– 18% Bulgaria, Romania, Serbia, Georgia, Russia

• Even if we include Pontians in migrants, then still over 50% of the total are Albanians

• Majority from Southern Albania (where commercial and investment links concentrated).– Radically different from rest of Europe

• Bulk of arrivals until 1998 (after pyramid scheme collapse).– In comparison arrivals since are a trickle

• Very large and very abrupt change.

Thessaloniki Research Findings (2000)1. Educational backwardness?

Education level (economically active population)

Greece total (%)

Albanian migrants

Higher 17.0% 15.2%

Upper Secondary 29.4% 39.4%Lower Secondary 8.9% 21.8%

Primary 37.2% 11.9%Less than primary - 7.5% 11.7%

Relatively well educated

2. Financial situation

• Family income 3,24 million GDR. • Poverty line for I person 1,3 m GDR in 1999.

• Pay rates comparable to Greeks– Concentration around the minimum wage

• Labour law not irrelevant

• Expenditure low – large savings– Family expenditure 1,9 million GDR

• Improvement through time – As the stay is extended and – Through legalisation

3. Position improves with time

• Jobs improve with time• Normalisation of labour situation

• 65% have health insurance• Less avoidance of minimum wage

• Comparison with other studies: clear improvement• Only 18% «without papers»

• Consumption standard also improving• 76% have telephone• 98% TV. 46% VCR• 16% car

The 2003 Athens Survey: Key facts

• Interviews in Athens 9/2003-11/2003• Snowball sampling – informal networks

– Only way to approach illegals. Otherwise bias.– Original sample frame not directly related to employment (orthogonal)

• 500 structured interviews answered by household head and Conducted by private survey agency. (Kapa research).

– 60 separate surveys conducted as a control by the researchers.• Data cleaned and first tabulations focus on perceptions and social factors

• Fuller analysis to follow, focussing more on economic factors• Separate survey has companies as the sampling frame (130 in total)

conducted, but will not be reported on today.

Employment findings• Very high participation rate (though bias expected)

– 96,1% for men; 65% for women. – Note gender gap (30 per cent). Similar to native gap

• 88% pay social insurance contributions regularly.• Sectoral mix of sample (men):

– Construction (41%), Mfg and services (30%).– Self-employed and business owners (25%).

• Women (as % of population)– Domestic services 34%, 12% mfg and restaurants– 20% self-employment. 34% inactive

• Job turnover very small – 75% has not changed employment over last 3 years.

Income adequacy

• Sample relatively well off (monthly hh income).– 30% Have income less than 900 EUR– 24% have more than 1500 EUR per month– (ECHP poverty line for 4 member household 840 EUR 2002)

• Savings high but remittances over time show downward trend.

• Mobility and improvement of housing conditions over time.– No ghettoes

• One in three owns a car.• 74% have bank accounts.

Conclusions• Community on an upward trajectory• Appears to resemble the indigenous in a number

of respects– Resemblance grows over time: prone to self-

employment• Individual success combined with lack of trust to

all non-relatives, regardless of nationality. – Similar findings for Greeks – lack of social capital.

• Situation is still fluid and attitudes ambivalent. How things will turn out depends on future policy and integration initiatives

Overall comparison between Greeks and foreign-born

• EU-SILC (2003): sample of 11.274. – 500 foreign-born

• Confirms general picture: Though not in the top gear, immigrants are better off than groups such as women

• Younger with more children and less elderly members, • less likely to receive state benefits (7,7% vs 14% of hh)• More likely to participate in the labour market if male (71,5%

vs 66%) but less likely if female (by 5 percentage points)• Less likely to do supervisory work (3% vs 15%)• Less likely to hold a part-time job than women• Wages of Greek males are 18,5% higher than Greek females´,

and 19,8% higher than foreign-born wages.• The largest wage differential is between women: Greek earn

33,7% more

The Greek economy: from stagnation (1980-95) to growth

• Impressive growth performance in the 1960-74 period (8,0), slowing down up to 1979 (3,2).

• Very poor performance in 1980-87 (-0.05) and 1988-95 (1,85) periods:divergence.

• New growth phase since the mid-1990s and convergence with EU.

• Substantial transfer of resources from the EU throughout the last 25 years (from 1,5-3,6% of GDP annually).

• Growth (despite public finance problems) continues post 2004

Annual rate of increase in GDP

-2

-1

0

1

2

3

4

5

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

European Union Greece

How did the labour market absorb these immigrants?

• Fast growth and high unemployment: – Two speed Labour market?– Resistance to labour market reform

• The Greek paradox is that unemployment does not involve low-skill– Co-existence of unemployment with demand for low-

skilled and flexible labour• The Greek economy finds itself “stuck in the

middle”• Hence Low labour costs and flexibility provide a

breathing space– Migrants exploit niche

Accelerating employment growth

Growth of Employment (thousand persons), 1999 - 2003

3750

3775

3800

3825

3850

3875

1999 2000 2001 2002 2003

Employed 20-64

Steady decline of unemployment

Total Unemployment (1,000 individuals), 1999-2003

300

350

400

450

500

550

1999 2000 2001 2002 20038%

9%

10%

11%

12%

Unemployed Unemployment Indicators

Positive overall effect on the Greek economy

5 Positive elements :1. Creation of new jobs (mainly in services)2. Growth speeded up 3. Defensive strengthening of sectors and regions4. Alleviation of bottlenecks in labour market5. Personal services allow women to enter the labour marketHowever, two potential counter-developmental temptations

1. Abundance of low wage labour.2. Strengthening of grey economy.

Immigration key driver in the ‘Growth Spurt’ of the Greek economy, starting mid-90s and still unwinding

New trends in immigration after 2000

• Immigration flows change. Three distinct groups alter the simple picture:– ‘Albanians’ (plus other Balkan and E. Europe)

• Informal networks with 1990s migrants• Close links with Albania and source countries• Post 2008 Bulgaria and Romania in EU

– ‘Third country’ migrants• E.g. Pakistan, Africa• Greater importance of trafficking• Greater cultural distance

– Chinese migration• Self employed and self-contained• Part of international value chain of Chinese manufacturing.

The global picture is also positive:

• The potential gains from liberalising migration are far more important compared to those from removing barriers to world trade.

• Dani Rodrik of Harvard : relaxing restrictions on the international movement of workers would yield benefits 25 times larger than those that would be realised by liberalising goods and capital flows.

• Tito Boeri of Bocconi: migration of 3% of Eastern Europeans to Western Europe would increase the total EU GDP by up to 0.5%.

Economic logic thwarted by political constraints

• A temporary visa scheme (3-5 years) amounting to no more than 3% of rich countries’ labour force would easily yield $200 billion annually for the citizens of the developing nations (Rodrik)– Relaxing restrictions to migration has a compelling

economic logic. But those gains can be made only at great political cost.

• However, the same applies to trade, which is being liberalised.

Explaining the immigration/ free trade political paradox

• Is it public opinion? – It is against both free trade AND immigration

equally.• Rodrik:

– the beneficiaries from free trade have organised successfully and become politically effective.

– By contrast, the beneficiaries of labour flows are not easily identifiable, neither known ex ante.

Migration as a mirror: societies get what they deserve

• Evidence (and common sense) suggest that positive attitudes to immigrants maximise economic and social benefits from migration.

• Two main challenges for the rich world’s governments:

1. How to manage the inflow of migrants2. How to integrate those who are already there.

From the point of view of Greece…

• All in the same neighborhood: differences in current performance BUT common future…(in the EU?)

• The economic argument is easier to win… but the cultural terrain is less conducive

• Essentially it is about overcoming the “fear of change” and building open societies.

• How to reap the economic windfall?– How do economic and political actors respond?– Some concluding remarks

The Civil Actors: Ambivalence

• The Church– Tirana Anastasios vs. Thessalonika Anthimos

• Civil society– ‘The Albanian flag carrier’ vs. ‘Gangs’

• The Unions– Solidarity vs Prevention of labour flexibility

• The Employers– ‘Short-termism’ vs. ‘Investing in people’

The political actors: Pusillanimity

• The politicians:– Even when recognise positive role, afraid to say so.– Ex-minister of Labour:

• ‘when confronted with an unemployed man, you cannot defend being liberal in immigration’

• The Parties– Rhetorical differences large esp after 2004– In practise hesitant between treating as public order

issue or social policy• The Government

– After legalisation in 1998, very few new initiatives– Progressive outlook when confronted with EU– Yet unclear whether much is done to counter ‘street

level’ discrimination by the State machinery

Conclusion

• The situation is becoming harder– New immigrant groups harder to integrate– Growth episode may peter out

• However, there are grounds for optimism– Integration of first wave– Balkan win-win

• How it will turn out depends largely on political economy.