This article was written by TORTUGA: a student led think-tank of Economics students from Bocconi and LSE University. Its current members are Andrea Cerrato, Francesco Chiocchio, Marco Felici, Francesco Filippucci, Giulia Gitti, Alessandro Greco,Cecilia Mariotti, Alberto Mola, Marco Palladino, Benedetta Pavesi, Isabella Rossi, Matteo Sartori, Giulia Travaglini, Francesca Viotti, Alessandro Zhou e Alessandro Zona. Here are the links to their Facebook page https://www.facebook.com/tortugaecon/ and their website http://www.tortugaecon.eu/“.


There is an unsolved question, ever more relevant in these times, that is worrying the public opinion:

Is immigration improving or worsening Italy’s, already precarious, economic conditions?

Although there is no general consensus, a good amount of skepticism about a possible positive impact of immigration is perceivable whenever the topic is brought up, be it in a debate on tv, or in an afternoon discussion in a bar. It turns out all this skepticism might be unjustified after all, so it is worth trying to make some order in the information we have on what immigration has meant so far for our economy. 

immigrants

Photo credits: Wikimedia/Migrants arriving on the Island of Lampedusa in August 2007
Sara Prestianni / noborder network / CC BY 2.0

Does immigration reduce jobs and lower Italian wages? Not quite

Studies dealing with wages and the labour market in Italy fail to find, in general, a significant negative impact of immigration on employment and wages of native workers. Precisely, it seems that wages and employment remain substantially unaffected, or even positively influenced. Empirical evidence (Etzo, Massidda and Piras, 2015), focusing on natives’ employment and the establishment of new firms’ units, using data from the Italian statistical agency (Istat, 2004-2010), excludes any displacement effect for the low-skilled natives, whilst for the high-skilled native workers the estimated impact is even positive. As far as the industrial dynamics are concerned, the effect of migration on the number of firm establishments is positive and significant at nationwide level. More specifically, it is positive both in the Centre-North and in the South, with stronger impacts in the southern provinces.

immigrants

Photo credit: Wikimedia/Ironworkers/ Paul Keheler/ CC BY 2.0

Similar results were highlighted by previous empirical works focusing on Italy. Romiti (2011), using data from the Italian institute for social insurance (INPS, 1995-2004), finds a small degree of imperfect substitution between immigrants and natives of the same skill level, but strong complementarity between high and low-skilled workers. Interestingly, the analysis suggests that the group suffering the most from immigration are the low-skill immigrants themselves, that saw a decrease of 1% in wages due to subsequent immigration flows in the period considered. Bettin et al. (2014), using the 9th wave of the Capitalia survey (2001-2003), find that in high-skill intensive sectors, foreign workers are complementary with respect to both blue collar and high-skill natives; nevertheless, the authors warn that a sharp increase in the availability of immigrant workers could change the industry composition in favour of production in less skill-intensive sectors and push firms towards the use of less skill-intensive techniques. Gavosto et al. (1999), analyze the impact of foreign workers on the Italian labor market. They investigate the effect of supplementary supply or replacement of native workers from immigrants from less developed countries, using an INPS archive data set starting in 1986. The results show again that the influx of migrants increases the wages of Italian workers (and therefore has a complementary effect), and the effect is greater in small businesses and in the North of the country. They conjecture that this positive effect can be due to the existence of constraints at corporate level: firms cannot expand production because there are no natives willing to deal with specific tasks (often of a low-level kind). The hypothesis is strengthened by the fact that after a critical percentage threshold of foreign labor (7.7%), additional flows of foreign workers have an adverse effect on wages.

These results are based on past migration flows, so there is no certainty about the effect that the current inflow may have both in the near and in the far future. However, national data from the last five years (Direzione Generale dell’Immigrazione e delle Politiche di Integrazione, 2015) seem to back the trends highlighted.

On the one hand, the +0.3% growth in the employment rate of 2014 is given exclusively by foreign employment. On the other, such employment is all direct to low-skill jobs; 70% of the immigrant workers are classified as industrial workers (for instance, the agricultural sector experienced a decrease of 0.2% of Italian workers, while witnessing an increase of 13.8% of foreigners). Furthermore, immigrant professional profiles tend to concentrate all in the dependent worker category, with the management roles occupied only in the 0.9% of cases by immigrants, versus the 8% of Italians. The two average working profiles of the immigrants and Italians are thus markedly different.

Do immigrants take away more than what they contribute? Again, not exactly

An example of study on welfare transfers is the most recent edition of the annual report on the economics of immigration (Leone Moressa Foundation, 2015), which highlights a few figures on the impact of immigration on the Italian public finances. Out of 5 million foreign residents, 3.46 million are taxpayers, contributing personal income taxes (IRPEF), for a total of € 6.8 billion. Considering all fiscal revenues ascribable to foreign born, we then reach the figure of € 16.5 billion, while the outflows are € 12.6 billion: the Italian public finances are benefiting little less than € 4 billion from the current state of affairs. 

This situation has a demographical rationale: the incidence of 75 years old or elder among Italians is 1 in 10, while it is a striking 1 in 100 for immigrants. Such a disparity in age structure has obvious consequences in terms of welfare transfers, especially in a country, like ours, whose public expenditure is largely devoted to paying pensions and elderly care. Immigrants are mostly in working age and hence taxpayers, while very few enjoy old-age benefits. Analogous conclusions about the positive impact of immigration on the sustainability of the Italian welfare state can be found in earlier analyses, including Devillanova (2008) and Coda Moscarola (2003).

immigrants

Photo credits: Flickr/Pedro Ribeiro Simões/ Warming the bones Funchal, Madeira, Portugal/ CC BY 2.0

Finally, our working population is declining. Therefore, our economic growth will inevitably be hindered, putting at risk the sustainability of italian unfunded pension system. Considering what is written above, the mixing of policies aiming at raising the employment rate during periods of negative demographic trend can hardly impact positively on productivity and growth. This is why, also in this case, one possibile solution could be the compensation of this adverse trend with a higher presence of immigrants in our workforce.

With all the due disclaimers about the future applicability of these results, there seem to exist more than an arrow pointing at a positive impact of immigration on the Italian economy; indeed, it would be unwise to consider immigrants a threat and not a resource. For Europe, but especially for Italy, it is high time to embrace this phenomenon as an opportunity to harness the synergies and complementarities that come from diversity, rather than campaign on the fear that this same diversity may create.

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